1. PEO has a range of benefits for companies seeking to hire internationally.
2. Using a PEO saves time and money, and can help you source talent overseas.
3. Using a PEO gains employees access to better employee benefits.
4. Using a PEO helps you manage risk, and maintain employment and tax compliance.
Hiring internationally can be an exciting, yet confusing, process. You will, of course, need to understand the nuanced rules of the country where you wish to expand, which means being familiar with local labor laws and customs. You will also need to know if the country in which you wish to expand restricts business activities to only those businesses that have a legal entity in the country.
If you do not have a legal entity, however, you may still be able to expand in the desired country. Using a PEO to hire staff and remain in full compliance with all regulatory bodies is an easy method of doing so.
In this article, you can read about some of the benefits you can gain by doing business through a PEO.
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Top PEO Benefits
1) Time Savings
One of the biggest PEO benefits is the ability to delegate non-revenue generating activities to a trusted third party. A reputable PEO can handle important but time-consuming tasks such as administering foreign benefit plans, creating a compliant payroll system, tax reporting and filing, and other administrative tasks.
This allows you to save time so that you and your staff can focus on more important work tasks that affect your business, such as:
By using a PEO, you can get hours back into your day that are better allocated to your core competencies.
2) Cost Savings
Because leading PEOs are established entities that operate with best practices and the latest technology, you can often save money as well as time by using a PEO instead of paying in-house staff to handle your human resources functions.
Working with a PEO can decrease the cost to process your payroll and other accounting costs. One of the best PEO benefits is when a company that can provide automated services that quickly and accurately handle payroll calculations and distributions.
You can also avoid the costs associated with setting up an entity, which can sometimes be considerable and may result in a requirement for you to deposit significant funds into a foreign bank account that can only be used for specified purposes.
It’s important to remember that one of the best PEO benefits is having the ability to hire, reassign, or terminate employees as the needs of your business change. There may be various reasons why you are unable to work staff, such as:
- A pandemic
- Political instability
- A weak economy
Being partnered with a PEO during an emergency can be critical to your company’s ability to deal with the fallout.
For example, during the 2019/20 COVID-19 outbreak, companies with PEOs were able to temporarily adjust contracts with new working hours, allowing them to retain workers rather than firing them.
PEOs position companies to move quickly once demand resumes after an emergency, too. Production can easily be amped up and employees can be restored to their previous hours. If necessary, more workers could quickly be hired.
Moreover, companies do not have to incur expenses for running a company if there is no production. PEOs can also make prompt changes on the ground so that you can react to the market, such as reassigning workers or making temporary adjustments in salaries. They can also direct refunds from social insurance with governments in affected countries and provinces.
These changes can be made quickly when a PEO is at your side.
PEOs can also handle termination matters at short notice, if required. Many countries in Asia require continued payments to employees as severance after termination from employment. By using a PEO, this will not be your responsibility. The PEO will be responsible for complying with all employee protection laws and guidelines.
4) Compliance Assurance
Another significant advantage of using a PEO is having knowledgeable local experts on your team. Employment laws often change, and it is important that you understand those changes in the countries where your company does business.
PEOs are familiar with local rules and regulations and can ensure that the proper policies are put in place to protect your business. This will help you stay in the good graces of local bureaucracies and insulate you from the possibility of facing infractions or fines.
PEO representatives can advise on important laws and best practices regarding several matters that are important to your business, such as:
Written employment agreement requirements
- Minimum wage and wage equity laws
- Overtime rules
- Sick leave
- Maternity and paternity leave
- Other types of administrative leave
- Benefit administration
- Hiring practices
- Workers’ compensation and unemployment insurance
- Social insurance
A PEO can work closely with you to notify you of regulatory updates and help you make changes when necessary. Additionally, if there is a crisis situation or new legislation, local HR support can help you adhere to new local government guidelines.
PEOs also employ best practices based on their knowledge of the local customs, industry and market, so your employment agreements will provide you with greater protection than if you were trying to craft an agreement without any background on this aspect of your business.
5) Faster Market Entry
Additionally, using a PEO allows you to bypass the process of incorporating a business, which is often very time-consuming and involves clearance from a number of bureaucracies that are foreign to you. You can simply deploy staff on the ground in order to take advantage of new opportunities and gain the competitive advantage of being the first to market.
Again, a great example is how companies were able to respond to opportunities during the COVID-19 pandemic.
Certain supplies – masks, hand sanitizer, paper products, and other health products – came into great demand. Companies with PEOs were able to easily expand their existing business and ramp up production in order to provide the essential supplies to consumers.
Without the existence of their PEO relationship, their only alternative would have been to set up a legal entity, but by the time that would have been approved, they would have missed the opportunity.
6) Risk Protection
Because you are working with local experts, you can protect yourself from risk. You can avoid making expensive payroll mistakes. You can also ensure that you avoid infractions and fines from lack of compliance. PEOs are experts on compliance matters related to employment.
Additionally, because the PEO is the employer of record, it takes on all employer-related legal liability. PEO experts will help you mitigate risk and give you great peace of mind so you can concentrate on the success of your expansion.
7) Better Recruitment Options
A lesser-known but still valuable set of PEO benefits are seen in providers who also offer supplemental employment solutions, such as recruiting.
Recruitment experts know where to find the most talented workers for various industries and also have a global network of talent at their disposal. This allows you to find talented members to add to your team faster and more affordably than trying to handle this aspect of your business alone.
8) Access to More Attractive Benefit Packages
Because PEOs have many employees in many countries, they are able to offer employees far better benefit packages than a small business might otherwise be able to offer. These benefits are often cost-effective and comprehensive, offering employees access to health coverage at rates that are similar to those available to large corporations.
Benefits may include:
- Medical insurance
- Dental coverage
- Vision coverage
- Healthcare flexible spending accounts
- Life insurance
- Disability benefits
- Retirement plans
You can work with your PEO to develop a comprehensive and attractive benefit package that will encourage top talent to work with your business. Your PEO can handle all administrative tasks related to benefits administration, including negotiating with insurance carriers, enrolling employees and providing necessary legal notices.
Is PEO Better Than the Alternatives?
There are other options to hiring local staff other than using a PEO. However, they often come with various disadvantages.
Two common alternatives and the cons of using them are described below.
1. Hiring a Contractor
Some companies may consider hiring a contractor in the country where they are expanding. This could, however, be a risky endeavor.
The country may, for example, not even allow this type of employment relationship. In China, for example, long-term partnerships should not be engaged via contracts, as there is little means of ensuring compliance with labor regulations.
Additionally, contractors may later try to claim that theaaaaaaaaay were employees and misclassified in order to take advantage of various statutory benefits.
Using a PEO helps you avoid this unnecessary risk because PEOs have written employment agreements and a standing process to handle resignations and terminations that avoid these end-of-relationship problems.
Hiring a contractor in a foreign country may also be difficult operationally for your business. There may be substantial time differences and language barriers. You also may not have much control over your contractor.
By taking advantage of the PEO benefits granted by your provider, you retain control over how your business is run and how your employees perform their jobs.
You also may not be familiar with the contractor if you find him or her online. He or she may not have the necessary skills and may not perform the job well. He or she may run off with the end product. A PEO has access to vetted candidates with strong employment and educational backgrounds who can better fill the position.
Another disadvantage to using an in-country contractor is that you may risk sharing confidential information or intellectual property with the contractor. If the contractor misuses it, you may have little legal ability to enforce your rights when you did not go through the proper channels to set up the employment relationship in a compliant manner.
Outsourcing Human Resources Functions
Another option that you might consider is simply delegating just your back-office administration. While this may help you delegate certain tasks and free up more time for revenue-generating activity, it does not provide all of the benefits of using a reputable company with all of the key PEO benefits included.
You have no co-employment model with this approach, thus essential functions of the employer-employee relationship are missing. Moreover, as the legal employer of record, you are burdened with all of the employer liability.
What to Look For in a PEO
To take advantage of all of the many PEO benefits, it is important that you work with a good PEO. Consider working with a PEO that offers the following:
- Services that align with your business needs
- A company that has a strong reputation in the countries where you are hoping to expand
- Professionals with experience in your industry
- A team familiar with national and local labor laws and regulations
- The ability to customize services to meet the specific needs of your business
- Personal access to a professional who will manage your service
- Global mobility solutions
- A track record of success
- High-profile case studies that show how a company was able to benefit from using the PEO
Get Started with a Leading Global PEO
Horizons is here to assist you with your employment needs. We provide a flexible and customizable set of services that is delivered through a time-tested and cost-effective model.
By delegating human resources responsibilities to us, you are able to free up your time and energy on the areas of your expertise while we focus on the areas in which we excel.
Contact us today to get started with your international hiring.