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.
Any business that sees growth domestically looks further afield to international markets as a potential way to expand on their success–and an international PEO can be a valuable partner to a business during this process.
The growth of the Internet and globalization has seen more and more businesses expanding internationally to offer their products and services to a global market. This is because doing so has become much more accessible and straightforward, even for start-ups and small- to mid-sized businesses that once upon a time would have been largely confined to operating within their domestic borders
While it has undoubtedly become easier, expanding internationally is not an easy thing to do. Selling to new markets can be a step into the unknown, and very few companies actually make a success of doing so according to the Harvard Business Review.
For those that get it right, however, the rewards can be huge, with the average impact of expanding internationally on revenue growth sitting at roughly 13 percent. With numbers like this, it should come as no surprise that international expansion is at the top of the priority lists of small- to mid-sized business owners, directors, and CEOs worldwide, with 27 percent of these people calling it an obvious growth opportunity.
That being said, businesses looking to grow internationally need to spend significant time, energy, and capital not only identifying a viable market but truly getting to know it, too. This is so that they’re able to provide the best product or service offering, hire the right employees, and comply with applicable laws such as tax and labor regulations.
For small- and mid-sized businesses (and, indeed, even some larger ones) this can be a significant drain on precious resources and lead to disruptive bottlenecks in the expansion pipeline.
That’s why more and more businesses are relying on the services of an international or global PEO for their overseas expansion and hiring efforts. In this guide, we’re going to go over the basics of what an international PEO is, what they do, how they work, and what the key international PEO benefits are.
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:
The key difference between a domestic and international PEO arrangement is that a domestic PEO usually doesn’t act as an employer of record.
This is because the client has already established a full legal entity. Instead, the PEO becomes a “co-employer”, which is a common form of PEO service that divides employment responsibilities between the PEO provider and the client.
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
New Horizons’ International/Global PEO Services
New Horizons Global Partners is a renowned international PEO, with a vast breadth of expertise in many global markets.
We’re able to provide you with a turnkey international PEO service for your foreign market entry and employee management needs. Our experts can also simplify your international business incorporation, taxation, payroll, and other important functions.
With an international PEO service like ours, you can even delegate all of this and more to us and have it handled on your behalf.
Contact our team of experts today if you’d like to learn more about our international PEO services.