International PEO & Employer of Record: What Is It? 

If you are looking to expand your business, relocate employees internationally, or hire employees overseas, you might want to look into hiring an international PEO. International PEOs will provide human resource services to your international employees and overall will save you time and stress.

What Is an International PEO?

An International PEO, or Professional Employer Organization, is a global employment solution that allows companies to hire qualified employees anywhere in the world as quickly as possible without having to initiate a legal foreign establishment. International PEO provides management services that come with hiring new employees, like handling benefits, payroll, and taking on any additional HR duties

A PEO acts as the employer of a company on behalf of the client, and hires employees on behalf of your company. For tax purposes, the PEO will be considered the Employer of Record and will oversee any global payroll or HR functions. This allows your company to focus solely on business objectives, without having to worry about things like double taxation or shadow payroll, while the PEO will handle the liabilities of being a local employer. 

How Does it Work? 

When your company partners with a PEO, you can save money by not having to set up a foreign establishment on your own. This will allow your company extra money to use towards move management services if you need to relocate your company.

To start, you will need to hire a PEO, who will then onboard employees for your companies in as little as two days. Your PEO will manage salary, social contributions, and expenses, leaving all HR responsibilities to a professional team. You will be able to maintain control of your employees and properly run your business, while the PEO will offer ongoing support to ensure the compliance of the employees and your company. 

PEO Services

What Are the Benefits of Using PEO?

There are many advantages of relying on an International PEO while globally expanding your company. 

Making Sure Employees are Correctly Classified 

A PEO ensures your employees are being classified correctly and that they are operating according to local labor laws. 

Saving Money

If your company decided to not hire a PEO and establish a traditional foreign entity on their own, it is likely that your company would pay close to $20,000, while also having to pay the annual costs of maintenance. 

When you hire a PEO, you will not have to pay such an astronomical price, since they only require a service fee and financing for your employees’ payroll. Having a PEO will greatly reduce your costs and time spent reviewing and approving employee contracts. 

Utilizing a Graceful Approach to Expanding Globally

When you use a global PEO, your company will be able to operate in a new market without the use of long term contracts. This will give your company a chance at discovering if remaining in that specific market makes sense for your company’s growth. 

Your company will have a better sense of local competition and how well your company’s service does within the new culture. It is wise to take cultural diversity into consideration when globally expanding your company in order to see success.

Having a Exit Strategy

Having a well thought out exit strategy is just as important as having an entry strategy when globally expanding your company. When using a global PEO companies, you will easily be able to exit the market without having to worry about the stress and costs that typically come with removing an establishment. 

What is an Employer of Record?

An employer of record is a strategy for a company to outsource talent globally without needing to set up a legal establishment in the country where the employees are located. An employer of record is similar to a PEO because it also helps split up the responsibility of payroll and HR from the everyday employee management. However, workers are completely employed by the employer of record, as opposed to PEO. 

The employer of record already has a business in the country that is registered, so the client organization can escalate globally. They can add workers in new markets without the stress of expenses and compliance risks that come with entity establishment. 

Frequently Asked Questions About Global PEOs

These are some frequently asked questions regarding global PEOs.

What is the difference between a PEO and Employer of Record?

A PEO is a business or company that partners with your company to provide human resource services like benefits, payroll processing, and tax filing. An employer of record offers most of the same services as a PEO, but is a full legal employer of the employee on the payroll.

How does global PEO work?

A global PEO handles all the functions a PEO typically handles, like benefits, payroll, and legal compliance, but specifically for employees that are located outside of the company’s country of origin. It is valuable to have a global PEO when expanding overseas so your company can hire employees in multiple countries.

Are PEOs valuable?

The strongest advantage of using a PEO is the increase in quality of benefits that it can help you to offer workers. This will allow small companies to offer high level benefits, like great healthcare plans and 401k options, that are typically only available to larger companies. 

How do you explain PEO to employees?

You can explain to your employees that the PEO handles the administrative functions and liabilities that come with having employees. PEOs handle benefits, payroll, tax administration, workers’ compensation, and HR tasks.

Why Should You Use an International PEO?

If you are either initiating global mobility or expanding your company overseas, having a global PEO can be valuable. Cultural expectations and regulations vary from country to country. Having a global PEO can help your company navigate through these differences and expand into a new market successfully.

Who Should Use an International PEO?

A company who is internationally expanding should use an international PEO to help navigate through the changes that occur when setting up your company in a new country. Offering cross cultural training to your employees is an important aspect of international relocation and can help your employees adjust to the change. 

Final Takeaway 

All of this might sound a little complicated. Understanding international PEO, how it works, and how to use it isn’t easy. If you need help looking for international PEO companies, schedule a consultation with ARC Relocation today and we’ll help walk you through it!