What is International PEO?
Key Takeaways
1. For almost any business operating today, international expansion is a realistic prospect as it grows over time.
2. While all businesses want to expand internationally, it’s not just something that happens overnight. It requires careful research, planning, and timing.
3. To make international expansion a success, businesses should be prepared to comply with the laws and customs of each country they want to operate in (i.e., tax and employment laws).
4. For businesses that don’t have the time or resources to carry out all the necessary research, planning, and execution, it’s not the end of the road – international expansion is still a possibility with the right partner.
What Does ‘PEO’ Stand For?
‘PEO’ stands for ‘Professional Employer Organization’. In essence, these are organizations that provide global employment solutions, enabling businesses like yours to hire employees anywhere in the world quickly and compliantly, without the need to establish and operate your own foreign legal entity such as a company or corporation. By partnering with an international PEO, businesses like yours can efficiently expand overseas and gain an understanding of relevant foreign markets without the full burden of having to do everything yourself. This is because global PEOs are experts in global expansion, staffed by consultants with all the necessary niche knowledge and understanding required to prepare businesses for foreign market entry. Below are some examples of where an international PEO’s services can help a business with its overseas operations:
How Does an International PEO Work?
If you’re looking to expand overseas, an international PEO can help your business gain a legal presence in virtually any foreign jurisdiction. In addition, they make it easier for businesses to source, hire, and onboard skilled employees based in the locality they have expanded to.
This is possible due to the way international PEOs operate: Their in-country recruitment and employment experts hire your international employees and become their legal “Employer of Record”. As the Employer of Record, the international PEO is responsible for all compliance, tax, payroll, employment benefits, and risk mitigation.
This reduces a significant amount of the burden from your business, allowing it to save up to 85 percent on standard expansion costs and focus on what’s important without being bogged down by the formalities.
What is an Employer of Record?
An employer of record is a way for companies to benefit from international talent without having to set up a legal entity and comply with local laws, regulations, and customs.
This is because the employer of record (the international PEO) already has a registered company within the country that you’re hiring international employees in. They handle all the legal formalities while you reap all the benefits.
The employer of record arrangement also allows you to scale your international operations very quickly. This is because you can add new international employees as you need them without having to worry about the expense and compliance risks.
When an international PEO acts as an employer of record, your business handles the employees’ day-to-day while the PEO takes care of hiring, payroll, taxes, HR, and more on your behalf.
How an International/Global PEO Differs from a Domestic PEO
A PEO’s remit isn’t limited to international expansion; plenty of businesses use domestic PEO services to outsource specific HR tasks and other administrative responsibilities for their domestic operations.
Some examples of domestic tasks that a business may outsource to a PEO include:
- Payroll & taxes
- Employee benefit management
- Workers’ compensation schemes
- Delivery of training
- Risk management
5 Key Benefits of an International PEO
International PEO is a great solution for firms that want to expand internationally while limiting their growing pains. If a business uses an international PEO solution, such as a Global PEO & Employer of Record, it can expect to realize several benefits, including:1. Fast Market Entry
Utilizing the services of a global PEO will grant you much faster entry to the international markets where you want to be. This is because a global/international PEO already has everything in place—all you need to do is discuss your requirements with them and they’ll do all the work for you. Rather than having to jump through all the regulatory hoops in each country where you want to expand to and hire employees (establishing a legal entity, getting financial and tax affairs in order, etcetera), you can dive straight into what’s important: hiring the right talent and focusing on your growth.2. Local Compliance with Applicable Laws
An international PEO can also help to make sure that its clients remain compliant at all times with various laws and regulations (i.e., those relating to employment classification and tax) by helping them achieve initial compliance and then keep up with any changes as they occur. This is critical for businesses expanding into international markets and is potentially a make-or-break scenario because failure to comply with necessary laws and regulations could lead to large fines, the refusal of necessary licenses, and more. Luckily, an international PEO’s local experts have all the knowledge necessary to make sure that you’re 100 percent compliant at all times, even as the regulatory landscape changes.3. Global Hiring Simplified
One of the most common pain points for international organizations is that of hiring and managing employees. It’s also one of the most common reasons why organizations choose an international PEO. An international PEO can leverage its local knowledge and expertise to find and hire the very best and most qualified international talent for your company. Again, this can be achieved without having to establish a local legal entity.4. Seamless Payroll
International payroll management can get very complex, very fast. Taxes, local laws and customs, 13th and/or 14th-month pay, mandatory bonuses, pay dates, and more can make it easy for businesses to get it wrong and fall out of compliance. And this isn’t a good situation to be in. An international PEO eliminates these issues. Because it has a legal presence in the country you’re expanding to, it can process payroll for your international employees on your behalf. This ensures that payments are made in full and on time, and because the PEO has deep ties to the countries where it operates, your international payroll is guaranteed to account for everything “extra” that it needs to, such as bonuses, taxes, pensions, and more.5. Streamlined Expansion
New markets all over the world provide a range of new opportunities for businesses of any kind. Today, companies in every market and industry are constantly weighing up the costs and benefits of international expansion and thinking about the challenges and potential opportunities. As your company navigates new international markets, working with an international/global PEO can help by providing you with all of the knowledge and confidence that you need in a range of key areas, making it easier for you to undergo future expansions into new territories.Examples of How an International PEO Can Help
Scenario: A business already works with people in another country, but they work as independent contractors/freelancers rather than employees. But because of the way the contractors work, the business is at risk of violating employment and tax regulations in this country.
Solution: With an international PEO, the business can access country-specific expertise on hiring, employment classification, and tax laws, among other things, so that compliance can be achieved, and penalties avoided.
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Scenario: A company has identified a country that would help its growth plan, however, they don’t have the time to set up an entity there and jump through all the hoops necessary to hire employees.
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Solution: While it depends on the specifics of each company’s situation, an international PEO can generally help by acting a employer of record. This means employees can be hired for the company in as little as a few weeks while it sets up its legal entity.
Scenario: A company has recruited a small workforce in a new jurisdiction but doesn’t have a way to compliantly pay the new employees.
Solution: An international PEO can act as the employer of record for the employees and compliantly pay them either on a long-term basis or until the company sets up its own legal entity. Even after an entity has been established, the PEO could still handle international payroll on the company’s behalf.
