Key Takeaways:
- An international PEO, also known as a global PEO or Global Employer of Record (EOR), is a company hired by other companies to manage the hiring of employees abroad.
- A local PEO / EOR manages HR functions within a specific country or region, whereas an international PEO handles employment responsibilities spanning multiple countries.
- When partnering with a global PEO / EOR, companies must consider its service offerings, local presence, pricing model, contract flexibility, and client experience.
What Is A Global PEO?
Global PEO, a global professional employer organization or global employer of record (EOR), helps companies expand quickly and legally worldwide without setting up a foreign office.
1. How Does A Global PEO Work?
When your company wants to expand into the foreign market without an entity, Global PEOs act as your official employer and take care of all the employer stuff, such as:
- Hiring and onboarding
- Handling payroll and benefits
- Managing contracts
- Local and government taxation
- Dealing with the global movement of employees
- Ensuring that everything follows the employment laws in each country.
2. Benefits Of Using Global PEO Services
International PEO and Global EOR services simplify global talent acquisition and expedite business market expansion, providing key benefits:
- Expedited market entry: Seamlessly establish operations in a new country, accelerating the time to market.
- Cost efficiency: Achieve substantial savings by reducing costs related to setting up and managing a foreign legal entity.
- Risk management: Avoid legal problems and protect your business, ideas, and employees.
- Talent retention: Preserve relocating employees by eliminating the necessity of establishing a new entity.
- Operational efficiency: Consolidate talent support services like onboarding, payroll, benefits, and regulatory compliance.
You can retain complete control over your business’s day-to-day operations while an international PEO handles HR tasks and employs your global team.
Domestic PEO vs. International PEO – What’s The Difference?
The main difference between domestic PEO and international PEO lies in their operational scope.
Domestic PEOs function within a specific country or state / province, whereas international PEOs extend their services across multiple countries.
While domestic PEOs typically offer lower costs, they cannot serve as employers of record. In contrast, international PEO companies assist businesses in expanding their markets and assume the role of global employers of record.
3 Signs Your Business Needs A Global PEO
International professional employer organizations are beneficial for businesses aiming to do the following:
1. Enter Or Leave New Markets Swiftly
International PEOs simplify companies’ setting up or exiting international markets. Partnering with an international PEO is a wise decision for companies that:
- They are still determining their duration in a market. Partnering with an international PEO allows companies to explore new markets and attract local talent without establishing a legal entity.
- Lack of the financial or internal resources needed for global expansion. International PEO partners solve the expensive and time-consuming issues of establishing an overseas legal entity.
2. Attract And Retain Top Talent Worldwide
Hiring staff for a new business overseas can take time and effort. However, teaming up with an international PEO, global EOR lets your company hire the best candidates quickly, regardless of location. For instance, an international PEO / EOR can seamlessly manage onboarding, payroll, benefits, and HR support if a US tech company wants to hire a software engineer in Spain.
3. Turn International Contractors Into Employees
Companies often hire international contractors for short-term projects due to their flexibility and cost-effectiveness. However, if the company desires to turn contractors into full-time employees, an international PEO, global EOR streamlines this process by:
- Checking worker classification
- Guiding competitive compensation
- Drafting compliant employment agreements
- Managing payroll for new employees
- Administering tailored benefits packages
- Ensuring adherence to employment regulations
9 Considerations When Partnering With An International PEO Company
Once you’ve decided to use international PEO services to help your organization grow, you must pick the right agency. Here are five things to think about when choosing:
1. Does The Global PEO Have A Local Presence?
Each country has its own laws for employers, employees, and tax regulations. For international PEO’s, global EOR’s to comply with these laws in other countries, they must establish a local presence, either directly or through a local partner.
Without a local presence, the international PEO may not stay updated on recent law changes and won’t be able to help your company hire and vet new employees on the ground.
2. What Pricing Model Does The Global PEO / EOR Use?
When it comes to pricing, global PEOs typically have two options.
A fixed fee for each employee, called the fixed price model, or a percentage of their salary. While both ways are valid, a fixed price model makes planning and predicting costs easier.
With salary-based fees, costs vary significantly between employees, countries, and positions. Knowing how much your company will pay the global PEO / EOR is hard. However, with a fixed fee per employee, your company can quickly calculate costs based on the number of hires in each location.
In short, Global PEO / EOR fees can vary, but they usually depend on how many employees you have and which services you need. Make sure to compare quotes for similar services. Experts suggest that PEO costs typically range from 2% to 12% of employee wages.
3. How Does The Global PEO Keep Your Data Safe?
How does the PEO / EOR keep your data safe? Before the EU’s strict GDPR rules, privacy and security were paramount in business. Payroll involves sensitive employee data, so knowing how a global PEO / EOR protects that data is crucial.
You should check if web transfers use secure HTTPS protocol and avoid sending anything through regular emails, which is risky for data protection. EORs should restrict access to data to as few people as possible. It’s not just about protecting your employees; mishandling data can lead to hefty fines.
4. How Much Flexibility Does The Global PEO / EOR Show In Employment Agreements?
Each company and global PEO / EOR has its own rules. But what happens when these rules clash? For example, will they let you offer extra benefits, even if it’s not their usual practice? Will they adapt to your needs if they only handle full-time employees but you need a mix of contractors and full-timers?
Some PEO’s / EOR’s are flexible, while others stick strictly to their contracts. Foreign companies sometimes feel pressured to accept the PEO’s / EOR’s rules, thinking they know best. But often, these rules are just preferences, not local standards. You’re better off with a PEO / EOR that collaborates with you rather than imposing their terms.
5. Does The Global PEO / EOR Have Experience Supporting Similar Clients?
Look at testimonials or referrals to learn about the clients of the PEO / EOR company you’re considering. Understanding their clientele gives you insight into the company’s focus and helps you assess if they’re a good match for you.
For instance, if a PEO / EOR mainly serves large Fortune 500 companies hiring a few managers abroad, they might not suit a small, remote-first company with a global workforce.
PEOs catering to big corporations tend to be more expensive and slower. Consider it: big companies have the time and money to spend on a lengthy hiring process, but small companies or startups might need more time. In contrast, PEOs tailored to startups typically offer faster processes like swift onboarding and offboarding.
6. How Quickly Does Global PEO / EOR Support You And Your Employees?
The quality of customer support provided by a Global PEO / EOR is crucial. Look for one that reaches out promptly upon sign-up, offers round-the-clock support, and provides flexibility through various consultation channels like phone, email, or WhatsApp.
Furthermore, check if the PEO / EOR offers your employees emergency assistance and support services. Picture a scenario where your employee faces health issues and seeks help from a local medical center serving PEO clients. Will they receive immediate assistance or wait hours to hear back from customer support in another country?
7. Does The Global PEO / EOR Cover All The Services You Need?
PEO’s / EOR’s offer various services, such as payroll technology, employee management, and HR advice. Select one that matches your needs to support your global expansion plans effectively.
ERA can help your company overcome the hurdles of global expansion. Our Global Employer of Record solutions are available in over 100 countries, and we handle compliance, payroll, and human resources for your global workforce.
Our EOR services save you time and money when expanding your business into new countries.
Contact us at contact@erastaffingsolutions.com to find out how we can support your overseas expansion efforts.
8. How Compatible Is The Technology In Use?
When you team up with a PEO / EOR, you gain access to their HR platform for managing various aspects of your human resources.
Inquire about the specific app or software they utilize and if you can have a preview. This enables you to assess whether these tools integrate smoothly with your existing technology ecosystem, including payroll management, time tracking, and compliance management.
9. What’s The Deposit Size?
PEO’s / EOR’s ask for deposits to cover potential payment delays or non-payment situations. They must ensure that employees receive their salaries regardless of payment issues. Deposits are a common way for PEOs to secure transactions.
Some may require a one-month deposit, while others may ask for three months per employee. This discrepancy can significantly affect your budget planning, so checking carefully is essential.
Frequently Asked Questions
1. What Does The P.E.O. Stand For?
PEOs, or Professional Employment Organizations, are occasionally confused with other outsourcing service providers offering similar or related services. These may include staff leasing companies, employee leasing companies, and managed payroll services.
2. Who Should Use An International PEO / EOR Company?
Global PEO’s / EOR’s are great for companies aiming to expand quickly into international markets. Companies, including startups and enterprises, use global talent pools to speed up hiring and establish a presence abroad.
3. What Services Do Global PEO’s / EOR’s Offer?
Global PEO / EOR’s companies help businesses expand internationally by hiring talent worldwide. They provide services such as global payroll, handling employment contracts, managing taxes, benefits, and insurance, and assisting with visa applications.
4. Do Global PEO / EOR Co-Employment?
No. When you team up with a global PEO / EOR, they become the only legal employer of your international worker, so there’s no shared employment situation. On the flip side, a regular PEO shares the employment relationship, where both the PEO / EOR and the client company are legal employers of their workers.
