If international expansion is on your radar, you’ve probably heard of international PEO as a possible avenue for adding employees in new locations around the world. Let’s get right to the point: a lot of the information out there about international PEO is incorrect.
That’s because the term “international PEO” has largely been co-opted to describe a practice that, when applied on a global scale, does not fall under the purview of a professional employer organization, or PEO.
What exactly is the Global Professional Employer Organization then?
PEO is an acronym for “Professional Employer Organization,” which is an HR service establishment in a company that manages employee payroll activities. A PEO typically employs experts in legal, tax, human resources, client service, and accounting.
The only difference between Global PEO and a PEO is that Global PEO services allow a partner company to hire employees globally without regard for legal boundaries.
How Does a Global PEO Function?
Now that you understand what a global PEO is, it’s time to learn how it works in a business.
Because these organizations frequently support companies’ international expansion, the services provided by global/international PEOs are often more extensive than those provided by domestic PEOs.
A professional employer organization (PEO) is essentially a company that provides employee and financial management services during processes such as international expansion or mergers and acquisitions (M&A). They will assist with critical obligations such as:
- Setup and support for entities
- International migration
- Payroll processing and administration
- Acquisition of global talent
- Management of benefits
- Employee vetting
- Consultation on global employment
PEOs work directly to support and expand a business in a new territory, covering the key processes that will be required in these circumstances. They can, for example, hire local talent to become employees of record in local entities, eliminating the need for the time-consuming task of entity setup. This also ensures that payroll processing, taxation, benefits, and insurance requirements are handled in-country by labor and business law experts.
The Advantages of PEO services
- Lower HR overheads
HR administration is time-consuming and expensive, particularly when attempting to establish a back office in another country. By eliminating the need to establish physical operations — including personnel — in your target country, using a global PEO for seamless employment management allows you to scale up your business in a cost-effective manner. It also keeps your internal HR team focused on activities that provide a higher ROI (ROI).
- Employer compliance and risk management
Global PEOs will create compliant employment contracts for employees and can assist and advise you on how to employ staff in accordance with local laws, regulations, and customs. When attempting to comprehend various concepts, this can be an extremely useful source of information.
- Easier payroll
You can avoid having to jump through the bureaucratic hoops of different target countries and the need to convert currencies for salaries and other payments if you use a global PEO to manage your payroll. Entrusting this complex task to experts at a global PEO lowers the risk of noncompliance when dealing with unfamiliar territories where the rules and regulations can be different and difficult to follow.
- Simple taxation
Aside from payroll, global PEOs can manage any tax requirements for each of the countries into which you want to expand, with a high level of experience and understanding. Withholding, calculating, and remitting payroll taxes and contributions to the appropriate authorities are examples of this. The PEO will ensure that everything is covered and in order.