If you're planning to take your business global, you might find yourself quickly overwhelmed by the complex world of international employment laws, taxes, and payroll systems. The excitement of breaking into new markets can swiftly become a stressful endeavor as you try to navigate through this confusing maze.
Moreover, finding skilled accountants and recruiters in the US can be an additional hurdle due to a significant shortage of CPAs. As reported by the AICPA, there's been a 35% drop in accounting graduates sitting for the CPA exam since 2010¹.
But it doesn't have to be so challenging. That's where International Professional Employer Organization (PEO) comes into play. It's a solution designed to handle these exact complexities.
In this guide, we're going to break down what International PEO is, giving you a straightforward roadmap for managing global employment. Get ready to swap the headaches of intricate legal issues for the excitement of growing your business internationally.
What Is International PEO?
International PEO stands for Professional Employer Organization. It is a service that allows you to hire and pay employees in foreign countries without having to set up a legal entity or subsidiary there.
An International PEO provider acts as a co-employer of your workers, taking care of all the administrative and compliance tasks related to payroll, taxes, benefits, visas, and labor laws. You retain full control over the management and performance of your employees, while the International PEO handles the back-office functions.
International PEO vs. Employer of Record (EOR)
You may have heard of another term that is often used interchangeably with International PEO: Employer of Record (EOR). While both services have similar features, they are not exactly the same. An EOR is a legal entity that hires and pays your workers on your behalf in a foreign country. An EOR assumes all the employment risks and liabilities, as well as the compliance obligations. An EOR is typically used for short-term or temporary projects, or for hiring a small number of workers.
An International PEO, on the other hand, is not a legal entity, but a co-employer that shares the employment responsibilities with you. An International PEO does not take over the employment risks and liabilities but rather helps you mitigate them by ensuring compliance with local laws and regulations.
This service is particularly useful for companies looking to expand into new international markets quickly and efficiently, or for businesses that want to test a new market without committing to a full-scale entity setup. It simplifies global expansion by reducing risks, lowering costs, and providing faster entry into new markets.
What Does an International PEO Company Do?
An International PEO company plays a pivotal role in facilitating the hiring and management of a global workforce, offering a suite of services tailored to your needs such as:
- Talent Acquisition: Leveraging their local know-how and networks, they can assist in locating and attracting competent talent in foreign markets. They also aid in conducting background checks, orchestrating interviews, drafting contracts, and streamlining onboarding processes.
- Payroll Administration: An International PEO can manage payroll for your employees in their respective local currencies, ensuring all necessary deductions and withholdings align with local tax laws. They're also equipped to handle payroll taxes, social security contributions, and other mandatory payments.
- Employee Benefits: Although you don’t hire your employees directly, you can offer them competitive benefits packages through your PEO, including health insurance, retirement plans, and vacation days among other perks.
- Visa Processing: For employees requiring work permits or visas for relocation or travel, an International PEO can expedite the process. They also manage immigration compliance and pertinent documentation.
- Labor Law Compliance: To ensure your employment practices align with local labor laws and regulations, an International PEO provides guidance on issues such as minimum wage, overtime pay, working hours, leave policies, termination procedures, and dispute resolution.
Why consider an International PEO?
Cost Savings
An International PEO can help you save money by eliminating the need to set up and maintain a legal entity or subsidiary in each country where you operate. You can also avoid paying high fees to lawyers, accountants, consultants, and other intermediaries. Additionally, an International PEO can leverage its economies of scale and bargaining power to offer lower rates for payroll processing, benefits administration, and other services.
Time Savings
An International PEO can help you save time by taking care of all the administrative and compliance tasks related to hiring and paying employees in foreign countries. You can focus on your core business activities and strategic goals, without having to worry about the details of global employment.
Risk Mitigation
An International PEO can help you reduce the risks associated with global employment by ensuring compliance with local laws and regulations. You can avoid penalties, fines, audits, lawsuits, and reputational damage that may arise from non-compliance. You can also rely on the expertise and support of an International PEO in case of any issues or challenges.
Flexibility
An International PEO can help you increase your flexibility by allowing you to enter new markets quickly and easily. You can hire employees in any country where an International PEO has a presence, without dealing with the complexities of setting up a legal entity or subsidiary. You can also scale up or down your workforce as needed, depending on your business needs and opportunities.
Employee Satisfaction
An International PEO can help you improve your employee satisfaction by offering competitive benefits packages, timely and accurate payroll, and local support. You can also enhance your employer's brand and reputation by demonstrating your commitment to compliance and social responsibility.
When to Use a Global PEO Provider
In the face of an increasingly scarce accounting talent pool, many finance and accounting firms are looking overseas for recruitment. The appeal of acquiring cost-effective, highly-skilled talent to build a global workforce is undeniable. Coupled with the rise of remote work and the pursuit of more balanced lifestyles, exploring new labor markets and managing an international team has never been more accessible.
Here are some instances where partnering with a Global PEO provider can be highly beneficial:
- You're interested in testing a new market before making a significant, long-term commitment.
- You aim to hire a handful of employees in a country where your business currently has no legal presence.
- You want to recruit employees from multiple countries without the burden of managing various legal entities or subsidiaries.
- You'd like to delegate your global payroll and benefits administration to a single, proficient provider.
- You need to ensure full compliance with the local laws and regulations in each country where your business operates.
References:
¿Qué es una OPE internacional y cómo puede ayudar a su empresa?. https://www.serviapgroup.com/es/blog/what-is-an-international-peo-how-can-it-help-your-company/.
¿Expansión Global? Conozca Los Servicios Internacionales PEO | Serviap .... https://serviapgroup.com/es/blog/international-peo/.
Fixing the Crisis in Accounting - The CPA Journal. https://www.cpajournal.com/2022/11/25/fixing-the-crisis-in-accounting/.
Why There's a Shortage of Accountants and We Should Be Worried. https://www.businessinsider.com/shortage-accountants-we-should-be-worried-recruit-young-talent-2023-2.
