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Part 1: What is a Global PEO?

If you’re thinking about international business expansion, then it’s important to be fully aware of every option out there for you and your business. Now, whether you’re a business owner, an entrepreneur, or a savvy investor, knowing the difference between something as simple as a Global PEO and a global payroll company or HR outsourcing company is critical — especially when you’re in the planning phase of your international business expansion strategy.

In this intensive 3-part series, we’re going to take a deep dive into the building blocks and basic necessities that all Global PEOs offer. From there, we’ll talk about how PEOs are different from payroll companies. Finally, we’ll discuss the reasons why people often confuse the two and show the ultimate difference choosing a PEO over a simple payroll company can make.

What Is a Global PEO?

A PEO is an international entity that has the exclusive ability to provide a foreign business with a wide range of services related to employee management, payroll, administrative assistance, and compliance strategies. These services can be delivered for multinational organizations, businesses, and institutions that are planning to operate outside of their domestic jurisdiction.

This means that everything from talent acquisition, to payroll, to benefits, to employee rights protections and employee management are all services that a Global PEO can provide — for a fee, of course. If you haven’t already noticed, many of these services are the same duties as your internal HR team. And while it might seem like a Global PEO is similar to an HR outsourcing company, you should be able to tell right off the bat that the services of a Global PEO are much more extensive and comprehensive.

Essentially, a PEO is a legal entity that will serve as the Employer of Record for your multinational organization. This means that your partnering PEO can and will hire, manage, and pay taxes for your organization within your new host country on your behalf. Obviously, this can be quite beneficial for an expanding business, especially if you don’t want your HR or administrative staff to have to tackle domestic and international issues.

Why Work with a Global PEO?

By partnering with a PEO, you can bypass all the complex legal hurdles that come along with international incorporation.

From there, your PEO will work to hire full-time and part-time employees on your behalf to manage your new company. In other words, you can sit back at home base and watch your international operations come to life.

The true purpose and the most significant benefit of working with a Global PEO comes down to one thing — making it easier for businesses with an eye on international expansion to bring their visions to life. Working with a Global PEO provides you with a seamless entry point into a new market without taking on the added risk of formally incorporating — and that’s what makes it such a gamechanger for international businesses.

How Does It Differ from a Payroll Company?

In part 2 of this series, we’ll take a deep dive into the differences between a Global PEO and a payroll company, so that you can see just how extensive the services of a Global PEO truly are.

Part 2: The Differences Between a PEO & a Payroll Company

As one can imagine, a PEO is essentially a payroll company in one way or another. However, they also perform a number of additional functions and tasks that significantly enhance what a typical payroll company might offer. With that in mind, let’s get into the details of what differentiates these two types of organizations.

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What Exactly Does a Payroll Company Do?

With every business, nothing is more important than your human capital. At the end of the day, when you’re expanding internationally, you’re going to need a robust and responsive workforce filled with high-end talent, capable of helping you get your new international operations off the ground. One way to do that would be to do all the hiring on your own, shipping your domestic HR team overseas to conduct interviews in your new host country either in your native language or with the assistance of a translator. Or you could hire an HR outsourcing company based within your new host country and have them conduct everything from recruitment and talent acquisition to interviewing and onboarding.

You could also choose to go with a Global PEO — but we’ll talk more about that later. In the meantime, regardless of how you go about hiring your new international workforce, you’re going to need to have the ability to pay them. Now, you can work through this intensive process with your own payroll department and accounting department at home, which could be a challenge. You could also set up a new payroll department and accounting department in your host country, but that’ll certainly add to your startup costs.

Or you could simply work with a payroll company and have them take care of all your payroll needs. Essentially, a payroll company would likely be based in your host country, which means that they’ll already know and understand the rules, regulations, and laws that protect workers in your host country. Your payroll company will be able to manage tax liabilities, compliance, paid time off, and so much more, which can really be quite beneficial for a newly established international business.

And while this might seem like a worthwhile investment, it’s important to remember that this is essentially all that a payroll company can and will do. A Global PEO, on the other hand, can take things much further.

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A Global PEO Manages More Than Just Payroll

It’s critical that you keep in mind the fact that a Global PEO can, indeed, manage the payroll needs of your international expansion project, but it can also do so much more than that. As your Employer of Record, the company can and will hire employees on your behalf, but it’ll also keep your employees on their payroll, which means that you’ll have absolutely no payroll liabilities or responsibilities whatsoever. Instead, the PEO hires your employees and then essentially outsources them to you.

However, keep in mind that the employees your PEO hires for you are your employees. They’re not contractors or consultants who work with multiple employees at a time. They’re under your leadership, they follow your rules, and they perform their duties as outlined by you and your team. The only difference is that instead of receiving a check, benefits, and PTO from you, they receive it all from your PEO.

Your PEO will also cover all HR and administrative needs for your employees, taking things like benefits, retirement, training, claims, and so much more off your shoulders.

Essentially, working with a PEO allows you to focus on what’s most important — running your business and optimizing your operations.

The Difference Is Clear - So Why A PEO?

In the final instalment of this 3-part series, we’re going to talk more about why internationally expanding businesses choose to work with a PEO over other organizations like HR outsourcing companies or payroll companies. At this point, the difference between all the above should be pretty straightforward, so let’s talk about the problems that a PEO can solve.

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Part 3: What Problems Does Working with a PEO Solve?

Before we talk about the different problems that working with a Global PEO can solve, we’d like to remind you why people often confuse Global PEOs with payroll companies. First, each of them offers the same services — to an extent. You see, a Global PEO can offer the same services as a payroll company, but a payroll company cannot offer nearly as wide of a scope of services as a Global PEO. A Global PEO serves as your Employer of Record, which means that they can hire employees for your company on your behalf. A payroll company has absolutely no authority whatsoever to hire employees — they’re merely there to help you manage your payroll needs on a daily basis.

In addition, Global PEOs can handle HR tasks, administrative tasks, compliance requirements, and so much more. As you can see, a payroll company is one way of making your international business expansion strategy a bit easier, but a Global PEO takes it to a whole new level. With that said, let’s take some time to dive a bit deeper into the various problems that a Global PEO can solve.

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No Need to Incorporate

Working with a Global PEO makes it easier for businesses to avoid establishing a legal international entity in a new country — meaning there’s no longer a need to formally incorporate your business in your host country. While this clears a logistical hurdle that often turns businesses away from international expansion, it also provides an intangible benefit that is equally important to consider.

Essentially, partnering with a Global PEO makes it possible to dip your toes into the water before diving in headfirst. Choosing to work with a Global PEO provides businesses with a small window and a test period to see what the waters feel like before going through the process of formally establishing your international business expansion project as a legal entity in your host country — which also has its benefits.

Remember, formally incorporating into a foreign country is time-consuming, expensive, and quite challenging. Not only are there a ton of logistical hurdles that need to be crossed, but the bureaucracy can be complex, time-consuming, and quite overwhelming — especially for your administrative staff back home. With that in mind, it allows businesses to give it a go in a new market, without all the added risks of a poor investment.

Global PEOs Eliminate Tax Compliance Issues

Every business knows just how stressful tax season can be — especially in your accounting department. When you’re a business operating in a single country, you don’t have to worry about separating revenue and income, following different tax laws, and searching for tax credits or potential liabilities. When you’re expanding internationally, however, tax law becomes much more complicated. By choosing to work with a PEO, you won’t have to stress out about tax season. Instead, your PEO will take control of your international taxes and handle everything from tax preparation to tax filing — all while your domestic accounting team dedicates 100% of their attention on your at-home expenses and profits.

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Global PEOs Help Reduce Stress for Your HR Team

When any business is thinking about growing or expanding, there’s inevitable stress and strain put on your HR team. And whether it’s a domestic expansion or an international expansion, that stress will certainly be there and could eventually cause human error. Working with a PEO helps to reduce stress for your HR team because the PEO will handle all your HR-related functions for your workers overseas.

This allows your HR and administrative staff members to remain focused on the task at hand back at home, while your PEO solves problems overseas. The importance of this benefit cannot be overstated — it’s such a valuable thing to have your HR team on board with your expansion endeavours.

And with that, you now have a better understanding of the differences between a Global PEO and a payroll company. So, if you’re interested in working with a Global PEO for your international business expansion, contact us today and learn more about our services.

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