In honor of the US tradition where in January the President provides an annual State of the Union Address, we are presenting the International PEO State of the Union. As the broadest and fastest growing International PEO firm, we are uniquely positioned to share our thoughts on the state of the industry and what it means for those looking to hire people overseas in 2015 and beyond. The focus is on the following categories:
- Who are using International PEOs and why;
- What is happening with International PEO from a global and local regulation standpoint;
- Which countries are trending? (you’ll never guess the answer);
- Where we go from here
Who are using International PEOs and why?
Everyone. Seriously. We are seeing incredible adoption across established old-world consumer product businesses, oil and gas services, engineering firms, early-stage technology companies, life science startups, professional services firms, and so on. Let’s take two extremes: the startup tech company and the established consumer products company.
The tech startup wants to employ a team of software developers in Romania. Currently, they are using an outsourced tech staffing firm, but for all the obvious reasons they want these developers to be their employees – not some staffing firms. The problem is that the startup doesn’t want a subsidiary in Romania which could easily cost $15K to set up, $50-$75K per year to maintain, and they’re already lean startup staff is now tasked with learning and knowing Romanian labor and tax law. So they go with an International PEO to hire these developers today, saving almost $50K in that first year alone while cash is king and leaving the labor expertise up to us.
•$1B Consumer Products company
A Fortune 500 consumer products company was using a partner’s employees in Malaysia and Colombia to help them with sales; unfortunately, their partner decided to shut their operations. Suddenly the consumer products company was faced with transitioning the two salespeople but no plans to set up their own entities in those countries – particularly not for one employee in each location! So they used an International PEO.
What is happening with International PEO from a global and local regulation standpoint
Countries are wising up to the concept that getting companies to create jobs and invest locally earlier at a lower price point is good for everyone. We are seeing relatively little in the way of wholesale changes to regulations and employment law, but that countries are often promoting the International PEO structure behind the scenes. A labor board representative of a particular European country specifically told us that job creation is the number one priority – and that they will not be enforcing outdated permanent establishment provisions for companies that can demonstrate job creation and a long-term plan to ultimately establish in the market. Which is great news for companies that want to get into a market faster, cheaper, and with the greatest flexibility?
What countries are leading the charge?
Tunisia, no question. While we are seeing the usual interest in difficult employment and expensive-to-set-up countries like France, Brazil, and China… Tunisia may prove to be the most popular country for our clients in 2015. At first, we were surprised by the number of requests so we started doing our research. Tunisia basically led off the Arab Spring and the results have been more successful than any other country with regards to opening the borders to global business and achieving peace and security. Further, just about every Tunisian University graduate is fluent in 5 languages and speaks countless others. The result? A secure climate, an educated and multi-lingual young population that is eager to explore the world, and access to all of Africa and much of Europe from a geography perspective. Honorable mention goes to Colombia – when compared to Brazil and Argentina for accessing South America it’s no contest.
Where we go from here
It’s a good time to be in the International PEO space. If you walk around our halls you’ll often hear people saying “if you build it they will come; if you delight them they will stay”. The point is that the world has been waiting for an International PEO service like what we’ve created at Velocity Global. Just last week we had a long time and well-respected General Counsel tells us “I’ve been looking 10 years for a service like this”. Ironically the CFO of a hot Bay Area later-stage tech company told us the exact same thing two days later. The international expansion model is officially disrupted and companies are the big winners with this revolution. If you need to convert some contractors over to employees in a foreign market, or planning an expansion into a new region, the direction is clear – talk to us about International PEO. Do your friends a favor and tell them Velocity Global has created a better way to expand overseas, they’ll thank you. And come join the Velocity Global family – you’ll be delighted you did!