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Businesses exploring global expansion, or easier ways of employing an international workforce, often opt to use the services of a Professional Employer Organization (PEO) or an Employer of Record (EOR).
These companies take on many of the key administrative functions of a business such as payroll, employee benefits, tax deductions, and other related human resource functions. Outsourcing these functions can be hugely beneficial for global businesses, and can remove many of the barriers to agility that large organizations often find when operating in multiple territories.
It’s important to understand the difference between a PEO and an EOR. PEOs are generally only used in the United States, where the PEO takes over HR tasks and uses its own tax ID numbers for paperwork filing, but the business still employs staff directly. Elsewhere in the world, EORs are more common and fulfill a much more comprehensive role, becoming the legal employer of workers and taking on compliance responsibilities, too.
The local advantages you can gain with a global PEO
The benefits of using a global PEO or an EOR can be far-reaching through an organization, including (but not necessarily limited to):
Smoother administration and compliance
Hiring employees internationally can be a long, drawn-out affair: indeed, it can often take as much as three months to jump through all the administrative hoops. A global PEO can take care of a lot of the work for you, dealing with compliance issues like tax, social security, employment laws and so on. An EOR will go further and actually employ your remote workers themselves, and then lease them to you, simplifying the running and onboarding of an international workforce even further.
Easier expansion into new markets
When expanding into a new country, accessing local expertise and connections is key, because it can help a business better understand market conditions and any specific cultural characteristics. Incorporating this expertise can be a challenging, time-consuming task as it needs to consider personnel management, payroll administration, training and other duties. However, a global PEO can look after all of these concerns and leave the business free to focus on its strategy for the new territory.
Stronger acquisition of local talent
Connected to the previous point, using a global PEO makes it much easier to attract the most talented employees available in a new territory. A good global PEO can provide flexibility to customize employment structures to the benefit of both employee and employer, such as creating independent subsidiaries for employing workers in each territory. This can make hiring talented staff cost-effective, while still ensuring full compliance.
Larger knowledge base
When new expertise is brought into an organization from a new territory, the whole business can benefit from extra knowledge and a fresh perspective. New methods of working can also be explored, and opportunities can be opened up to improve operations and practices in every department worldwide.
Better brand recognition
One of the knock-on benefits of easy international expansion is the ability to increase the visibility of a brand to a much wider audience. Organizations that are recognized as leaders in their field in a number of different territories can be perceived as a reliable company, trusted by customers and clients all over the world. This can help give a company an extra level of respect within its marketplace.
Is a global PEO right for me?
A global PEO isn’t always a good fit for every organization. It’s worth remembering that it means ceding some control over hiring policies, making it harder to ensure that employees with the right skills and cultural fit are hired. It’s also important to ensure a global PEO has the right security controls in place regarding HR and payroll data, and that what a PEO will or won’t do can vary substantially from country to country.
Notwithstanding those considerations, a global PEO can still be immensely valuable to a business that wants to get an international expansion right, attract talented staff, reduce admin burden and stay compliant throughout.
Explore the finer detail of global PEOs and Employers of Record, and how best to make use of their services, in our free report here.
