Global ExpansionIndependent ContractorsInternational PEO

The Big Question: How Does an International PEO Work?

By August 30, 2019 October 1st, 2019 No Comments
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Firms have a handful of global expansion methods available to them. Most of which, however, require that companies handle all the logistics themselves, and go through the massive amount of effort required to get their businesses up and running in new international markets.

To simplify their global expansion efforts, firms can partner with an International Professional Employer Organization (PEO) to handle the lion’s share of the burden on their behalf—but what, exactly, is an International PEO, and what advantages does it provide businesses expanding overseas?

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How Does an International PEO Work? A Guide to Going Global

An International PEO is a partner organization that hires on a company’s behalf in an international market without first establishing a legal entity.

In most markets, it’s also a viable way to create a greater degree of cooperation around the administration and logistics of employee contracts between A) the employing company, B) an administrative company, and C) the employees themselves.

The major benefit of this is that it allows firms to get up and running in a new country not only faster than when compared to traditional entity setup, but more cost effectively as well; rather than setting up their own local entity, the International PEO acts as a company’s employer of record. So, not only can organizations expand quickly, but can also exit a market just as fast if the market is no longer advantageous.

But for most organizations, working with an International PEO is also the single best way to employ and retain the top talent needed to thrive during an international expansion; firms can focus their efforts on daily operations while the International PEO adheres to all aspects of employment law in a new area.

Additional Considerations About Using an International PEO

Another major reason why so many organizations employ the services of an International PEO has to do with how such a partner can help them navigate many of the risks inherent in the staff process—and the risks of hiring foreign independent contractors.

In most countries, the misclassification of an employee as an independent contractor could expose an organization to serious financial penalties. In the United Kingdom, for example, one court case ruled that an employer had misclassified an employee as an independent contractor for 14 years. In addition to the fines that they incurred, that employee was also entitled to a minimum leave of almost six weeks per year for that entire period.

Things have gotten so problematic in the Netherlands that Dutch tax authorities have begun to proactively seek out companies that have an actual “employment” relationship with their existing independent contractors, all in the name of protecting workers’ rights.

Even if firms are not purposely misclassifying employees, it’s still far too easy to do—particularly as “employee” and “independent contractor” are two terms with very fluid definitions around the world. Rather than spend time worrying about misclassification, companies can rely on their International PEO partner to compliantly hire top talent to drive their expansion efforts. That way, firms can spend less time focused on potential tax and regulatory issues and more time on growing revenue and expanding their customer bases in the world’s top markets.

Break into New Overseas Markets with an Experienced Expansion Partner

Velocity Global’s International PEO solution has helped hundreds of companies break into (and remain) in the world’s top markets—without worry of noncompliance. With global expansion capabilities in more than 185 countries, we can help your company establish its presence virtually anywhere and, in many cases, in as few as 48 hours.

Ready to take your company global and establish your global presence? Let’s make it happen.