A professional employer organization can make an international expansion painless for your business.
If you're thinking about expanding and need to hire staff to work abroad, consider doing so through a professional employer organization (PEO).
- A PEO can assist you with payroll, benefits and human resources support for your business.
- PEOs take care of your overseas human resource requirements through a co-employment model.
- A PEO can take care of the needs of your staff abroad and make sure your business stays compliant.
Through a co-employment model, these organizations offer comprehensive human resource services abroad for businesses without a physical presence in the country. This is especially helpful for businesses that want to dip their toes in a new market but aren't yet committed to building an office. Having flexible human capability in a new market can make the difference in your success.
Smaller businesses should look at what a PEO can bring to their work environment. Overseas employees can access the PEO's benefits and have a localized support network. Understand what assistance you can find in a PEO and how it can support your business success.
What's a professional employer organization?
Professional employer organizations (PEOs) take care of your overseas HR requirements through a co-employment model. They support smaller businesses seeking to employ people in a country they don't yet have a physical footprint in.
A PEO partner can pay your overseas employees' wages on your behalf. It can also offer staff benefits available in larger companies, such as health subsidies and training. You can relax about foreign tax and employment regulations; a PEO takes care of these too. This enables you to focus on your core operations and staff at home.
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What is an international PEO?
An international PEO has similarities to a PEO, but it's geared toward companies that conduct business worldwide or expand operations to foreign countries. Another term for an international PEO is "GEO," which stands for "global employment organization." The two terms can often be used interchangeably, according to service provider Shield GEO.
The international PEO, or GEO, provides an invaluable service: allowing a company to do business in a location where it's not physically present. It provides the opportunity to operate locally without running into many common legal issues. International regulations vary around the globe, and the GEO would help your company remain in compliance.
An international PEO operates under a co-employment scenario. You work in conjunction with the global PEO, since you need to be registered legally in each country as a business entity. The PEO shares accountability for any employees you hire at the international location. As part of its services, the GEO would handle most HR tasks for the out-of-country location, including payroll, employee benefits and tax withholdings.
According to Safeguard Global, an international PEO is not the same as an employer of record. An employer of record doesn't act as a co-employer. Instead, workers are employed by the international entity, so the company can outsource for global talent.
Pros and cons of an international PEO
An international PEO has both advantages and disadvantages for business owners. Review all features of each service provider to confirm you're selecting the right type for you. You will also want to confirm any legal issues that could pose a problem in the future. Speak to a business attorney if you have any concerns about using a PEO to expand your operations.
- You'll have no need for a legal entity in the country of business. You can also avoid serious fines for noncompliance in a foreign country, according to Globalization Partners.
- An expert from that specific geographic location will handle your HR needs. This HR expert will understand the local payroll and tax laws and employee regulations.
- Legal protections are in place, since the international PEO provides co-employment.
- The PEO lends support to help you establish HR services in a foreign country.
- It permits international expansion. Many companies are reluctant to enter the global marketplace, but an international PEO makes the leap possible.
- According to global PEO provider New Horizons, an international PEO can reduce the startup costs you'd otherwise face in international expansion.
- Some companies may not want to enter into a legal agreement to offer co-employment. You may feel like you are giving up some control over your operations.
- Although co-employment is permitted in the United States, some countries don't permit the practice.
- Additional service fees may apply. International PEO services usually start at a higher rate than traditional PEOs do.
Working alongside a PEO
A PEO can take care of the needs of your staff abroad and make sure your business stays compliant. This frees you up to focus on your operations and responsibilities in your home country.
Employment laws and regulations can differ greatly abroad. You won't need to undertake extensive research to protect your business from penalties. Using an expert in this area will save you that time.
At a micro level, a PEO can undertake a full range of HR administration activities, to avoid incompleteness in your overseas employment records due to lack of knowledge and connection.
It's important for your business to land on its feet in this new work environment. Though you may only be hiring one person to gauge market potential, you'll have a number of new and complex laws to comply with. Again, a PEO will take care of many of these for you.
While your expansion is underway, it's crucial to mitigate risk where possible. Your first impression on a new market is important, and unforeseen financial penalties for noncompliance can be easily avoided. Besides support from an international PEO, you should also consider how other legal, financial and commercial representation could protect you from unnecessary risk.
Finding the right PEO for your business
PEO services can vary, as companies try to distinguish themselves. An employee leasing company, HR outsourcing organization and administrative services organization can all offer assorted overseas HR services.
Generally speaking, a PEO can provide the following services:
- Pay staff wages and employment taxes
- Report on and deposit employment taxes with the overseas authorities
- Act as the "employer of record" for certain overseas employment responsibilities
- Take responsibility for a specified level of employee safety
- Be responsible for staff compensation coverage for employees
- Support your business's compliance with overseas regulation
- Offer other HR services
You can identify the services your chosen PEO will take responsibility for (and to what extent) in the client service agreement. This agreement will clearly outline your responsibilities and those of the PEO. Once this is agreed upon and signed, the PEO can employ staff overseas for your business.
Notably, the PEO will need authority to undertake outsourced HR requirements such as payroll, for the purposes of complying with the foreign country's regulations.
Recruiting the right staff
A PEO's flexibility means you can get its support bringing on a staff member you've already found abroad, or it can carry out the entire recruitment process. Work with your PEO to identify your target talent.
Once selected, your overseas staff member will sign a co-employment contract. This contract will outline the roles of your business and the PEO. A PEO's expertise normally means that the onboarding process for your employees abroad is faster and smoother.
'Big company' benefits for overseas staff
PEOs are especially valuable for small and midsize businesses hiring overseas, as they can offer some benefits smaller companies cannot.
Local support, advice and engagement are important for overseas staff. This weight is taken off your shoulders when you work with a PEO.
Bigger companies can cushion overseas employees with health and dental insurance and training opportunities. Internal processes in areas such as safety, HR and risk management may be more structured and accessible. Your overseas employees may have a more comprehensive support network, reducing turnover among your staff abroad.
Leveraging PEO services will help you avoid feeling stretched in having to monitor and comply with overseas laws. Consider how a PEO can support your business's success in market entry.
Bridging cultural gaps
Soft skills are often underrated for businesses moving into new environments. However, they're key to building new relationships and ensuring client satisfaction.
When your business is expanding into another country, it's important to consider the culture and language differences you're likely to encounter. When hiring your overseas staff for your expansion, emphasize to them the importance of integration into new communities.
The populations of every country have different customs and ways of doing things that take time to understand. In business, you can bet that another country's workplace environment, expectations and behaviors differ from your own in some way.
Hiring overseas staff through an international PEO ensures your business can meet potential clients and partners on their terms and in the manner they're accustomed to. This shows that your business respects the customs of your new clients and stakeholders. An effort to bridge cultural or linguistic differences demonstrates your commitment to your expansion and to building enduring professional relationships.
An international PEO offers comfort to a business moving into vastly different social, professional and cultural landscapes. These organizations have the experience and etiquette knowledge for the country or countries they're working in. You can rely on their knowledge and soft skills to recruit the right employees and, if they're not local, support them through their inductions into a new environment.
International PEOs are a lifeline for businesses entering new markets. They can support your business at different stages of expansion ‒ whether you're interested in hiring just one person overseas to test your market viability or taking the leap and establishing a permanent presence in a new destination.
Make the most of what PEOs can offer. For small businesses, a PEO's international reach and company size offers security and support for your overseas staff. You can feel secure in the knowledge that an international PEO will take care of your employment needs and help you comply with local laws while you focus on the business at home.