What is International PEO?
International PEO is a flexible employment solution that enables businesses to employ workers in a foreign country, bypassing the need to first establish a legal entity before operating in that market.
Often referred to as an Employer of Record (EOR), an International PEO provides access to in-country talent pools and sources and hires local talent on your behalf. The International PEO executes essential HR responsibilities, handles risk mitigation, and covers all compliance considerations while you maintain control of employee liabilities and daily operations.
Why utilize International PEO?
1. Ensure Your Employees are Classified Correctly
There are many advantages to relying on an International PEO during a global expansion—not least of which is avoiding risks associated with hiring contractors/freelancers. If a contractor/freelancer is proven by the local government to meet its criteria as a full-time employee, the employer may face significant fines and penalties.
An International PEO mitigates these global hiring risks by managing the employment relationship, ensuring that your employees are correctly classified, and are operating in compliance with all local labor laws and regulations.
2. Provide Cost- and Time-Saving Solutions
Traditional foreign entity establishment is expensive and cumbersome. The average cost of setup hovering around $20,000 USD, with annual maintenance costs reaching several times that. An International PEO requires only a service fee and financing for international employees’ payroll, more than halving the cost of operating in a new market.
Entity establishment is also a sluggish process, and can quickly eat away at executive teams’ valuable hours, energy, and resources. An International PEO significantly reduces the time needed to complete necessary steps, including employment contract review and approval. This, coupled with the International PEO overseeing and executing administrative tasks most commonly performed by HR and legal departments, frees up employees to dedicate time and energy elsewhere.
3. Utilize an Agile Approach to Global Expansion
Establishing a foreign entity means that your business is committed to a long-term presence in that market. But not all organizations are ready to make that leap—especially small businesses taking their first step towards global expansion.
International PEO allows organizations to begin operating in new markets with no long-term contracts, providing the opportunity to test whether or not remaining in that market makes the most sense for their growth objectives. Companies can gain a better understanding of local competition, and how their product or service fits within the local culture. Taking into consideration and understanding cultural nuances is an integral part of a successful global expansion strategy, and should be top of mind for all organizations considering going global.
4. Enter or Exit Markets Quickly—Or Establish a Long-Term Presence
Just as important as developing a thorough market entry strategy is having a compliant exit strategy. Each market has its own exit requirements that are dependent on the entry method—and tearing down an entity in virtually any country is a long, expensive process. By using an International PEO, organizations can easily leave their market without the crippling costs and headaches that come with tearing down an entity.
International PEO is a sound option for organizations expanding their global reach and scale. And for companies whose long-term plans include establishing an entity, International PEO offers a seamless transition when the time is right. This process is often utilized when a business’ headcount reaches a number that makes more financial sense to establish an entity than continue with International PEO. And for organizations that hold a large number of physical assets, establishing an entity may be the only option, depending on the assets and country.
Take Your First Step Towards Global Expansion with International PEO
International PEO provides a number of benefits not available through traditional entity setup, and enables businesses to begin operating in their new target market in a number of days—not months.
If you would like to learn more and explore the details of International PEO, download your free copy of the Definitive Guide to International PEO, or reach out to GMS today to learn how International PEO can help grow your global presence.