It all comes down “local reach.”
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? Through great local reach. How do Global PEOs achieve great local reach? 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 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.
Of these, which would 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.
If you’re investigating a Global PEO, be sure to ask these two questions about its local reach.
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.)
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.
There are many other questions you should seek answers to when choosing a Global PEO. Download our eBook, “Not All PEOs are Created Equal: 20 Questions to Ask Before Choosing a Global PEO” to learn them all.