I’ve been talking to many of our clients and prospects over the past couple of weeks about their future plans for expansion, who they hope to hire and how that will benefit their organizations. Increasingly, I’ve heard a resounding theme from many of our prospects, “I never knew a service like this existed. The idea that we can expand into a new country in a few business days without setting up an in-house entity lets us expand into multiple countries quickly and easily.” So I started thinking that maybe there are others who haven’t heard of a Global Professional Employer Organization (PEO) or an Employer of Record who would benefit from learning more.
What is a PEO?
A PEO is a Professional Employer Organization. PEOs have been around since the 1960s in some form or another primarily in the United States and Canada. These organizations are concentrated in North America and primarily function as a co-employer in the U.S market. The reason companies use PEO services in the U.S. is to minimize health care and other benefit costs, and to offer “big company” HR solutions to a small and growing team without the administrative burden.
Often referred to as a co-employer in the U.S., a PEO becomes the employer of record for tax purposes and files paperwork under its own tax identification numbers. It is the designation of “co-employer” that allows the PEO to operate legally.
A Global PEO is a PEO that assists companies with expansion overseas. Companies which use Global PEOs can hire employees in as few as 10-15 days without ever having to set up an in-country entity. Globalization Partners differs from a U.S. PEO because we do not offer co-employment. We are 100% the employer of record, which keeps our clients from being legally engaged with a Professional. In our case, Globalization Partners helps U.S. companies expand internationally (if you are reading this and are a non-U.S. company looking to expand to the U.S., we can make a great recommendation). In essence, the client company chooses the local candidate, the Global PEO makes the hire and in most cases, the client company continues to direct the employee’s day-to-day activities. We are legally the employer of record, and 100% responsible for making the social security and tax filings and following all labor laws in-country. Use of a PEO internationally speeds time to overseas markets and saves staff time that would be used to set up an entity, administer foreign benefit plans, create and distribute payroll and maintain foreign entity structures including tax reporting and filing. In general, a Global PEO can help reduce the overall headache of expanding internationally.
Do Global PEOs recruit candidates?
Most Global PEOs do not recruit candidates. However, some may partner with agencies or recruiters who can help. At Globalization Partners, we leave choosing the perfect employee to our clients and assist when they are ready to make an offer. Hiring a candidate is not one dimensional. It is not as easy as “putting someone on the payroll”. Really understanding the needs of the client, the needs of their candidate and the circumstances of the hire are critical. Here at Globalization Partners, we give expert consultation on the terms required in local employment contracts, paid leave, insurance and other benefits and the whole host of intricacies that are part of the hiring and onboarding process. We do not advise on the exact salary or compensation details for any given candidate, as we are not experts in specific industries. This data is best sourced from salary surveys that aggregate data from multiple sources, or alternately, a recruiter. However, once the compensation package details have been agreed and documented, we pay the Professional according to the terms you would have, had you hired directly. We realize every client and candidate situation is unique and adapt our service to meet that need.
Can’t I just hire a Contractor in-country?
The short answer is yes. But the advice we give our clients is: don’t. Almost every other country in the world has very tight restrictions on employment and benefits. You can read more about that here. Most people hire in-country contractors because they are in a hurry and can’t set up an entity or payroll in time and don’t want to lose that perfect hire. A Global PEO can help get the candidate hired within days without creating unnecessary risk.
What if the employee resigns or I have to make a termination?
Most Global PEOs have a process in place for resignations and terminations. At Globalization Partners the process is usually easier than it normally would be because we’ve taken care of the details during the hiring process and ensured that the candidate has been employed via local market best-practices, and treated in accordance with his/her rights every step of the way. Being proactive in the hiring phase means less stress and headache should the employee resign or need to be terminated. Ending an employment relationship is never easy, but our team works diligently to make sure the interests of both parties are met and that the smoothest possible “breakup” takes place. We negotiate fair settlement on both sides to the best of our ability and in line with market norms and best practices.
Where can I learn more about how this works?