An International PEO is introduced in the employment world to ease the global hiring process of businesses trying to expand internationally. International PEO is not a co-employment of international employees but is a service similar to an employer of record service (EOR) to onboard resources without having an entity in a foreign country. Basically what an International PEO does is to help businesses set up a fully functional and legally thorough international remote team without the need of setting up an entity in the country a company is hiring from.
Let us take a closer look at how an International PEO actually works, what is the difference between an International PEO and other closely related employment models, what are the requirements to collaborate with one of them, the benefits of collaborating with them, and how to build a dream team with the help of them.
What is an International PEO?
International PEO is an employment service that helps companies with the compliant hiring of international candidates from anywhere in the globe without setting up a legal entity in that country of the candidate. It saves companies from HR and legal hassles involved in the recruitment and maintenance of international candidates. An International PEO manages complex processes like international payroll, onboarding and offboarding of the candidates, dealing with conflicting local labor laws of the hiring country, employee engagement and employee retention, and many other related operations. The HR tasks can often be finicky especially when a business is dealing with international candidates and employers have to be particularly expert in handling individual HR issues all by themselves.
Employers may find themselves in the middle of nowhere with this humongous responsibility and miss out on stellar candidates. Fortunately enough, there is an employment model (International Professional Employer Organization) at hand whose expertise will not only eradicate this operational conundrum but also make these tasks rudimentary in the global expansion process of a company’s workforce.
This legal employer for a company’s global workforce along with all the compliance and administrative heavy lifting, comes in handy to manage the employee benefits, contracts, and taxes at a very cost-effective budget. The International PEO employment service is however frequently confused with other interconnected employment services such as global PEO, domestic PEO, and global employer of record (EOR).
While each of these services is responsible for hiring and managing an organization’s workforce, there is a thin line between these three-letter employment acronyms and the terms and conditions for the individual models vary greatly from one another.
International PEO vs. PEO
International PEO
International PEO has its roots in a PEO and acts as the sole legal employer for your business.
An International PEO model is associated with hiring international candidates or handling their employment contracts.
An International PEO caters to businesses aspiring to build and manage an international remote team.
With an International PEO, there is no need to have a legal entity in another country as it acts as the Traditional PEOs are the domestic version of the model. Traditional PEOs do not act as the sole legal employer for your business.
PEO
Traditional PEO is a co-employment model that takes care of the outsourced human resource services for the local workforce.
A PEO is solely responsible for managing the payroll, health benefits, onboarding, and other administrative tasks for local employees.
Collaborating with a PEO does not change the employment dynamics of your local teams. You are still the legal employer for your team and is responsible for all compliance matters.
Employer for all your hires with shared compliance risks and responsibilities with the PEO.
International PEO vs. Employer of Record (EOR)
International PEO
International PEO offers similar solutions as an employer of record (EOR) to businesses expanding internationally.
International PEOs are focused on hiring and onboarding international employees while managing payroll and benefits for the hired employees.
Employer of record (EOR) is a more popular and commonly used terminology.
Employer of record (EOR) has similar terms and conditions on the working models as an International PEO.
Employer of Record (EOR)
Employer of record (EOR) provides you with some added assistance like IT and infrastructure support, customized employee documentation, etc.
The terms International PEO and employer of record (EOR) are synonyms in their literal meaning and are often used interchangeably.
What Do International PEO Companies Do?
International PEO companies help businesses explore new opportunities in emerging global markets by assisting them with a full spectrum of services. International PEO companies support businesses in expanding their workforce without any geographical constraints by abiding by all foreign laws and regulations.
They manage the entire legal payroll on a company’s behalf which involves international taxes, timely salary for every employee, and miscellaneous financial liabilities for international employees. Even a slight negligence of the payroll system can lead a business to reputational damage and in worst-case scenarios to potential compliance risk but International PEO companies cover it all for it.
However, the core essence of partnering with International PEO companies is that they become the heart and soul of human resources of a business along with saving time and money in the process. With their vast network and strong hold on the international markets, International PEO companies work way smarter and faster than any other employment model.
An International PEO has access to a diverse talent pool that is excellent at their jobs yet available at a very economical salary range. International PEO companies also save businesses from unnecessary legal fines due to non-compliance, on-time payment failures, or workers’ misclassification.
Benefits of International PEO Services
Let us elaborate on a few of the major benefits of International PEO services from the large stack of benefits offered by them to growing businesses.
Speedy Expansion
It is very important to stay ahead of the competitors to have the early bird advantage while a business is testing international waters. However, complex and never-ending paperwork may slow things down for the business. International PEO services bring in the expertise required to speed up the process while staying compliant with all international laws and regulations.
Expertise in Local Laws
Local employment laws can be more complex than ever and only experts doing full-time jobs can handle such catastrophic processes without any loopholes. It is almost impossible to gain knowledge about such vast labor laws of a foreign land, let alone to execute them properly.
Non-adherence to such laws can cause a company heavy penalties and even ban it from doing business in that country. An International PEO company shields it from all such unpleasant circumstances and keeps the business fully compliant with international legal codes.
Budget-friendly Process
Building a workforce from scratch in another country mostly gets heavy on the pockets as there are multiple investments and hidden costs associated with it. The expenses typically involve recruitment cycle costs, the cost of onboarding highly qualified professionals into the team, employee training expenses, employee benefits expenses, tax equalization expenses, etc. An International PEO company reduces expenses through efficient management of employee-related operations.
End-to-end Support on HR Operations:
International PEO services take the entire responsibility that a full-house HR team of any organization would have taken. It covers HR functions like international payroll solutions, employee engagement, employee training, taxes, and employee retention among others. The monstrous amount of time and burden that an International PEO company takes off the shoulders frees a company up to focus on other analytical business services.
Access to a Large Talent Pool
When building a remote workforce with highly qualified professionals from a new location, there is no better formula than leaving it up to the global hiring experts. International PEO services have a full hand on unique and exclusive candidates in the talent market.
They are called the talent hunters in the hiring world and rightly so. For example, Remunance has been serving more than 100 clients across 16 countries and has been building dream teams of global experts since its foundation.
When to Use an International PEO?
Small and medium-sized businesses that are aiming to grow bigger and potentially expand their teams in foreign locations can engage with an International PEO. It helps them to access the less expensive talent pool outside their own country. International professional employer organizations are for those organizations who plan to build a fully operational remote workforce in another country but do not want to go through the hassles of setting up a legal entity in a new and unknown location. Additionally, International PEOs are also used for converting existing contractors or freelancers to permanent employment. Let us discuss the reasons for using an International PEO in detail:
Swift Entry and Exit in Global Markets
An International PEO acts as the perfect guide for organizations that have not planned a period of stay in the new location and are just experimenting with the business market. In such cases, investing in a legal entity financially and emotionally may feel premature.
An International PEO allows a business to be less committed here and takes on the operational responsibility in the new country for it. This way the business can enter the new market without much paperwork or legal hindrances and exit the market as and when required if it does not work out for the business.
Moreover, setting up a whole new entity in an international land can go over budget for some businesses. Many businesses become wary of the cost and time involved in the expansion process and step back assuming undesirable consequences. An International PEO provides such businesses an opportunity to grow in an international market on a low budget.
Recruit Top Talent and Set Up Entity Simultaneously
Sometimes businesses that are on their way to legally establishing an entity in the target country halt their recruitment process and other business functions due to compliance risks. Additionally, they need to focus on the entity build-up process as it is a full-time and complex job per se.
An International PEO partner, being aware of the nuts and bolts of local business laws eliminates all the compliance risks and helps a company to continue with the recruitment process coherently. An International Professional Employer Organization also has a strong grip on the local talent market which in turn speeds up an organization’s recruitment process with highly qualified professionals being onboarded into the team.
International PEO also takes care of the employees’ day-to-day necessities and keeps them engaged through multiple training activities. Thus, collaborating with an IPEO during the legal establishment period of a business can help the organization with a smooth transition and unfaltering operations. An International PEO handles the entire recruitment process of the company’s international team so that it does not have to worry about intricate details and focus on the core operations of the business.
Engage and Retain Employees Beyond Geographical Constraints
An International PEO partner not only hires the best talent for a remote team but also successfully engages and retains the hired employees. Along with tapping into highly skilled professionals, an International Professional Employer Organization adopts best-in-class employee training programs, employee benefits programs, wellness programs, and other engagement programs to keep the employees happy and ensure the job satisfaction of each individual in the team.
Remote jobs can be monotonous at times and remote employees need extra attention to keep up the same level of enthusiasm. It might get difficult at times to maintain the motivation and emotional engagement among employees especially when they are from different cultures.
An International PEO can mitigate these cultural barriers and amplify the productivity levels of a remote team. Additionally the HR team of an IPEO researches and arranges customised training and skill-based programs for the employees specific to the requirements of their job profiles.
Convert Independent Contractors to Full-time Employees
Companies that are expanding internationally often tend to hire independent contractors for specific projects. These hiring contracts are short-term and can save up money and logistical hassles in hiring full-time employees. However, this hiring model has more cons than pros such as worker misclassification which can endanger the company to heavy legal penalties and monetary loss through large fines.
Full-time employees are also more committed to their work and loyal to the company. Independent contractors on the other hand always try to have some extra income by moonlighting as there are no specific legal agreements on their hiring contracts. Hence, it is always better to have a team of full-time and permanent employees for an organization rather than having independent contractors working for it.
An International Professional Employer Organization seamlessly assists the organization in converting independent contractors into full-time hires by supervising worker classification and curating compliant employment contracts for each individual hire.
Accelerate Transactions Across Borders
An International PEO assists a business with all kinds of cross-border transactions be they monetary or non-monetary. There are multiple transactions involved in the business expansion process like employee salary, employee bonuses, new-hire documentation, service level agreements, and IT and infrastructure to name a few. While building a fully operational remote team, it must be ensured that each employee is supported with the required amenities to work effortlessly from home.
An International PEO partner aids a business with just that by generating offer letters for employees, crafting smooth payroll for each one of them, conducting onboarding and induction programs for the new hires, providing them with IT support including all the necessary tools and software, efficient connectivity platforms across the teams, etc.
There are other legal and regulatory transactions as well that an International PEO partner accommodates a business with. An IPEO verifies all the transactional processes and quickly amends any stagnant dealings if any.
How Do You Select an International PEO Company?
Selecting an International PEO company for your business is one of the most crucial aspects of the expansion process. You might want to ask all the right questions and get to know your potential International PEO partner thoroughly.
It is important for an International PEO to have a proven track record in this business and check all the boxes of being a full-fledged support system for an organization. Let us have a detailed observation of the factors that truly matter when choosing an International PEO partner.
Transparency in Fee Structure
Before signing any contract with an International PEO, it is significant to ask them for a detailed pricing structure of their services and if there are any hidden costs associated with it.
Network and Experience in the Global Market
The industry experience, industry reach and competency of an International PEO speak a lot about their capability of delivering quality HR solutions.
Reputation and Client Feedback
Ask for customer testimonials and case studies of previous work from an International PEO before finalizing a deal. Also, look out for the market reputation of the concerned International PEO and what others have to say about it.
Response Time and Support Services
Check whether the International PEO has a prompt response time and has a holistic approach toward support services. Check out how Remunance is known for its prompt response time within 2 business days or less and 360-degree support services for all its clients.
Legal Track Record
Ensure that the International PEO has a clean legal track record and is free from any complex legal liabilities that may otherwise affect your business operations in the long term.
Data Security and Confidentiality
Ensure that the chosen International PEO handles sensible data carefully and has solid data protection and encryption policies to avoid any data leakage. Check its reliability on factors like data transmission, data storage, firewall protection, and regular security audits.
Know more: How to choose the right PEO partner?
Build Your Dream Team With International PEO
International PEO solution can be a torch bearer for all the small and medium-sized businesses planning to build a dream team internationally. In the present scenario where a competitive market has become the talk of the hour, a team expansion strategy can come into your business plan at any time.
After all, onboarding talented professionals from across the globe and building a dream team for your organization is like hitting a home run. You have to be fully equipped for such crucial situations while entering the talent market. Moreover, expanding a business internationally and building a completely new workforce in a foreign land already possesses a whole lot of challenges and opportunities to explore. After all, building revised strategies to sustain in a new global market is no joke.
Amidst all these operational and business dilemmas occupying a fair amount of space in your busy schedules, HR and administrative functions should be the least of your worries. To add global experts to your team, safeguard you from any legal liabilities, and take care of the entire employee lifecycle of your international workforce, the International PEO solution is just the right fit for your business expansion plan.