Decoding international PEO
Researching and finalizing your global employment strategy is complex enough. Add in the confusing acronyms and industry jargon, and the undertaking can quickly become overwhelming. We’re here to help clarify and simplify—and we’ll start with a dive into the murky definition of international PEO.
Let’s start with the basics: What is a PEO?
A PEO, or Professional Employer Organization, provides outsourced HR support, including benefits and payroll administration, HR guidance, and assistance with employment law compliance. However, there are big differences in what PEO providers can deliver on a global level.
PEO providers within the United States operate what is referred to as a “co-employment” model. Here, the PEO provider becomes responsible for the legal employment and payroll component of hiring an employee, while the workers have their day-to-day activities managed by the company. One crucial but often overlooked feature of the co-employment model is that the client organization is required to be legally registered as a company, or entity, in the country where the employees are.
This co-employment format does not exist outside the United States. Some countries, such as France and Switzerland, may also view co-employment as illegal.
What about an international PEO?
It’s easy to see why some providers refer to themselves as international PEOs—there are certainly similarities between PEOs and global employers of record service.
By referencing the PEO model, they give would-be buyers a familiar concept to help them understand what’s being offered. However, there must be a clear line between the domestic and global offerings due to the implications of co-employment and entity establishment.
Introducing Global Employment Outsourcing
To distinguish between international PEO and a global employer of record service, we’ve coined the term “Global Employment Outsourcing,” or GEO. This means our service does not require clients to establish an entity in the countries they are looking for employment support.
GEO shares many similar properties with PEOs, such as removing the administrative HR and payroll burdens for our clients, but one key difference is that GEO allows our clients to compliantly employ and pay employees and contractors without the need for establishing a legal entity.
Another way GEO differs from international PEO is that it provides a flexible solution based on clients’ specific employment scenarios.
Traditional staffing agencies and other international PEO providers have rigid employment contract terms and benefit provisions for its workers. This can have an impact on clients looking to hire and retain a higher level of talent—particularly in countries where statutory benefit provisions may not be sufficient. The ability to customize employment scenarios can be invaluable in these circumstances.
Which model should I consider?
When evaluating your options, ensure that your provider is not advocating for the co-employment model that U.S.-focused PEO companies operate. Your provider should be able to deliver a full employer of record service—including handling payroll and employment compliance, tax remittance, and other administrative and reporting tasks—without requiring you to register a presence either as an entity or an employer in that country.