If you want to recruit top talents - the world is your oyster. Best candidates can be found across the globe and when it comes to recruitment and selection, we truly are living in a borderless world. With the rapid technology advancement, the entire world becomes your talent pool, and you can seek the very best for your company. And many companies do just that - the global workforce is new normal. However, this opportunity comes with strings attached. The process of hiring foreign workers can be lengthy, complicated, and expensive. If you own a business and you want to expand internationally, you might need some help. Just a simple Google search can show you that there are organizations that can help you bridge the gap. They are just called differently than you think. Let’s dive deep into this issue.
What is an International PEO?
An international PEO is a term that got coined after the US market got very accustomed to PEOs - professional employer organization. These organizations are quite popular in the US market and they provide co-employment services. That means that they help companies with their staffing needs, but the responsibility is divided. The company takes care of employee’s day-to-day management, while PEO is in charge of HR and payroll. Both the company and PEO are legally responsible. When this need to outsource staffing processes grew bigger, and globalization became the everyday reality, the term international PEO was coined. However, there are two terms that are more appropriate.
Instead of using international PEO, it would be better to use a more accurate term - Employer of Record (EOR) or in some cases Global Employment Outsourcing (GEO). Why is that? One of the most important components of PEO is that the legal responsibility is shared and that both the company and PEO need to have a legal entity in the origin country of the new employee. This is not the case with international PEOs, and this distinction is quite different.
If you are interested in working with international PEO you can expect that they will assume the legal burden entirely. They will be responsible for the entire hiring process on the behalf of a company that is their client, once they decide to expand to the international market. Being in compliance with local labor laws, drafting contracts, processing payrolls… They assume all of the responsibility. Essentially, they do all the hard work. How can a company benefit from that?
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Why use an International PEO?
Expanding to new markets can be time-consuming, expensive, and very frustrating. Investing a lot of resources into hiring experts for hiring employees locally, educating employees, and getting familiar with the realities of the country you are expanding to can be more trouble than it’s worth. In-house solutions aren’t always the best fit. Global expansion is something every company dreams of doing. But it can also be its downfall. Unless they ask for help.
Global PEO, or better yet EOR, can take care of several very important steps when it comes to expanding to new markets. International PEO services cover every single step of an international expansion. They are responsible for the compliance, taxes, payrolls, background checks, timesheets, insurance, onboarding, employment contracts… Every single step in the process is their responsibility, legally and otherwise, since they are the legal employer and only theirs legal presence is required in the employee’s country.
Employee management, training, promotions, and task division remain the responsibility of the client. International PEO, also called global employment solution, doesn’t participate in this part of the employee’s life cycle within the company
Using EOR can help a company protect itself from legal repercussions, streamline its hiring process and improve the quality of the hire. In turn, this leads to a better retention rate, improves their overall performance and results, as well as employee satisfaction.
When to use a Global PEO?
If you are considering expanding your business to a new country, there is not enough research you can do that will enable you to be familiar with every single local employment law, tax law, compliance issue, and regularity. You will be liable to lawsuits and it will be difficult for you to have efficient hiring processes. If you are expending to a foreign country whose language you don’t speak, it will be even more difficult.
However, if you decide to cooperate with an international PEO, as a client company you will be able to outsource the entire process, no matter how complex it is. You can also do this if you are expanding internationally, to more markets, all at the same time. Your business doesn’t have to be impacted at all, and more expansions can happen concurrently.
Hiring a global PEO can be very cost-effective, a benefit that shouldn’t be neglected. New market entry can be a very challenging time for a company, and any method that helps spend fewer resources - time, money, and personnel should be taken into serious consideration.
It is important to note that international PEOs aren’t responsible for recruitment and selection. Although they in a way assume the role of the local human resources department, they don’t assume all of the tasks that are HRs responsibility. It would be better to say that they are in charge of the administrative part, and they aren’t part of any decision-making processes.
Although this type of cooperation can be great for hiring international employees, it can’t help you if you are interested in working with freelancers. EOR shouldn’t be your first choice if you are looking to hire independent contractors. International PEO is meant to bridge the gap when you are interested in recruiting full-time employees, committed to working exclusively for your company. If you want to hire employees to perform certain services only, take a look at our guide for hiring independent contractors.
How does an International PEO work?
Before you take the final step and decide that this type of cooperation is good for you, you should understand how the entire process works, and what can you expect. To begin with, you should know that the downside of this type of arrangement is that you, as a business owner, will lose some control over your employees. With control, you will also lose the headache that comes with it. Once you choose the country and finish the recruiting process, the rest is up to them. Workers’ compensation, respecting employment laws, filling out the necessary paperwork, health insurance, payroll taxes… They can even be responsible for the entire portfolio of employee benefits. All of that will be the responsibility of the entity you hire - International PEO, EOR, GEO…. However, you choose to call it.
Essentially, they will be hiring your employees, and in a way leasing them to you. This employee leasing means that you skip through the grueling administrative part and jump straight to actually cooperation with your global employee - training them and assigning them responsibilities.
Although there are many names for this type of partnership, the purpose remains the same. It allows companies to expand to global markets, improve their business, and enjoy the perks of a global talent pool without having to endure the difficult process of getting familiar with local laws, translating complicated regulations, and drafting contracts. It also frees the company of several relevant administrative tasks while making sure that there are no issues, legal or otherwise, with the international expansion. It protects company assets and interests while enabling growth and increase in revenue.
In order to achieve the best possible solutions, it is preferable for companies to do market research before any new market penetration, so they can make the best possible decision in regards to their global expansion. Once a destination is chosen, and new employees have been hired, international PEO can take care of everything else.