A global Professional Employer Organization (PEO) is a company that helps businesses manage international employment by handling payroll, benefits, compliance, and HR functions for employees in multiple countries. This allows businesses to expand globally without needing to establish legal entities in each country.
PEO vs. global PEO vs. EOR
The terms PEO, global or international PEO, and EOR are often used interchangeably. But they have distinct meanings that are important for businesses to understand if they’re considering engaging with any of these services—especially for help hiring a global workforce.
Professional employer organization (PEO)
A professional employer organization (PEO) works by establishing a co-employment relationship with its client companies. That means:
- Your business is the worksite employer, and manages day-to-day operations and employee management, including who to hire (and let go), how much to pay employees, overall business strategy, and other operations-related tasks.
- The PEO is the administrative or statutory employer, and manages employment-related administrative tasks like payroll, benefits administration, compliance, and workers’ compensation.
When you partner with a PEO, they become the legal employer on record for your workforce (it’s what allows them to do things like process wages, benefits, withholdings, and taxes). But to work with a PEO, you have to have your own legal business entity established in the US, which is the only country where PEOs operate.
Employer of record (EOR) or global PEO
“Global PEO” and “international PEO” are two other names for an employer of record (EOR), a service that helps businesses manage global employment by handling HR functions like payroll, benefits, and compliance in multiple countries.
An EOR allows businesses to hire employees abroad without needing to establish a local entity in each country first, because it serves as the sole legal employer for employees in a foreign country. In this way, an EOR streamlines many of the complexities of global employment, from onboarding to legal compliance, making it an efficient way for businesses to expand into new markets without forming a foreign entity.
What does a global PEO do?
Global PEO services can provide a range of services to help businesses all over the world meet their global expansion needs. By managing HR, payroll, and compliance, they allow companies to quickly and efficiently build and manage a global workforce.
Employee onboarding
Many global PEOs streamline employee onboarding for businesses expanding globally by helping ensure all international employees—whether full-time employees or contractors—are onboarded according to local regulations and practices. This helps avoid risks like misclassification and build a compliant global workforce.
Global payroll
Managing international payroll for a dispersed team can be complex. A global PEO handles payroll processing for global employees, so your company’s entire workforce gets paid accurately and on time. This includes handling the complexities of international payroll regulations and tax deductions.
Global benefits administration
Many global PEOs administer employee benefits by creating or providing access to benefits packages tailored to local expectations and legal requirements. This helps businesses offer competitive benefits, from health insurance to retirement plans and more, to attract and retain top talent in different countries.
Tax filing and compliance with local tax laws
Navigating tax systems in different countries can be a challenge. A global PEO helps ensure tax compliance for your global team by managing local tax obligations and resolving compliance issues that may arise from operating in foreign jurisdictions.
Local compliance support
A global PEO can offer compliance support for businesses expanding into countries where they don’t have expertise in local labor and employment laws. From localizing employment contracts to advising on workers’ compensation and other insurance coverage, a global PEO can offer expert guidance in navigating local laws, particularly complex labor laws that vary from one jurisdiction to another.
HR outsourcing
We’ve already mentioned quite a few human resources tasks that global PEOs can handle. But an EOR can take over other time-consuming HR tasks, like employee management, giving your internal team more time to focus on strategic tasks and business needs as you grow your company globally.
Benefits of using a global PEO
PEO companies can provide a wide range of benefits to companies looking to expand internationally. These services help streamline your business operations, manage your compliance risk, and help you save both time and money.
Reduced compliance risk
One of the biggest benefits of a partnership with a global PEO is how it can help your business manage compliance risk during international expansion. Because your PEO has a legal business entity—and often HR or legal experts—in the new country where you plan to hire employees, it can help ensure you meet local labor laws, tax regulations, and other foreign compliance requirements as you hire and onboard employees and start business operations. It can also help you avoid any activities that could result in legal penalties.
Time savings
Partnering with a global PEO streamlines the global hiring process—the PEO takes on much of the administrative burden of managing employees in international markets, which can help your business save time both while hiring and while getting your operations up and running.
Cost savings
Using a global PEO can be a cost-effective solution for businesses looking to operate in new markets. It eliminates the need to establish a local entity, which can come with significant startup costs. It can also reduce operational costs associated with compliance, payroll, and HR management in multiple countries.
Local expertise and guidance
A global PEO provides local expertise and guidance on international hiring practices, helping businesses navigate the nuances of regional labor markets, local regulations, and cultural expectations. This can be invaluable for businesses that don’t have the same level of expertise in-house.
How to choose a global PEO
When looking for a global PEO solutions, there are a few key factors to consider:
- Industry expertise: Look for a global PEO that has a proven track record in your industry.
- Service offerings: Make sure the global PEO you’re considering offers the services you need in all the countries you’re considering hiring in or expanding to.
- Technology: Look for a PEO with a modern technology platform that’s easy to use. Look for self-service tools your employees can access, and make sure it’ll fit into your existing tech stack and integrate seamlessly with other essential tools your business relies on.
- Reputation: Look at reviews and testimonials for a global PEO that’s well-regarded by its past and current customers.
- Pricing: Lastly, make sure it fits your budget—both now and as you scale.
Frequently asked questions about global PEOs
Can you use a PEO to hire international independent contractors?
Yes. Many global PEO companies can assist with hiring international independent contractors by helping with compliance, contracts, and payments. This further allows businesses to tap into a global talent pool without the need to establish local entities.
How can a global PEO help with your recruitment efforts?
A PEO provider can support your recruitment efforts by expanding access to a broader global talent pool. They streamline the hiring process by managing compliance, and can often offer access to high-quality benefits packages, helping you attract and retain global talent across different markets.
Rippling and its affiliates do not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any related activities or transactions.