What is an International PEO?
Mis à jour le Monday 19 December 2022
A must for any company looking to hire employees worldwide, global PEOs simplify the process all while ensuring compliance. Here is what you need to know about international PEOs and how they can help you unlock new markets.
Many businesses are now seeking to expand globally and to explore new markets. Taking advantage of the technology at their disposal, companies are extending their teams and looking to recruit internationally to infuse their workforce with more diversity and talent. This approach is a wonderful way to create opportunities for growth and success.
It does, however, come with a few caveats as international hiring is not as straightforward as it may seem. Hiring employees in a different country is not only a complex, expensive, and lengthy endeavour, but it may be downright impossible without establishing a local business entity there. To this issue should be added the difficulties you may face with regard to overseas banking and currency conversion, as well as labour laws and taxes. Failing to comply with regulations, you may find yourself gravely liable.
This is where international PEOs (or global PEOs) and EORs come in. Designed to facilitate compliant hiring anywhere in the world, these employment partners help businesses gain access to the international talent pool. Let us delve deeper into how these solutions work, as well as the benefits of partnering with a PEO for international hiring.
What is an International PEO?
An international PEO – which stands for Professional Employer Organisation – is a global human resources service which allows businesses to benefit from a co-employment solution to facilitate global hiring.
Where it would otherwise require you to set up a subsidiary to be legally permitted to hire employees, a global PEO can take on this mantle for you. This grants you access to as many foreign markets as you like without any of the complications that typically come with adding local workers to your own teams.
Going through a PEO for international hiring means that you won’t need to worry about employment law compliance, global payroll, employee benefits, or any of the factors that make global employment so complex. Instead, you get to focus on what you do best and select your staff only based on their talent, assigning tasks to the most qualified member of your team, regardless of where they operate from.
What are EORs and GEOs, and How to they Compare to PEOs?
There is a common misconception which consists in equating international PEOs with other acronyms that describe similar but not identical services. Strictly speaking, a PEO – unless it is an international one – is not a legal employer. This means that non-international PEOs do not handle global payroll, hiring, or employment tax for companies wishing to hire abroad.
Instead, these traditional PEOs provide a solution for companies looking to outsource their HR within their own local area. Their status as co-employers allows them to offer such services as employee reviews, onboarding, as well as contract termination. Yet, their responsibilities do not include cross-border legal employment. For this, you will need to turn to a global PEO.
International PEOs – also referred to as EORs (Employers of Record) or GEOs (Global Employment Organisations) – are the only ones able to give you access to international recruitment. They can also handle global payroll and will make sure every aspect of the process is compliant in the country of hiring.
Why Entrust an International PEO with your Global Hiring?
Breaking into international markets can be as expensive as it is time-consuming for businesses, as very few resources are available to those wishing to achieve such a task on their own. And when it comes to expanding their team to encompass workers from several foreign countries, the roadblocks are often significant enough to deter them altogether.
Global PEOs operate by establishing legal entities in various countries around the world and provide a foothold from where they can manage local employment in a simple and compliant way on behalf of their partners. Thanks to the financial and legal systems they implement, complex procedures can be handled remotely much more effectively than through in-house solutions.
Expanding internationally poses issues in terms of payroll, insurance, background checks, taxes, timesheets, contracts, onboarding, employee benefits, and more. International PEOs take on the legal responsibility of all these matters while leaving the actual management of your global workforce up to you. From an operational perspective, your foreign employees are every bit as much part of your team as their domestic counterparts. While your global PEO ensures that every aspect of international hiring is legally compliant and practically convenient, you can focus on leading your workers, employee experience, and retention.
What are the Benefits of Using an International PEO?
Establishing and managing an international workforce is no easy feat. Yet, a global PEO can help you in some very concrete ways.
Global Expansion through a Single Partner
Although it is possible, having to find a dedicated partner for every country in which you wish to expand demands more time and effort on your part, ultimately defeating the purpose. Using a global PEO allows you to dispense with the hassle of dealing with several providers and facilitates your expansion into multiple regions of the world.
By selecting the right PEO for your international needs, you can outsource your legal and tax compliance verifications, global payroll, benefits distribution, and even HR duties and employee onboarding. As an Employer of Record, your partner effectively takes on all local employer responsibilities, ensuring that your operations are fully compliant everywhere you wish to establish a presence.
Legal Compliance in Multiple Countries
Your business may be absolutely legal in the country where your headquarters are located, but that doesn’t mean you can employ workers anywhere else. In addition, international employment laws are constantly evolving, making it challenging for companies to maintain compliance with the regulations that govern employment in their markets of operation. Ever-changing tax laws, local payroll regulations, employee benefits, and more factors still make it a complex task to employ personnel without incurring fines or penalties.
With the help of a global PEO, international operations run more smoothly and the risk surrounding legal compliance is eliminated. By establishing a legal presence across multiple international markets and taking on all the administrative responsibilities of an employer on your behalf, these experts in international employment law allow you to hire global workers in full compliance with local requirements.
Straightforward International Expansion
Exploring new business horizons is crucial for any brand seeking to grow and take advantage of new possibilities, and while no international expansion endeavour is without risk, the benefits usually prevail. But that doesn’t mean it isn’t worth minimising risks and taking the easier route. A more streamlined expansion process also means that you can take this opportunity to expand faster, further, or to better protect your current assets.
An international PEO will oversee and administer every aspect of local employment so you can focus on what you do best all while resting assured that your global workforce is justly and compliantly compensated. Because global PEOs know and understand local markets, they are in a prime position to help you attract talented individuals and grow your operations successfully.
Without having to manage the practical aspect of overseas HR, you can save much time and manpower and employ them to more constructive ends. Outsourcing global payroll and HR integration to and expert is a cost-effective way to expand quickly and compliantly.
No Permanent Entity Abroad
Some business owners opt to have a permanent establishment in every country where they want to operate. Yet it is important to know that having a fixed place of business means that corporate income tax will be applied to your profits.
It is also worth noting that, in many cases, the very presence of a business constitutes a permanent establishment. This leads unknowing business owners to inadvertently create an entity and potentially incur penalties or, at the very least, unexpected tax bills.
Operating through an international PEO allows you to do business in a country without setting up a subsidiary (purposely or otherwise).
Attractive Employee Benefits
Local experts know exactly what type of benefits to offer if you wish to attract and retain high-talent workers. Regardless of the size of your own organisation, the right international PEO will be able to recommend competitive benefits packages for your employees, including health care and supplemental benefits.
Offering employees guaranteed benefits that are typically available in their country is the least a foreign employer can do. A global PEO will help you select and administer these benefits in a cost-effective manner all while remaining compliant.
Who Can Benefit from the Help of an International PEO?
If you wish to pursue an international expansion without having to establish a permanent entity in every country where you wish to hire employees, then going through a global PEO or EOR is the best way to face the challenge. In some cases, however, their help is practically mandatory.
Enterprises
Breaking into international markets involves expanding operations across languages and time zones, broadening talents, and diversifying your team as never before, and international PEOs are there to support you.
Larger structures with a significant budget can consider building the kind of HR and legal teams necessary to expand to one, or perhaps two foreign countries. To unlock a worldwide market and talent pool without leveraging an immense amount of funds and time, however, partnering a global PEO makes more sense.
Startups
For startups, being able to secure high-quality, yet affordable technical talent can be of the essence. Partnering with an international PEO does not require your company to be a full-blown enterprise. It allows you to gain access to international talent pools even if your business is just starting out and makes it possible to start hiring foreign workers within just a few days.
Frequently Asked Questions
What kinds of companies can partner with an international PEO?
From tiny startups to large corporations, companies of all sizes can benefit from the help of an international PEO to expand their operations to new markets. Flexible and resource saving, this solution can apply to any structure wishing to hire abroad without having to set up their own foreign subsidiaries.
What types of services does a global PEO provide?
Global PEOs are there to allow businesses to recruit employees in countries where they do not have a legal presence of their own. From hiring to payroll, employee benefits, taxes, and legal compliance, every administrative and practical aspect of global employment can be managed by an international PEO.
What is the difference between a PEO, an international PEO, an EOR, and a GEO?
The term PEO stands for “Professional Employer Organisation”, whereas GEO and EOR stand for “Global Employment Outsourcing/Organisation” and “Employer of Record” respectively.
GEOs correspond to the international iteration of PEOs, which can otherwise operate domestically. International PEOs are also known as global PEOs or EORs.
What are the risks associated with having a permanent establishment abroad?
If you operate in a country where you do not have a legal presence, you are subject to permanent establishment risk. This corresponds to the risk that your company will be judged to be operating on a sufficiently permanent basis in a foreign country to be liable for corporate income tax. Mitigating this risk involves clarifying your tax status, which an international PEO can help you achieve compliantly.
Is an international PEO similar to employee leasing?
The relationship between the employee and your company is of a different nature when you opt for employee leasing than when you partner with an international PEO. With the latter, the PEO takes on the role of a company of record and manages all HR-related matters, including payroll, employment taxes, and employee benefits. This solution allows you to build a genuine relationship with the employee in question, who can become a true part of your team. Employee leasing allows you to temporarily lease an employee from another company with which you have an ongoing relationship, but not to fully integrate the employee as part of your own team.