So, you’ve made the decision to partner with a Global PEO to help manage your international workforce. That’s an important first step. But how well do you know your new partners?
The Global PEO model works, especially in today’s increasingly global business world. Partnering with such a company can significantly ease the burden on your organization as help you test new markets in new territories quickly.
But it’s important to understand your new partner’s roots—its “DNA”—to really understand what you’re getting when you sign on with a Global PEO.
This is because 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.
“It’s crucially important to understand the PEO’s DNA,” says Nicole Sahin, CEO of Globalization Partners. “The Global PEO industry is very young, therefore, before you sign anything, you should get an easy-to-understand origin story, a history of the company, its founders, and its areas of expertise.”
Here are the five questions you should ask—and the answers you want to receive—about a Global PEO’s “DNA” before you sign on the dotted line.
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 makes 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.
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?
The 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.
There are many other questions you should seek answers to when choosing a PEO. Download our eBook, “Not All PEOS are Created Equal: 20 Questions to Ask Before Choosing a Global PEO” to learn them all.