By Globalization PartnersMarch 2019
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When international expansion is your business goal, but borders are a hurdle, a global PEO (professional employer organization) is an elegant solution for bridging operational and service gaps.
Businesses today have more opportunities than ever to scale and expand into new international markets. Yet with those opportunities comes risk. Every nation and many regions have their own set of legal requirements for hiring, paying and managing employees. Does your team have expertise in them all?
How do you navigate compliant hiring, onboarding, worker classification, and payroll practices amidst country-specific labor laws, taxes, and regulations? Do you cross your fingers and hope for the best? Or would you instead partner with international-expansion experts whose sole purpose is lending burgeoning companies back-office peace of mind? A global PEO offers expertise your company can leverage for short and long-term success.
Table of Contents
- What Is a Global PEO?
- Why Use a Global PEO Model?
- What Kind of Business Uses a PEO?
- Benefits of a Global PEO
- Why Use a Global PEO?
- Expanding Internationally? Choose a Global PEO to Have Your Back So You Can Look Ahead
What Is a Global PEO?
Professional employer organizations provide back-office support for expanding businesses. Support services often include employee recruitment, onboarding, benefits administration, payroll management, and legal or regulatory compliance consultation. Global PEOs provide the same suite of services, only on an international scale.
Global PEOs deliver these compliant services through their networks of locally established entities, or subsidiaries. When you partner with a global PEO, you register as a co-employer within one of these PEOs’ in-country entities. Your employees in that country then go onto the PEO’s payroll, though they still work for you and only you. After enrollment, the PEO takes care of all employee-related HR and accounting work.
In addition to country-compliant payroll services, you receive access to your partner PEO’s ecosystem of back-office resources legally tailored to the nation or nations you’re now in. These resources may include:
- Expanded human resource operations to manage more payrolls, commissions, classification types, and documentation of new and ongoing international employees
- Legal and compliance experts to review contracts, worker classifications, labor laws, benefits packages, and more under the country’s laws
- International finance consultants to properly compile, manage, and file country-specific taxes and expenses
- Digital software supplied by the PEO, providing transaction support across all back-office documentation and reports you access anytime, from anywhere
Why Use a Global PEO Model?
A PEO model is the framework used by your partner global PEO to compliantly manage your workforce — so you don’t have to establish your own overseas subsidiary.
This independent, subsidiary-free expansion is one of a global PEO’s greatest advantages. Your company’s expansion plan won’t require significant infrastructure investment around the globe, which is expensive, laborious, detail-oriented, and ultimately reduces the likelihood of sustainable expansion.
Your global PEO partner’s model includes the actual tools, resources, and systems that make the PEO a day-to-day operational partner for international HR, legal, finance, and accounting work. That resource model will typically include the following:
- Global multi-country payroll and expense reporting software
- Benefits and paid-time-off administration
- Global talent acquisition, from candidate screening and onboarding to international employee training
- Lawful termination and employee dispute processes
- Compensation and benchmarking consultations
- Local subject-matter expertise, including regional counsel with some of the country’s finest law firms
When choosing a global PEO, it’s important to assess its model of services, determining which offerings complement your current in-house capabilities and if they offer everything you’ll need. Also essential to note are the levels of expertise a PEO has in your target country, and if they have experience in industries like yours. A perfect match isn’t always necessary, though it may provide more peace of mind in your earliest days of expansion.
What Kind of Business Uses a PEO?
Global PEO clients are usually seeking solutions for branch growth with reduced overhead and mitigated risk. That growth can be prior to, or in tangent with, your expanding global sales footprint or servicing strategy and requires hiring and managing international employees along different labor terms.
Businesses with a global PEO partnership achieve these goals without needing their own physical infrastructure built in every country where they’ve hired employees. They face fewer management demands, experience less risk, and ultimately save money across expansion efforts.
There are many businesses that benefit from partnering with a global PEO, such as:
- Companies scaling up quickly: Businesses with aggressive hiring plans on tailored timelines that wish to be competitive within their new local market often turn to global PEOs. PEO partnerships streamline the entity initiation process, meaning your business won’t need to open a new bank account, won’t need specific fund capitalization in that account, and won’t need to register as a lone entity with local tax authorities.
- Small to medium-sized businesses without in-house capacity: PEOs offer guidance across complicated tax structures, multi-country payroll administration, hiring protocols, and compliance challenges, plus assist in IP protection and navigating employment laws — things many small and medium-sized business don’t have the internal resources for. Organizations of this size can compete globally today — and often do — yet require assistance to take HR, accounting, and compliance burdens off their shoulders.
- Large companies that’d rather focus elsewhere: A PEO’s existing operations model translates into significant cost-savings, even for those who could manage international expansion on their own. PEOs also assist large companies in assessing proper entity classification types, guiding through extended HR activities, and lending expertise on the nuances of national and regional labor laws and tax compliance. In return, the client can focus on their core business operations, outsourcing the rest to their trusted experts.
- Any business looking to capitalize when opportunity strikes: Today’s globalized markets connect more people, more processes, and more products than ever imaginable at any other point in human history. Opportunities abound for organizations to push their boundaries — literally and figuratively. Global PEOs provide pre-set models to maximize interest or build momentum in new markets. They save organizations time and capital, and set them up for quicker expansion over competitors.
This list outlines just a few circumstances where organizations like yours turn to professional employer organizations. Your exact reasons for international expansion will determine if a global PEO is right for you. You should also learn how to screen and select the right global PEO services.
Benefits of a Global PEO
International PEOs can bring a range of cost- and risk-saving operational solutions to their client organizations. Those back-office benefits translate into a diverse range of advantages:
1. Smooth and Streamlined HR Outsourcing
Global PEOs provide turnkey HR infrastructure for your international workforce. PEO models minimize incongruent policies and practices across international workforces while still maintaining country-by-country plans, overseeing things such as:
- Payroll and Commission: Payroll and commission expectations vary across borders and cultures. These rules grow more complex depending on your industry and your employees’ classifications, plus other reimbursement technicalities such as job costing, job certifications, multiple employee pay rates, multi-state payees, holiday pay, overtime pay, bonuses, and more.
- Benefits Administration: Offering competitive and compliant benefits packages is one of the most significant recruitment and retainment strategies a company can employ. Yet building packages that are sustainable for the employer, attractive for the employee, and in line with local law can be challenging. What’s “beneficial” for workers in one country may not be for those in another. Your company’s in-house HR team can be overwhelmed by navigating benefits-related expectations on top of actual benefits laws, state-funded benefits programs, and more. PEOs provide your employees with locally appropriate benefits packages and insights and advice on how to design legal, fair and competitive offers.
- Onboarding: It can take weeks, if not months, for internationally expanding businesses to complete compliant end-to-end employee onboarding. You could spend hundreds of hours finding, screening, hiring, enrolling, processing, and then training new international workers to make positive contributions to the team. PEOs handle end-to-end onboarding with modules that are tailored, not prescriptive, to your in-country needs.
- Lawful Terminations: The majority of countries hold strict, state-outlined termination policies businesses must adhere to rather than handling terminations internally, as is standard in the US. For American companies, deciphering these policies is a particular challenge PEOs can take care of for you. PEOs can also process unemployment claims and review compliant worker contract terms.
2. Top-Tier International Finance and Accounting Operations
Many organizations’ finance and accounting infrastructure aren’t built to scale internationally. Global PEOs provide guidance and expertise across finance functions. They simplify your compliance burden in a domain where, if mishandled, it could spell serious financial penalties and possible litigation. They can manage:
- Salary and Compensation: Global PEO’s finance consultants help determine salaries, wage payments, overtime and holiday pay, bonus compensation and more, based on country and industry norms.
- Benefits Packages: Cost-effective and culturally informed benefits packages tailored to country-specific employees, from paid parental leave to travel stipends to retirement savings plans.
- Insurance: Global PEOs’ risk management experts assist in bolstering your company’s current insurance categories to match its new growth, as well as source in-country insurance providers for new employees.
- Group Rates: PEOs can potentially offer lower group rates for employer-sponsored benefits plans compared to rates you would find independently. As a result, benefits packages become more affordable and more sustainable.
3. Robust Legal Protection
Legal counsel opportunity costs are paramount when expanding overseas. Global PEOs help you protect your assets — and your reputation during these growth periods — without needing to hire additional, independent, or ad-hoc lawyers for every question or situation. They can assist you with:
- Labor Laws: In-country experts review your HR and finance operations to ensure in-country labor law compliance. You’re assured operations are transparent, documents accounted for, worker classifications correct, and many other labor-related regulations are met — all preemptively, not reactively.
- Investigations: A Global PEO’s legal network can set up return-to-work programs as well as initiate fraud investigations, if necessary.
- Document Review: Counsel can review formal labor and employee documents, contracts, and tax filings. A partner PEO’s lawyers can additionally help draft and review safety manuals or similar industry compliance publications when required by industry regulations.
Why Use a Global PEO?
Global PEOs are a single vendor for end-to-end international back-office expansion. No other organization type offers its range of services at the same scalability, for the same cost-competitiveness.
Still on the fence? Consider the additional reasons companies — from small businesses to Fortune 500s — turn to global PEOs.
1. Turn-key International Expertise
Few organizations have the time or resources for international subject matter expertise across every single back-office domain. Maintaining these experts in-house may be too expensive, too complicated, or misaligned with a company’s current priorities. Even large corporations must weigh the need for immediate expansion action with long-term sustainability and compliance, with global PEOs providing the intuitive solution for both.
Global PEOs mean clients get the international counsel and expertise where they need it, when they need it. Your in-house HR, accounting, and legal personnel then work smarter, not harder, across their own daily domains, procuring borderless operational alignment along the way.
2. Deferred Risk
Organizations expanding overseas face inevitable risk in doing so. Over 50% of surveyed executives cite legal, tax, and human resource complications as their primary international growth inhibitors. Even those with an established global presence already feel growth pains when navigating international tax liabilities, rates, and codes alongside new labor regulations.
A global PEO handles all this for you. Their entities take on all facets of compliance risk, as they handle back-office operations through their own long-proven models and systems.
3. Cost Savings
Working with a PEO helps companies avoid costly expansion oversights. Common growth pains can mean anything from incompatible HR document suites to training modules in the wrong language, incomprehensible to a new employee pool.
Many PEOs employ software to unify these tasks, ensuring new operations across borders don’t run into costly glitches, gaps, or missteps for the following demands:
- Increased Payroll: Hiring in-country talent in your expanded markets directly contributes to your ability to thrive in that new country. A harmonized payroll system keeps local employees paid according to local norms, following local regulations, and all payroll documents accessible in one place.
- Increased Tax Liability: PEOs help companies understand how they’ll be taxed under a country’s or municipality’s tax codes. Privacy-by-design software keeps this critical tax information secure, while records platforms assist in tax management and compliant filings. In-county or national subject matter experts provide oversight to navigate other questions in your new tax terrain.
- Increased Regulations and Laws: PEO network lawyers do the work of deciphering a country’s labor laws, writing contracts, and reviewing worker classification types. A PEO’s software suite maintains legal documentation as well as the proper subsidiary status as you grow.
4. Peace of Mind
Global PEOs are built to harmonize your operations no matter where they take place — optimizing for transparency, scalability, and security.
The results? You can be sure your business is crossing T’s and dotting I’s, focusing not on red tape, but on smooth, profitable, and fully compliant growth. You’ll have a partner whose success is linked to your own. Imagine the relief as your business achieves its expansion goals without:
- Getting buried in paperwork
- Setting up country-specific subsidiaries and registering with numerous local tax authorities
- Opening in-country bank accounts and funneling funding capital
- Vetting and hiring local attorneys, finance coordinators, and payroll companies
- Maintaining numerous, expensive ad-hoc document-management systems
- Running inefficient or impractical international employee onboarding programs
- Dealing with overstretched and overworked HR, finance, or legal staff
- Worrying over understaffed or underresourced HR, finance, or legal departments
Expanding Internationally? Choose a Global PEO to Have Your Back So You Can Look Ahead
Globalization Partners is an internationally recognized global PEO providing leading HR, accounting, and legal employer-of-records services — plus proprietary, privacy-by-design software to manage it all.
If you need help with global expansion, Globalization Partners’ Global Expansion Platform™ enables you to hire in more than 170 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.
Globalization Partners: we make global expansion fast and easy.
Take control of your company’s future. Get in touch with us today to strategize how you can expand across borders tomorrow.
For more information regarding global PEO, download our 20 Questions to Ask Before Choosing a Global PEO here: