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What is a PEO & how can it help you?

Mayank Bhutoria
16
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The tidal wave of globalization is dramatically transforming the business arena, reshaping how organizations operate, innovate, and engage talent worldwide. This global revolution is driving a monumental shift in the approach to hiring international employees.

Almost 4 million WSEs (Work Site Employee) employed by PEOs represent 13.7 percent of all employment by private sector employers, with 10 to 99 employees (the size range of a large percentage of PEO clients) and 2.7 percent of all civilian employment in the United States. They were paid a total of $216 billion in 2020.

Our modern marketplace is no longer limited by geographical boundaries, and this should also reflect in your talent acquisition strategy. PEOs are increasingly preferred for offering a compliant, cost-effective, and efficient gateway to international expansion. They empower your business with the agility to attract, recruit, and retain top-tier talent from around the globe.

Welcome aboard the future of global talent acquisition. Welcome to the realm of Professional Employer Organizations, the game-changers in hiring international employees.

What is a Global PEO (Professional Employer Organization)?

A Professional Employer Organization, or PEO, is like an external HR team for your business. In layman's terms, they are a helping hand that lifts the weight of HR duties off your shoulders, allowing you to focus more on your core business.

For instance, let's take a growing tech company, "TechNovate." They're based in San Francisco but want to enter Berlin's bustling tech market. Now, navigating the complexities of German labor laws, payroll, and benefits can be a herculean task. Here's where a PEO can be a game-changer.

Partnering with a PEO that knows the ropes in Germany can take the stress out of TechNovate's expansion plan. The PEO takes manages hiring, paying employees, managing benefits, and ensuring all regulatory hoops are jumped through, making international growth painless for TechNovate.

As a CHRO or CFO involved in the buying process, you're looking at technical and financial viability. You need to assess whether the PEO can technically meet your HR needs effectively and whether the partnership will offer an economic advantage over handling these tasks in-house. And given the growing prominence of PEOs, many businesses find the answer to both these questions to be a resounding 'yes'.

How does PEO work? 

A PEO’s operational model is a co-employment relationship. They provide HR services by becoming the employer of record for tax purposes while you control your employees' daily tasks and core job functions. This model simplifies HR tasks and eases compliance - a boon for businesses, considering that NAPEO reveals that PEO clients grow 7-9% faster that companies who do not use PEOs. 

PEO as a Hiring Tool or Resource? 

PEOs aren't merely a compliance tool but a competitive advantage in the global hiring landscape. They enable companies to hire top talent worldwide, streamline onboarding, and manage benefits. With PEOs, organizations can enjoy a 10-14% lower employee turnover rate, as per NAPEO.

How Can Employers Cash In on PEO? 

With a PEO, companies can save on HR-related costs and increase productivity by focusing on their core business activities. Businesses that use a PEO are 50% less likely to fail, a compelling statistic from NAPEO. 

The Functions of a PEO

Let's break down the responsibilities of a PEO:

1. Understanding Client Needs:

The journey with a PEO begins with a thorough assessment of the client's specific HR needs. Each organization is unique, and so are their HR requirements. Whether managing compliance for a global workforce or streamlining a local team's benefits, a PEO customizes its offerings to address these needs.

2. Establishing Co-Employment:

Post this assessment, a co-employment agreement is established. This agreement clearly outlines the roles and responsibilities of the PEO and the client company, carving out a path for shared employee management.

3. Managing HR Services:

PEOs manage the wide-ranging HR services - everything from processing payroll, managing employee benefits, and ensuring compliance with local labor laws, to handling workers' compensation claims. It allows clients to retain control over their business operations and workforce management.

4. Ongoing Support and Consultation:

PEOs don't stop at merely providing services; they offer continuous support and consultation, evolving with the company's needs. This could mean adapting to new labor laws, adjusting to changes in the workforce size, or even helping tackle unprecedented situations.

PEO operations are as dynamic as the businesses they serve. By providing flexible, customized solutions, they allow CHROs & CFOs to focus on what they do best - steering their organization towards success, with the assurance that their HR operations are in expert hands.

Top Advantages of PEO in Hiring International Employees

Think of PEOs as the silent superheroes behind small to medium-sized businesses. While larger corporations have ample resources to navigate the intricate labyrinth of HR, smaller companies often need help with handling these complexities. The good news? PEOs are here to help. They shoulder the hefty responsibilities of employee administration, paving the way for businesses to offer an improved employee experience.

1. Payroll Woes No More

Picture this: disgruntled employees, unhappy with delayed or inconsistent payments. It's a scenario no business wants to encounter. Thankfully, PEOs ensure this doesn't happen. They offer reliable payroll services, handling the nitty-gritty details such as bank deposits and extensive paperwork. They often provide self-service options, too, allowing employees to manage their information, adding a layer of convenience and reducing potential risks for your business.

2. Benefit Bonanza

From health insurance to time off, reimbursements, and beyond, PEOs can juggle even the most unique benefits your company offers. They often have complete access to benefit networks, helping your company tap into more comprehensive health insurance plans, superior 401(k) plans, and other retirement benefits at competitive rates.

3. Tax Trouble? Not Anymore

In today's remote work era, having a diverse, geographically spread team is common. Managing taxes can be daunting if you have employees worldwide. PEOs take over the complex task of managing tax withholdings and payments across federal and state levels so that you can focus on your core business. 

4. Compliance Made Easy

Staying compliant isn't only about taxes. There's a sea of regulations— from correctly classifying your workers to ensuring adherence to local rules regarding workers' compensation and social responsibility programs. Misclassifying workers can lead to severe consequences. While PEOs may not conduct audits to check employee classification, they ensure your paperwork is filed accurately, mitigating risks of non-compliance.

So, if you're overwhelmed by HR tasks, consider partnering with a PEO. Let them handle the intricacies of HR while you steer your business towards success.

Why Outsource Your International PEO? 

Outsourcing your international PEO can fast-track your global expansion by overcoming legal complexities and reducing administrative burdens. It unlocks a world of top talent, fostering your business growth while ensuring 100% compliance with local laws and regulations.

  1. Sharpening focus on core business – Delegating intricate international hiring logistics to a Global PEO allows your HR team to concentrate on core responsibilities and developing your workforce rather than grappling with complex foreign regulations.
  2. Enhancing data securityPEOs and EORs are often entrusted with vast amounts of sensitive employee data which includes personal identifiers, financial information, health information, and other confidential data. Your PEO should be GDPR compliant and provide robust security features, ensuring the safety of sensitive employee data.
  3. Tapping into a Global Talent Pool – A Global PEO eliminates geographical barriers to hiring, enabling you to secure top talent worldwide without the need to establish a foreign subsidiary.
  4. Hiring Globally, Without New Business Entities – Avoid the risk of worker misclassification and the cost of establishing foreign entities. A Global PEO allows you to manage your global workforce while handling legal and financial complexities.
  5. Accessing Clear Financial Data – A quality PEO provides clear, detailed visibility into your global payroll costs and HR data, empowering your decision-making with robust analytics.

Global PEOs are not just service providers but strategic partners, making international expansion a reality for your business.

5 Tips To Choose The Right PEO Service Provider

Choosing the right Professional Employer Organization (PEO) can be a game-changer in the quest for global business expansion. As a business leader, you're not just selecting a service provider; you're opting for a strategic partner that can streamline your HR operations, ensure compliance across borders, and create a superior employee experience. Here are five key tips aiding you in choosing the right PEO that aligns with your unique business needs:

1. Scrutinize Reputation and Stability

A PEO will be entrusted with your HR tasks, one of the core elements of your business. Research their reputation, longevity, financial stability, and transparency. Confirm they are accredited by bodies like the Employer Services Assurance Corporation (ESAC) or certified by the IRS. Also, ensure that the PEO gives you a clear view of how your money and other resources are being used. Accreditation and transparency are the strongest indicators of a reliable PEO.

2. Employee and Employer Needs

The right PEO should not only cater to your needs as an employer but also understand and address your employees' needs. Look for a PEO offering comprehensive services - from tax compliance, multi-currency payments, and benefits administration to talent management and development, ensuring both parties thrive.

3. Check Industry Reviews

Take a good look at reviews, ratings, and testimonials. Sites like Better Business Bureau or Trustpilot can provide insight into the PEO's customer service quality and performance. Ask for client references too.

4. Compliance Expertise

Compliance assurance is a significant advantage of partnering with a PEO, especially when hiring internationally. The PEO should deeply understand the legal landscape in all your operating regions. It's a bonus if they have an in-house legal team or reliable legal partners.

5. Support Availability

Your PEO should be a supportive partner, providing guidance when needed. Check their support structure - is it 24/7? Is there a dedicated account manager? These elements contribute to a smoother, more efficient HR operation.

5 Questions You Must Ask When Choosing A Peo

When selecting a PEO, clarity is vital. Don't hesitate to ask potential partners these essential questions.

1. Can a PEO lead to diminished value of the HR?

Contrary to belief, PEOs don't diminish HR's value. They amplify it. By taking over routine tasks, PEOs free up HR professionals to focus on strategic initiatives like employee engagement, culture building, and talent development, enhancing HR's role and impact.

2. Is a PEO applicable to hiring employees abroad "only"?

While PEOs excel in managing international employment complexities, their utility is wider than cross-border hires. They are equally effective for domestic employees, providing a uniform, streamlined HR solution regardless of geography.

3. What aspects does a PEO handle for companies?

A PEO handles various aspects, from payroll processing and benefits administration to tax filing and compliance management. They also assist with hiring, onboarding, and training, ensuring an end-to-end, hassle-free HR experience.

4. How does a PEO handle compliance?

PEOs manage compliance by staying updated with local labor laws and tax codes, ensuring that your company meets all statutory requirements. From providing proper employee classification to handling workers' compensation, a PEO takes the guesswork out of compliance.

In this spectrum, Gloroots emerges as a top choice. With robust global expertise, dedication to data security, a comprehensive suite of services, and a track record of delivering outstanding client experiences, Gloroots is well-equipped to support your company's expansion plans. 

With Gloroots, you can,

Fastrack your onboarding process (with fully automated employee contract generation)

Get detailed Excel reports providing clear picture of employer liabilities like tax deductions, social security, FX rates, FX rates in dollars, EOR fees and everything else.

Make multi-currency payments on time to employees across multiple countries seamlessly.

Gloroots is not merely your partner for outsourcing HR tasks but collaborating with a strategic partner committed to driving your organization's success in the international marketplace.
With Gloroots, you can focus on your core business, knowing your HR operations are in the best hands. 

FAQs

What is a global PEO?

A global PEO is a unique business partner that lends you its expertise in managing international employment logistics including onboarding, making multi-currency payments, tax compliance, and more. Whether your goal is to hire talent from around the world, test new markets, or scale globally without needing to set up legal entities in every country, a global PEO is your strategic facilitator. 

How much does international PEO cost?

The cost of engaging with a global PEO depends on the scope of services you require and the nature of the workforce you intend to hire (contractors versus employees). At Gloroots, we understand the diverse needs of our clients and offer customized pricing alongside a range of specialized functionalities. For qualifying startups, we even offer discounts to support your growth journey. To learn more about our unique pricing model, please explore the Gloroots pricing page on our website. 

Who should partner with a global PEO?

The beauty of a global PEO is its universal applicability. If you are a startup, a global PEO gives you access to a world of talent that is both diverse and cost-effective. With a PEO, you can hire within days, not weeks, propelling your growth while eliminating the headaches of compliance, payroll, and HR. For an expanding enterprise, a global PEO provides the strategic advantage of growing your business footprint.

Is co-employment a feature of global PEOs?

Contrary to standard PEOs, which entail a co-employment relationship, a global PEO is the sole legal employer of your international workers. This distinction simplifies the employment structure and allows you to focus on maximizing the productivity and engagement of your global teams without dealing with legal minutiae.

In the current era of globalization, the strategic value of a Global PEO is indisputable. So, as you plan your organization's global strategy, remember that Gloroots stands ready to support your ambitions, streamline your operations, and propel your international success.

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