PEOs serve about 175,000 small businesses. Expanding your business doesn’t have to be demanding, expensive, and complicated. An international PEO can help you grow and expand your business without much of a hassle. But first, what is international PEO?
International PEO is a professional employment organization that operates on an international scale. They handle everything from recruitment, compliance, insurance, and workers’ compensation, among other things. International PEOs are the all-in-one solution for companies that are ready to brace an international frontier.
If this describes your company, then read on as we highlight everything you need to know about international PEOs. That way, you can decide for yourself whether an international PEO is best-suited for your global expansion strategy.
What Is International PEO?
PEO stands for Professional Employment Organization and is a human resource service for outsourcing outside your country. It’s a tailored service that assists companies to recruit and manage staff in other countries. You can think of it as a way of employing people from a foreign country without having the company in the country itself.
A PEO agreement involves three parties, the PEO itself, the client company, and the employees. The PEO acts as the intermediary between the company and the employees and, by extension, the country’s employee administrating body. This type of agreement is known as co-employment, outstaffing, white-label, or agency employment.
International PEOs provide a wide range of services for the client company. Some of the services these PEOs provide include:-
- Regulatory compliance
- Recruitment and staffing
- Payroll administration
- Payment of taxes and tax record-keeping
- Assistance with immigration, including compliance
These are just a few of the services that international PEOs offer their clients. There are plenty of other human resources services that they also provide, depending on the PEO you settle for.
How Do PEOs Work?
A PEO agreement or a co-employment agreement starts with a deal struck between a reputable international PEO and a client company. However, the client company or host company approaches a PEO for specific services depending on the company’s needs. Therefore the PEO will outline the scope of services the company requires from the PEO in a written contract that they both sign.
The PEO operates at the site of the client company. On the ground, the PEO is the official and legally recognized employer. This means it’s responsible for any recruiting, making payroll, withholding taxes, and furnishing employees with proper insurance coverage.
However, that doesn’t mean that the client company can kick its feet up while the PEO takes over everything. Far from that, the client company still has to manage the day-to-day company operations. That means the client must handle all the production, manufacturing, marketing, and other company activities.
A PEO will take care of the human resource aspect of your foreign company, but the rest is completely up to the client company. However, as mentioned earlier, the written contract will detail the exact scope of services so that nothing catches you off-guard.
Why Do Companies Need PEOs?
The U.S. has about 907 PEOs that have employed over 3.7 million people from around the world. This naturally begs the question, why do so many companies use PEOs?
The main reason is to outsource their human resource services when they expand to a foreign country. It saves them the hassle of having to deal with regulatory compliance and other administrative needs. As such, companies can focus on other important aspects of company operations to ensure a smooth transition into the new country.
Expanding into a new country is an uphill task, even for small and medium businesses. The bulk of the work is in human resources because there’s just so much to do. Apart from the initial recruitment, there’s also employee training, accounting, workers’ compensation, insurance, and much more.
By hiring a PEO, a company can save both time and resources when they grow and also minimize risks. Sometimes hiring a PEO can alter a company’s internal human resource structure. This may necessitate some reorganization in your HR wing and maybe other departments.
Advantages of Hiring an International PEO
Companies have much to gain from hiring an international PEO. Here are a few benefits of hiring an international PEO.
The most obvious cost of hiring an international PEO is a marginal decrease in your expansion expenditure. PEO service providers use their industry experience and broad network to lower administrative costs. This reduces the amount of money you have to spend on employment.
The PEO handles employee recruitment and training, which are also a financial burden. They also take care of compliance to help you sidestep any penalties or fines for breaching regulations.
Hiring a good PEO service provider ensures you set up your new company base quickly and seamlessly. That means you can start company operations as soon as possible, and start raking in the profits. If your new branch takes off well, you can make enough money to start another branch.
The likelihood of an employee to leave a branch managed by a PEO is very low. In fact, companies that hire a PEO has an employee turnover that’s 10 to 14 percent less than companies that don’t.
Saves Time and Resources
Hiring a PEO saves your company the time and resources you spend on hiring staff from abroad. That way, you can focus on the more critical aspects of business, like marketing and production. It also ensures you establish a strong presence in whatever area you’re expanding into.
An International PEO Is Great for Business
Now that you know what is international PEO, we hope you’ll have no second thoughts about hiring them. An international PEO will be invaluable for your global expansion projects. However, just make sure you find the right international PEO service provider to do your bidding.
Establishing your business in new frontiers is always an uphill task. However, you can check out other pieces on the site for incredible tips on growing and improving your business.