If you’re thinking about expanding and must hire staff to work abroad, consider partnering with an international professional employer organization (PEO). International PEOs offer comprehensive human resources services for businesses that want to support employees abroad without establishing a legal foreign entity.
Large and small businesses can benefit from international PEO services, which can help companies hire and maintain overseas employees. Plus, international employees can access the PEO’s benefits while enjoying a localized support network.
We’ll explain PEOs and international PEOs and share the benefits and downsides of using PEOs to expand overseas.
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What is a professional employer organization?
A PEO service provider is an outsourced human resources provider that can replace an internal HR department. PEOs partner with client businesses via a co-employment model, in which both parties share legal responsibilities and liabilities regarding the company’s employees.
Specific PEO services vary according to each client’s needs. Generally, a PEO handles HR functions for the business, including the following standard PEO services:
What is an international PEO?
An international PEO is similar to a regular PEO. However, international PEOs are geared toward companies that conduct business worldwide or that plan to expand operations to foreign countries.
Here are some quick facts about international PEOs:
- International PEOs facilitate global business. International PEOs provide an invaluable service: They help organizations conduct business and support employees anywhere in the world without having to register as a legal business entity in the country.
- International PEOs are not GEOs. International PEOs are sometimes confused with global employment organizations (GEOs). However, there’s an important difference: GEOs are “employers of record,” while PEOs follow a co-employment model. Employees sign employment contracts directly with a GEO. In contrast, PEOs sign co-employer agreements with their clients. Businesses can assign specific duties to their international PEO and handle other tasks internally. The business remains responsible for employee management and salary negotiations.
- International PEOs help businesses comply with local laws. International PEOs help businesses avoid common legal issues that arise in other countries. Employment laws and regulations can differ significantly abroad. However, you won’t need extensive research to protect your business from penalties and noncompliance fines. Instead, your international PEO will serve as an expert to guide your decisions and compliance.
- International PEOs mitigate expansion risks. While your international expansion is underway, it’s crucial to mitigate risk. A new market’s first impression of your business is invaluable. Your international PEO can help you avoid unforeseen financial penalties and reputational damage for noncompliance.
What tasks can an international PEO handle?
An international PEO can handle many HR tasks for your overseas location, including sharing accountability for any employees you hire abroad. Generally speaking, an international PEO can provide the following services:
- Pay staff wages and employment taxes
- Report on and deposit employment taxes with the overseas authorities
- Handle specific 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 regulations
- Offer other HR services
If you want to take your e-commerce business global, you have unique considerations. For example, you’ll need to partner with an international e-commerce platform, such as Shopify, to ensure a global-friendly website.
What are the benefits of working with international PEOs?
Here’s a more in-depth look at the benefits of working with international PEOs to help achieve geodiversity:
1. An international PEO can help you recruit the right staff.
An international PEO is an invaluable partner in the hiring process. The PEO can support staff members you find abroad or carry out the entire recruitment process. Your international PEO will work with you to add new team members seamlessly.
Once hired, your overseas staff member will sign a co-employment contract outlining your business’s and PEO’s roles. A PEO’s expertise typically makes the employee onboarding process faster and smoother. And for small businesses, a PEO’s international reach and company size offer security and support for your overseas staff.
2. An international PEO brings “big company” benefits to overseas staff.
PEOs are especially valuable for small and midsize businesses hiring overseas because they can offer specific benefits that smaller companies can’t provide, including the following:
- Comprehensive employee support: Local support, advice and engagement are essential for overseas staff. When you’re working with an international PEO, this weight is taken off your shoulders. Your overseas employees will enjoy a more comprehensive support network, thus reducing turnover among your staff abroad.
- Employee benefits: More prominent companies can cushion overseas employees with health and dental insurance and training opportunities.
- Easier compliance infrastructure: An international PEO will make internal safety, HR and risk management processes more structured and accessible for overseas employees.
3. An international PEO will help you bridge cultural gaps.
Soft skills are often underrated for companies moving into new environments. However, they’re vital to building new relationships and ensuring client satisfaction. Your international PEO can smooth your transition and bridge cultural gaps in the following ways:
- An international PEO helps you navigate cultural and language differences. When your business expands into another country, you must consider the cultural and language differences you’ll likely encounter. Your international PEO can guide you and help hire employees who understand the importance of seamless integration into the new community.
- An international PEO can help you create enduring relationships. An effort to bridge cultural or linguistic differences demonstrates your commitment to expanding and building enduring professional relationships. Your global clients will appreciate this and respond with loyalty.
- An international PEO understands local customs. Every country has unique customs. Your PEO understands local customs and international business etiquette and can guide your organization on respectful behaviors and reasonable expectations.
An international PEO guides businesses that are moving into vastly different social, professional and cultural landscapes. They have country-specific experience and etiquette knowledge and can recruit the right employees for the region’s workplace culture.
4. International PEOs help businesses enter new markets.
International PEOs are lifelines for businesses entering new markets. They can support your business at different expansion stages, whether you’re hiring one person overseas to test market viability or establishing a permanent presence in a new destination.
5. International PEOs can help you save money.
International PEO services have streamlined systems in place, so you pay only the base costs for expanding your business. Their knowledge about your chosen country of expansion can help you quickly overcome costly language, cultural and government barriers.
Additionally, working with a PEO is less expensive than moving an HR representative abroad, which would potentially require you to pay for relocation, housing, child care, transportation and tax equalization, as well as incur costs associated with language and cultural learning curves.
International PEO services can make it significantly cheaper to expand your business because they reduce the startup costs you’d otherwise face in international expansion and save you from fines incurred from noncompliance.
What are the downsides of international PEOs?
An international PEO has significant advantages, but there are also some downsides, including the following:
- You must give up some control. You may not feel good about entering a legal agreement with an international PEO to offer co-employment because it requires you to give up some control over your operations.
- Co-employment may not be permitted. Although co-employment is permitted in the United States, some countries don’t allow the practice.
- You’ll need to pay the PEO. While international PEOs can help expanding businesses save money, they’re not free. Your costs will vary according to the services you need, the PEO you choose, and the country in which you want to operate.
Hire a business attorney to assess any legal issues you may face when using an international PEO to expand your operations.
What are the best PEOs?
The best PEO service providers can help your business expand internationally or operate domestically. Consider these excellent providers, which are affordable, accredited and full of features:
- Papaya Global: Papaya provides PEO support and compliance to international businesses in more than 160 countries. The PEO helps employers quickly process global payroll and securely deliver payments to employees in any region. To find out more, read our Papaya Global review.
- Paychex: Paychex provides extensive legal compliance services for businesses operating in multiple U.S. states. It also offers customized PEO services and an intuitive interface. Learn more in our in-depth review of Paychex.
- TriNet: TriNet helps organizations build customized HR platforms to suit industry-specific needs. Check out our review of TriNet for more information.
- Insperity: Insperity helps businesses with payroll processing, payroll tax filing, comprehensive benefits administration, administrative HR functions, risk management, legal compliance assistance and more. For more information, read our complete review of Insperity.
Julie Thompson contributed to this article.