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PEO Professional Employer Organization Basics for International Companies

By May 24, 2016 October 17th, 2017 No Comments
PEO Professional Employer Organization Basics for International Companies

If getting administrative responsibilities established in your new country of operations seems daunting, you have options such as PEO Professional Employer Organization.  PEOs can manage these tedious responsibilities and ultimately, allow you and your colleagues to focus on growth and your international strategy.

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What is a PEO Professional Employer Organization?

A PEO helps businesses manage various responsibilities related to employee relations. These tasks include employee benefits, payroll, worker’s compensation, recruitment, training, and risk management. This is a B2B relationship and a company typically pays for services based on a percentage of their employee’ total compensation.

There are multiple versions of a PEO, which include:

1. Joint Employment PEO

With a Joint Employment PEO, employers pass the employer of record status to the PEO for tax and benefits purposes. The employer still has total control of its operations, but the PEO managers HR-related duties like payroll and benefits.

2. Pass-Through Agencies

A pass-through agency acts as the employer of record for independent contractors but does not search for work. It’s a service to assist these workers with taxes, insurance, rates and other administrative responsibilities.

3.ASO or Administrative Services Organization

An ASO is similar to a PEO in that it provides payroll, insurance, benefits and other human resource services to employers. It’s an option for employers who are not interested in the other benefits of a PEO and simply want HR tasks managed.

4.Umbrella Companies

An umbrella company positions itself as an employer to agency contractors who are on fixed-term assignments. Essentially, an umbrella company reduces agencies’ liabilities.

5. International PEO

An International PEO gives companies quick access to full-time talent in their target countries. It removes the need for establishing a foreign subsidiary and services as the employer of record overseas. We will discuss the benefits of International PEO below.

The Relationship of International PEO and “Employer of Record?”

An employer of record is the company, person, or service that “leased employees” are contracted within a target country and they are responsible for maintaining employer liabilities associated with these employees.  Each of these requirements vary from country to country, but it typically includes:

  • Payroll and Tax Withholdings
  • Reporting and Filing Requirements for Payroll and Taxes
  • Workers Compensation
  • Health Insurance
  • Benefits Packages
  • Termination Requirements

Companies have the option to outsource these responsibilities to a firm like Velocity Global to manage its employee relations during an international expansion.

What are the Benefits of an International PEO Professional Employer Organization?

International PEO removes the risks of compliance issues that come with operating in a new country. By outsourcing these responsibilities to an experienced firm, you can rest assured knowing that you are operating effectively.

In addition, it removes the risks associated with independent contractor hiring. If a contractor is deemed a permanent employee by local governments, the employer is responsible for all benefits, back taxes, and insurance requirements. An International PEO manages this working relationship to save you from those expensive risks.

Furthermore, this service also saves you the time, money and effort associated with establishing a foreign subsidiary in your new country. It can take months and thousands of dollars to set up a legal entity, which can cause you to lose talent or business opportunities. An International PEO removes those constraints and gets you operational in much less time.

Overall, an International PEO is fast, cost-effective, flexible, and built around your company’s specific needs. If you have more questions about this service, give us a call. We can give you the resources necessary to determine if this is the best option for your international expansion.