Table of Contents
- What is Global PEO?
- The PEO’s DNA
- Local Reach
- Assessing Client Services
- Employment Expertise
- Administering Global Benefits
- Managing Your Global Workforce
- Tying the Whole Package Together
Chapter 1: What is Global PEO?
The traditional way of expanding globally doesn’t work anymore.
This is why: Let’s say you want to hire one person in France. This seems simple, but in today’s world, it’s actually incredibly difficult.
First, you’d have to own a subsidiary or branch office, which means you’d have to find a reliable local payroll company, accountants, lawyers, and HR advisors. Then, you’d have to wait until your entity gets a tax ID and a bank account. You’d also need to set up benefits, as required in France, and figure out which collective bargaining agreement (union) your employees fall under.
While this work is going on, you’re going to need to make absolute certain your brand-new entity is compliant with local labor laws. The liability of making sure all the details are covered falls on you—not the in-country partners you’re entrusting with this sensitive, complex process.
Finally, in six months, maybe a year, and after several thousands of dollars, you may be able to hire and run payroll in-country. This assumes that the employee you want to hire hasn’t already found another job.
Enter the Global Professional Employer Organization (PEO) and accompanying Employer of Record platform. The Global PEO acts as your company’s “Employer of Record” for all your international employees.
Using its local subsidiaries or partner companies, the Global PEO legally acts as the employer in any location. All local legal matters, including HR matters, are managed via the Global PEO, since the employees legally are employed via the Global PEO’s companies. The employees are assigned to work full-time and exclusively for you. Thus, you have a global workforce, without having to set up a complex global infrastructure.
Evaluating a Global PEO is much more complicated than evaluating many other go-to-market partners because setting up and managing an international workforce involves so much more than simply “putting someone on the payroll.” Drafting a compliant employment agreement—including how to structure benefits, avoiding unforeseen pitfalls with local working conditions, and working through the market norm best practices—requires deep expertise in any one of dozens—sometimes hundreds—of countries. Having a partner who can help you understand the nuances, see around corners, and prevent the inevitable bumps in the road is critical.
Within this eBook, you’ll find a list of the top questions to ask any Global PEO you are considering engaging. These are questions to help you uncover everything from hidden costs to the availability of advice, so you can establish what’s included and where there may be gaps.
Chapter 2: The PEO’s DNA
So, you’ve made the decision to partner with a Global PEO to help with your international hiring. That’s an important first step. But that was the easy part.
A Global PEO will serve not only as your company’s business partner, but a de facto extension of your organization. Remember, the employees you hire are on their payroll, not yours. They are responsible for meeting all the tax needs right down to the most local of levels. The Global PEO is also responsible for making sure your employees are paid on time, and that they feel the same level of respect and care you give to members of your team at your headquarters. When done well, the difference between your HQ employees and employees engaged through a Global PEO can be seamless. You’re required to put a significant amount of trust in your Global PEO—far more from a business capital perspective than you would any other business partner.
Here are the specific questions you should ask—and the answers you want to receive—before getting into business with a Global PEO.
- 1. Who started your company?
The Global PEO should be able to clearly explain its origins. If the Global PEO you’re considering is primarily a company with experience in payroll or other singular aspects of HR, it may be OK in that area but lacking in a variety of others needed to retain a successful global workforce and maintain a complex legal platform in an ever-changing global regulatory environment.
- 2. Who are your investors and what are their intentions/motivations?
The Global PEO should ideally be self-sustaining or at least set up to be successful long term. Too much venture capital or private equity financing may raise concerns. Your business will rely heavily on the PEO’s infrastructure, so it make sense to try to avoid working with a company whose primary motivation is to make as much money as quickly as possible in an explicit effort to sell to a new investor. Also, relatedly, you’ll want to ascertain whether the PEO has been around long enough to have sufficient cash reserves. In a high-growth industry, investing in a fly-by-night partner who carries the liability of multiple companies’ global payroll is very high risk. It takes capital to invest in the technology needed to sustain in this industry in the long term, and to secure the liabilities one takes on by engaging a global workforce on behalf of other companies around the globe.
- 3. What are your plans to build out the infrastructure of your Global PEO further?
The Global PEO should be invested in continued, sustainable success. This means, the Global PEO you’re talking with should be equipped with the following:
- An in-house client services team up-to-date on global expansion issues, based in
your time zone.
- The capability to manage complex issues that require high legal and technology
standards, such as data protection.
- A technology platform to assist your teams with payroll authorization, data
compliance, and other management or HR functions.
- Best-in-class IP protection and services.
The option to use a Global PEO to accelerate global sales makes it easier for companies to export technologies, goods, and services internationally, and take advantage of global markets.
- An in-house client services team up-to-date on global expansion issues, based in
- 4. Has your company been recognized by any third-party organizations as a leader in the PEO marketplace?
Simply put, the Global PEO should have won at least one award. Again, the Global PEO industry is very young with only a handful of truly viable players in the space. But, there are a variety of business awards, accolades, and citations (payroll, employment services, growth business) for which a Global PEO could be nominated.
- 5. What sort of costs should I watch out for?
Global PEO should be up front about their pricing, but it’s important to watch out for hidden fees. These typically relate to:
- A minimum term you’d have to continue paying even if a professional leaves;
- Additional percentage markup on foreign exchange (which can add several hundred dollars onto the monthly payroll), and;
- Value-added tax (VAT) charges. Find out if VAT applies and at what rate, as this can go up to 25% in Europe, for example.
Chapter 3: Local Reach
In theory, what a Global PEO does is simple.
A Global PEO is the employer of record for your international workforce, employees which you manage to execute your business needs. Operating your global workforce through a Global PEO affords you an elegant solution to a challenging problem not all companies are equipped to solve quickly: setting up the complex legal infrastructure traditionally required to hire internationally, and testing out geographies you’re not otherwise prepared or able to commit to from a time and resources perspective.
So how is a Global PEO able to do this so effectively? Two ways:
- The Global PEO owns its own recognized business entities in a large number of countries, and manages them through its in-house team—thus enabling lightning-quick onboarding and management.
- The Global PEO has trusted, reliable partners in-region to assist with the process, meaning the PEO essentially sub-contracts to partners in each country.
Of these, which would you guess is the better solution? The answer is easy: the first one. Here’s why:
A Global PEO, to even consider itself a viable option as a PEO, must have its own subsidiaries in the countries where it holds the abundance of its workforce. There are no exceptions to this statement. As a business, you’re relying on the Global PEO to get your employees onboarded as quickly as possible, and operating within full compliance of all local and national labor laws. The fastest path to onboarding and local compliance is to be working with a Global PEO with recognized business entities in the top markets in which global business is conducted.
Having in-house subsidiaries rather than sub-contracting gives a Global PEO more control over its end product—services quality, delivery of services, legal contract terms with your global workforce, and the assurance that the local entities are being maintained according to the standards a public company in the U.S. requires.
There is absolutely nothing wrong with a Global PEO having trusted partners at the local level. In fact, in many countries this is a necessity to getting started. But, to be sure you’re getting into business with a Global PEO that can withstand the test of time, the PEO must have a high percentage of its own entities compared to the percentage of local partners.
Be sure to ask these questions about local reach:
- 6. In which countries will my workforce be engaged via sub-contracted partners vs. your in-house subsidiaries?
The Global PEO should have between 60% and 75% of its professionals working within the Global PEO’s own previously established, government-recognized business subsidiary. (Due to legal issues related to ownership of entities, it is unlikely that any Global PEO will be at 100% for many years.)
- 7. How do you choose your partners in each country, and how long have you worked with them?
Remember, the professionals execute work for your company but are on the payroll of the Global PEO, so you should view the Global PEO’s partners as your partners. Ideally you want to be working with a top-tier Global PEO with extensive international experience. The Global PEO should have a sound internal vetting process when it comes to third-party partners, and they should consider themselves responsible for the decisions of their partners.
Chapter 4: Assessing Client Services
Client services is arguably the most important component when it comes to weighing your Global PEO options.
Because once you get involved with a Global PEO, that company becomes the Employer of Record for your employees. In other words, that company becomes an immediate extension of your business, and represents your company culture. When problems arise, you know you’re going to need to connect with the client services team at your Global PEO partner.
But how accessible is this team?
Assessing client services at a Global PEO starts right at the beginning. Your first few interactions with a Global PEO should revolve entirely around client services functions such as setting up employment contract terms, appropriate benefits packages, and the ability to negotiate with local candidates while staying within the local and national rules of engagement (laws).
Exemplary client services are really what you’re paying for when it comes to vetting a Global PEO. Because if you can’t reach the people you need in an emergency—and if you can’t trust that team to get you the correct answers to important questions—you’re exposing your organization to thousands of dollars in legal costs, business penalties, or possibly a lawsuit.
A high percentage of the Global PEO’s leadership should ideally be made up of lawyers with specific experience in international labor law. This ensures the Global PEO’s client services team is appropriately trained and will be able to service your needs as they spring up—which they will.
There are so many answers you’ll want from just this aspect of any Global PEO business. Here are the key questions you should ask when it comes to client services:
- 8. What assistance do you provide in helping us create legal, compliant employment contracts?
The Global PEO should understand the precise circumstances for the hire, as well as the country, and advise your team on best practices.
- 9. Do you have a dedicated team available to help answer my questions?
The Global PEO should assign a dedicated, experienced team to assist with all questions large and small.
- 10. Where is this team based? In my time zone or elsewhere?
The Global PEO should have locally based, regional teams in place who speak the local language and can help your employee with any questions he or she may have in their time zone.
- 11. How do you work with my candidate during the onboarding process?
The Global PEO should follow a standardized process for onboarding each employee, including making sure the candidate understands the Global PEO’s role and feels cared for as a valued member of the team.
- 12. What controls are in place related to payment of payroll and ensuring my global team is paid on time?
The Global PEO is legally on the hook to pay the client’s employees irrespective of whether the client pays the Global PEO. For this reason, their contract with you should carefully consider and balance this risk, to ensure solvency of the business. Additionally, the Global PEO should be able to boast a 99.9% (or higher) payroll accuracy rate.
Chapter 5: Employment Expertise
The Global PEO you sign up with needs to be built on a core foundation of expertise in employment law in just about every country in the world.
For example, in the Philippines, it’s customary to offer a bag of rice to an employee as an annual benefit. In the Netherlands, if an employee is injured on the job the company is on the hook to pay the employee approximately 91% of base pay during the first year after and 80% of base pay during the second year.
There’s much more:
- Payroll and commission structures vary widely country to country and differ significantly from the U.S.
- Mandatory benefits are sometimes difficult to decipher and can be overwhelming to a U.S. HR team
- “At-will employment” is exclusively a U.S. concept, making termination extremely challenging internationally
Laws are always changing. It’s critical that a Global PEO’s in-house experts can keep up with constant change.
The Global PEO should rest on the foundation of employment and HR expertise. Understanding the difficulties that come along with managing a large and disparate workforce is a core element of what a Global PEO should do well.
There are numerous HR-related situations that can come up at any given moment. Ask the Global PEO you are evaluating the following questions to test whether they can handle whatever is thrown at them—and ultimately, at you.
- 13. In the event of a termination, who will be my primary point of contact?
The Global PEO should have an upper management structure with at least a decade of experience in global employment and human resources management. In addition, a proportionate percentage of the leadership team should be attorneys with international labor experience. (See “Assessing Client Services” for more on this topic.)
- 14. Do you have in-country team members who can assist my professionals in their language and time zone?
The Global PEO should have locally based, regional teams in place who speak the local language and can help your employee with any questions he or she may have in their time zone.
- 15. Is there a charge every time I need to talk to the Global PEO’s team?
There should be no extra charge to talk to the team of experts. It should be included with the overall cost of doing business with a Global PEO.
Chapter 6: Administering Global Benefits
When managing a global workforce, simply stated: There is no one-size-fits-all solution when it comes to benefits.
Each country—each local municipality—has its own set of unique benefit requirements, making offering benefit programs to international professionals a challenge for a benefits administrator.
For example, Germany uses a “top up” system, which means the government provides adequate benefits to professionals (typically including medical, dental, and vision coverage), but that companies may be expected to add supplementary benefits often depending on seniority or other factors.
It’s this way in much of Europe with many countries offering state-provided health care entirely. In fact, high-end medical benefits are a point of continental pride in the EU.
And in Asia, there is a set of culture norms which a U.S. company must learn and abide by as it pertains to offering benefits. In the Philippines, it is typical for an employer to offer a monthly allotment of rice to the employee, for example.
Technically, the Global PEO should be your one-size-fits-all solution to this most challenging of HR problems. The Global PEO should have a set of solutions to satisfy the requirements—be they statutory or cultural—in every country per every professional you hire.
- 16. How can your team help me understand what benefits are statutory and what are market norm in a country?
The Global PEO should review the specific hiring circumstances and advise you on what’s best. For example, you may not want to offer benefits in Australia as those benefits are viewed by authorities as a taxable benefit to employees. Every hiring situation is different. The Global PEO should guide you on what’s best for the employee with the least amount of risk.
- 17. What benefit plans do you provide beyond those that are statutory?
To the extent that you hire with a Global PEO in multiple countries, the Global PEO should be happy to outline what is recommended that would best match up in each country to your U.S. plan (while reflecting the local market realities), so you have one plan you can justify to your global team.
- 18. What are the costs for those benefits?
Benefit costs vary by country but should be included in the total investment cost you’d make per professional.
Chapter 7: Managing Your Global Workforce
Data compliance is the oncoming storm of the international human resources world.
Governments around the world are taking the issue of employee data privacy very seriously–with major consequences for those who don’t comply. Time is truly of the essence for companies as it pertains to meeting this critical deadline in Europe and beyond.
Most anyone involved in HR, charged with the task of processing employee data, would agree that the most difficult aspect of the job is keeping on top of the endless emails, spreadsheets, and the patchwork of tools needed to ensure payroll and the proper administration of benefits to the correct employee stays on target. These solutions can be a lot like trying to patch a hole in the roof with Scotch tape once, twice, (sometimes four times) per month, when, really, a brand-new house is needed.
A lack of proper and compliant data security is about to carry consequences far beyond what already exists, especially for those who employ a segment of the company anywhere in the European Union. In April 2016, the EU Parliament passed a sweeping data privacy regulation called the EU General Data Protection Regulation (GDPR). The regulation, which will begin to be enforced May 25, 2018, tightens an already strict law governing how data is stored in every country in the EU.
You don’t need just any solution to manage GDPR, you need the best solution to manage data compliance in every country. When it comes to this critical issue, have these questions ready for any Global PEO you are considering as it may be the most important question you ask!
- 19. How do you follow data security requirements?
The Global PEO should at a minimum use secure email when necessary. Additionally, the PEO should closely examine the laws governing data compliance in every territory in which your company will hire employees. It’s a manual process when done this way, but utterly necessary to avoid massive monetary penalties.
- 20. Do you have software where all our global workforce data is maintained?
This is a bit of a trick question – that’s because no Global PEO can sufficiently say that they do. Globalization Partners is the only company in the Global PEO space that has a software platform designed to operate in full compliance with all international data privacy rules, regulations, and laws.
When a termination means sending someone home to a war zone
The termination of a Syrian national in Qatar would have had dire consequences if not for the high level of experience and expertise of Globalization Partners’ client services staff.
A client of Globalization Partners hired a Syrian national as its vice president of sales for the Middle East. The position was based in Qatar. Oil accounts for more than 60% of Qatar’s GDP, and much of the country’s economy is run by expats. Arab-speaking men are in high demand as sales leaders in this country, so the client felt very fortunate to have found the perfect candidate.
After about a year of the arrangement, the client felt that the employee was unable to sell as much locally as it had hoped, and perhaps the market was not as good as expected. The client decided it would have to terminate its relationship with the employee and pull out of Qatar.
Luckily, this was easy to do with our Global Employer of Record platform since the client did not have a branch or subsidiary in Qatar and could simply ask us to terminate the employee. However, when a work arrangement ends between a visa-holding employee and an employer in Qatar, the employer is responsible for sending the terminated employee back to his or her home country within seven days. To this point, the Syrian national working in Qatar for the client had been in Qatar for almost a decade. The employee had a home in the country and children in Qatari schools. Additionally, and most importantly, sending the employee back to his country of origin would mean sending him to Syria—directly into the throes of the country’s ongoing and incredibly devastating civil war.
How Globalization Partners Helped
Globalization Partners initially recommended that the client inform the employee that the position would be terminated with time, but that they would allow the employee additional time to find another job. This way, the employee would be eligible for further visa sponsorship through a different employer and would not have to immediately leave the country. This seemed feasible for a while, however, the employee was unable to find a new position. Ultimately, the situation became financially untenable for the client; waiting for the employee to find a new role was no longer an option.
Globalization Partners, which sponsors the work and residence permits of employees of our clients as part of our routine employer of record services, offered a special dispensation to this employee based on the extremely unique circumstances of his termination.
By negotiating with the local immigration authorities in Qatar, our client services staff worked diligently on behalf of the client and the employee to find a humane solution, and to ensure that the employee could secure visa status in Qatar without an employer visa in the event of the inevitable termination.
Specifically, Globalization Partners reached out to our local legal team as well as the local legal immigration bureau to determine what might happen if the termination were to play out without additional intervention. Our client never had to have a late-night call across time zones, nor did the client have to do research into this rare and unprecedented situation.
We provided a solution such that the client could graciously exit the employment situation and terminate the employment relationship without sending the employee home to a war-torn country in which the employee hadn’t lived for over a decade. We would never have sent the employee into an unsafe situation, and we knew that both the client and Globalization Partners would have to invest heavily in the right solution. Because we treat our clients’ team members as we do our own, we took a tremendous amount of responsibility for this team member. We did not treat the employee as if he were just another person “on our payroll.”
Termination of employment comes with a variety of far reaching issues for both employer and employee, which are much more meaningful than simply the end of a paycheck. These issues are compounded when visas and expats are involved. In this case, Globalization Partners, in conjunction with our client, found ourselves going from a somewhat routine employment situation, (the end of a contract), to a situation with dire humane consequences for a soon-to-be terminated employee. Because of our DNA as a Global Expansion Company, we knew to be careful in this situation, and navigated it much more carefully than a company may have if they simply viewed employer of record solutions as an “add-on service” to payroll.
Chapter 8: Tying the Whole Package Together
Choosing to work with a Global PEO to assist your company’s global expansion is a smart decision.
But choosing a Global PEO is unlike any other partnership choice in business. That’s because your business and the Global PEO you choose will be intertwined from the moment you sign the contract.
It’s vital for you to deeply consider all the questions posed here. Your team is the lifeblood of your company—as with your U.S. workforce, you know a major key to your company’s sustained success is keeping your professionals happy. This means meeting payroll on time, every time; this means providing employees with the right benefits packages; this means having the ability to manage responsibly at your fingertips.
Often, when it comes to a global workforce expansion, you find that you don’t know what you don’t know. The Global PEO industry is becoming a thriving services sector that will only continue in relevance as the business world becomes more globalized. Having a thriving business is great. Deciding to test an international market is tremendous. Making the smart call to work with a Global PEO that has the deepest experience, strongest team and most expertise to help you expand with absolute confidence is the best decision you can make.
We want you and your employees to have the best international experience possible. We hope that providing you with this information helps in that effort.
If you need help with global expansion, get in touch with us today. Globalization Partners’ Global Expansion Platform™ enables you to hire in more than 187 countries within days, and without the need to set up costly international subsidiaries. You identify great talent anywhere in the world, and we put them on our fully compliant global payroll—lifting the burden of global corporate tax, legal and HR matters from your shoulders to ours.
For more information on international expansion, download our eBook 10 International Expansion Mistakes to Avoid here: