What Is International PEO?
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Global hiring is the new normal. Today’s top companies don’t just let their employees work from home, they let them work from anywhere in the world.
Global expansion is one major incentive: companies looking to break into new markets have an incentive to hire in those markets. And for other companies, international hiring is a gateway to expand your search for top talent and build a more diverse workforce.
However, international hiring is not simple. Hiring employees in a new country is lengthy, complicated, and expensive. You may have to establish a local entity in that country, deal with currency conversions and overseas banking, and sort through that country’s unique tax and labor laws to remain compliant. And if you slip up, you face grave liability.
Enter international PEOs, or EORs, which are employment solutions designed to simplify this process and facilitate compliant hiring across the globe. Below, we explore international PEOs and how they help businesses break into the global talent pool.
What is an International PEO?
International PEO (professional employer organization) is a co-employment service that provides human resources services, including international hiring and employment.
International PEOs establish legal entities in foreign countries that can legally (and simply) hire in those countries. When you partner with an international PEO, you gain access to those foreign markets because the international PEO legally hires and employs local workers.
The international PEO handles staffing, global payroll, employment law compliance, employee benefits, and other essential aspects of international employment. You still manage the employee’s day-to-day duties and responsibilities, pay their wages, and decide who you want to hire.
We’ll use terms like “international PEO” and “global PEO” in this article since that’s how many people describe this kind of service. However, a more accurate term is “employer of record,” or EOR. Below, we dig into the source of this confusion.
International PEO vs. PEO vs. EOR vs. GEO
The term international PEO comes from (non-international) PEOs, but the two function quite differently. PEOs are not legal employers: they do not handle a company’s hiring, payroll, or employment tax, and they offer limited-to-no support for global hiring.
Traditional PEOs offer HR outsourcing restricted to the company’s local area. They offer services like employee onboarding, employee reviews, contract termination. They are called co-employers but don’t provide legal employment service at all, let alone across national borders. As we describe above, international PEOs offer this kind of international staffing service.
The more accurate term for international PEOs is EOR, which stands for "employer of record." For more about the distinction between EORs and PEOs, check out our article on EORs vs. PEOs. But for this article, remember: international PEOs are the same as EORs, and both are quite different from standard PEOs.
Another relevant term is “global employment organization” (GEO), which is synonymous with international PEO and EOR. All three of these services provide robust employment solutions that unlock global hiring, payroll, and compliance.
Why use an international PEO?
International PEO services are your employment solution to break into international markets, which is otherwise time-consuming, expensive, and frustrating. There are very few resources to help companies tackle this on their own in one other country, let alone many. Even for companies with significant incentives for global expansion, global employment usually creates more problems than it solves.
Global PEOs, or better yet EORs, establish local entities in countries worldwide and build systems for simple, compliant employment. The legal and financial systems operating behind the scenes at an international PEO are complex and full of red tape. But using these services is simple and highly cost-effective compared to in-house alternatives.
Excellent international PEO services cover every single aspect of international expansion. They handle:
- Background checks
- Onboarding new employees
- Employment contracts
- And more
Unlike traditional PEOs, this process is an international PEO’s legal responsibility because they are the legal employer of international employees. And while the global PEO service handles the legal matters of your global workforce and international payroll, you still manage the people. Employee management, training promotions, and task division remain the responsibility of the client business: you.
An international PEO provider handles the complex, legal nuts and bolts of international hiring so you can focus on employee experience, performance, and retention.
How does an international PEO work?
International PEOs (or EORs) establish local entities in countries worldwide. They acquire the necessary business registrations, understand local labor laws, design reusable employment contracts, and set up foreign payments for your entire workforce.
When business owners like you use these global PEO services, you can recruit wherever they operate. You can recruit, interview, and select candidates however you like. Once you’ve found your ideal candidate, the rest is up to the global PEO.
The global PEO generates a contract that complies with the candidate’s local laws and files necessary paperwork related to local tax laws. They also set up employee benefits like worker’s compensation and health insurance. In short, they handle every other legal matter required to make an employment offer.
Even if you prefer to handle these things yourself, doing so correctly is another story. International hiring is an international PEO’s specialty, so these services offer superior risk mitigation. They face far fewer compliance risks than you would if you tried to approach international hiring yourself.
It’s important to remember that international PEOs or EORs are the legal employers of people who work for you. This employment approach eliminates the grueling administrative aspects of global hiring and lets you focus on employee management, training, and performance. It enables you to expand to global markets and gain access to a global talent while also dedicating your time and energy to creating a positive employee experience–not staffing an entire department to keep up with foreign compliance and tax law.
Who are global PEOs for?
Global PEOs are a smart option for any company pursuing new market entry in foreign countries.
If you want to pursue international expansion without a global PEO or EOR, you will have to legally establish a foreign subsidiary to employ workers abroad. Plain and simple, the amount of research required to understand and comply with local employment law and tax law is monumental. And if you wish to expand to a foreign country that speaks another language, the project will be even more challenging.
Let’s zoom in on a few specific use cases:
Global PEOs are for startups
Many startups partner with global PEOs to hire affordable technical talent worldwide. Global PEOs unlock international talent pools for brand-new companies: your first five hires could be from the US, India, Serbia, Brazil, and the Philippines. And you can hire them in a matter of days, which would be otherwise unthinkable.
Global PEOs are for enterprises
Enterprises use global PEOs to break into international markets, broaden their talent, get better coverage across time zones and languages, and achieve a level of diversity that wouldn’t otherwise be possible.
Expanding to one or two foreign countries without global PEO services might be possible for enterprises that can afford to build robust HR and legal teams. However, partnering with a global PEO service unlocks a worldwide talent pool for a fraction of the cost and time it would take to expand to even one country.
Global PEOs are for full-time employment
Global PEOs primarily help you work with full-time employees: if you are interested in working with freelancers or independent contractors, a global PEO is probably not the best option. However, Deel offers a variety of employment solutions that allow you to hire contractors as well as full-time employees. And we don’t prioritize one over the other: contractors have access to a wide array of benefits and perks.
But generally, international PEO bridges the gap for hiring full-time foreign employees who work exclusively for you, the client company. If you want to hire employees to perform certain services only, take a look at our independent contractor hiring guide.
Build your global team with Deel
Building an international team can be a time-consuming compliance nightmare. You have to handle local labor laws, taxes, and mandatory employee benefits for each country to avoid significant legal consequences. Luckily, Deel handles all that for you.
Deel lets you hire anyone, anywhere in the world, within minutes. Plus, our employment contracts are pre-vetted by legal experts to be completely compliant, so your new hires are set up legally in no time.
Book a demo today to see how it works.