Expand Internationally by Leveraging Local PEO Services

What is a professional employer organization?

A PEO is an outsourced HR provider that can replace an internal HR department. PEOs partner with client businesses via a co-employment model, in which both parties share legal responsibilities and liabilities regarding the company’s employees. The best PEO service providers can help your business expand internationally or operate domestically.

Specific PEO services vary according to each client’s needs. Generally, a PEO handles HR functions for the business, including the following standard PEO services:

• Payroll services
• Employment taxes
• Benefits administration
• Legal risk and HR compliance management
• Employee training
• Employee professional development opportunities =

“PEOs are in the business of employment and, with ever-evolving labor laws, tax requirements and regulations, many small businesses are overwhelmed trying to stay compliant,” explained Guillermo Triana, founder and CEO at Peo-marketplace.com. “PEOs provide expertise in navigating the HR compliance maze to reduce the risk of costly penalties and gaps in a company’s people operations.”

What is an international PEO?

An international PEO is similar to a regular PEO. However, international PEOs are geared toward companies that conduct business worldwide or that plan to expand operations to foreign countries. 

Here are some quick facts about international PEOs: 

• International PEOs facilitate global business: International PEOs provide an invaluable service: They help organizations conduct business and support employees anywhere in the world without having to register as a legal business entity in that country.
• International PEOs are not global employment organizations (GEOs): International PEOs are sometimes confused with GEOs. However, there’s an important difference: GEOs are “employers of record,” while PEOs follow a co-employment model. Employees sign employment contracts directly with a GEO. In contrast, PEOs sign co-employer agreements with their clients. Businesses can assign specific duties to their international PEO and handle other tasks internally. The business remains responsible for employee management and salary negotiations.
• International PEOs help businesses comply with local laws: International PEOs help businesses avoid common legal issues that arise in other countries. Employment laws and regulations can differ significantly abroad. However, you won’t need extensive research to protect your business from penalties and noncompliance fines. Instead, your international PEO will serve as an expert to guide your decisions and compliance.
• International PEOs mitigate expansion risks: While your international expansion is underway, it’s crucial to mitigate risk. A new market’s first impression of your business is invaluable. Your international PEO can help you avoid unforeseen financial penalties and reputational damage for noncompliance. 

What can an international PEO help with as your business expands globally?

An international PEO can handle many HR tasks for your overseas location, including sharing accountability for any employees you hire abroad. Generally speaking, an international PEO can provide the following services:

• Pay staff wages and manage employment taxes.
• Report on and deposit employment taxes with the overseas authorities.
• Handle specific overseas employment responsibilities.
• Take responsibility for a specified level of employee safety.
• Be responsible for staff compensation coverage for employees.
• Support your business’s compliance with overseas regulations.
• Offer other HR services.

What are the benefits of working with international PEOs?

Here’s a more in-depth look at the benefits of working with international PEOs to help achieve geodiversity.

An international PEO can help you recruit the right staff.

An international PEO is an invaluable partner in the hiring process. The PEO can support staff members you find abroad or carry out the entire recruitment process. Your international PEO will work with you to add new team members seamlessly. 

“Working alongside an international PEO allows a business to hire international employees faster without getting caught up in the complexities of establishing a foreign entity,” explained Damien Filiatrault, founder and CEO at Scalable Path. “Instead of spending several months looking into local legal obligations, partnering with an international PEO makes it possible to employ people in a matter of weeks.”

Once hired, your overseas staff member will sign a co-employment contract outlining your business’s and PEO’s roles. A PEO’s expertise typically speeds up and smooths the employee onboarding process. For small businesses, a PEO’s international reach and company size also provide security and support for your overseas staff. 

An international PEO brings ‘big company’ benefits to overseas staff.

PEOs are especially valuable for small and midsize businesses hiring overseas because they can offer specific benefits smaller companies can’t provide, including the following:

• Comprehensive employee support: Local support, advice and engagement are essential for overseas staff. When you’re working with an international PEO, this weight is taken off your shoulders. Your overseas employees will enjoy a more comprehensive support network, thus reducing turnover among your staff abroad.
• Employee benefits: Typically, PEO employee benefits provisions are robust. An international PEO can help your business offer benefits packages often associated with larger firms.
• Simplified compliance infrastructure: An international PEO will make internal safety, HR and risk management processes more structured and accessible for overseas employees. 

An international PEO will help you bridge cultural gaps.

Soft skills are often underrated for companies moving into new environments. However, they’re vital to building new relationships and ensuring client satisfaction. Your international PEO can smooth your transition and bridge cultural gaps in the following ways:

• An international PEO helps you navigate cultural and language differences: When your business expands into another country, you must consider the cultural and language differences you’ll likely encounter. Your international PEO can guide you through these challenges and help hire employees who understand the importance of seamless integration into the new community. 
• An international PEO can help you create enduring relationships: An effort to bridge cultural or linguistic differences demonstrates your commitment to expanding and building enduring professional relationships. Your global clients will appreciate this and respond with loyalty.
• An international PEO understands local customs: Every country has unique customs. Your PEO understands local customs and international business etiquette and can guide your organization on respectful behaviors and reasonable expectations.

International PEOs help businesses enter new markets.

International PEOs are lifelines for businesses entering new markets. They can support your business at different expansion stages, whether you’re hiring one person overseas to test market viability or establishing a permanent presence in a new destination. 

“Companies can test new markets with no long-term commitments by allowing international PEOs to handle payroll, taxes and benefits across borders compliantly,” Triana noted. “The result will be faster and more efficient global expansion with reduced risk.”

International PEOs can help you save money. 

International PEO services have streamlined systems in place, so you pay only the base costs for expanding your business. Their knowledge about your chosen country of expansion can help you quickly overcome costly language, cultural and government barriers.

Additionally, working with a PEO is less expensive than moving an HR representative abroad, which would potentially require you to pay for relocation, housing, child care, transportation and tax equalization, as well as incur costs associated with language and cultural learning curves. 

International PEO services can make it significantly cheaper to expand your business because they reduce the startup costs you’d otherwise face in international expansion and save you from fines incurred from noncompliance. 

“Without working with an international PEO, companies may incur excessive expenses, longer lead times and bureaucratic hurdles, making global expansion far more complex,” Filiatrault cautioned.

What are the downsides of international PEOs?

An international PEO has significant advantages, but there are also some downsides, including the following: 

• You must give up some control: You may not feel comfortable entering a legal agreement with an international PEO to offer co-employment. “It may lead to concerns over loss of control over internal HR procedures,” Triana warned.
• Co-employment may not be permitted: Although co-employment is permitted in the United States, some countries don’t allow the practice. 
• You’ll need to pay the PEO: While international PEOs can help expanding businesses save money, they’re not free. Your costs will vary according to the services you need, the PEO you choose and the country where you want to operate. 

Casey Conway and Julie Thompson contributed to this article.