What is International PEO, exactly?
International PEO is a way to employ people without having your own “company” in the country. In some countries, it is also a way of cooperating around the administration of the employee contracts between the employing company, an administrative company, and the employee. This cooperation is also referred to as Agency Employment, Out-staffing, White-label, or Co-Employment.
There are several reasons for people to use International PEO. The most frequent is the freedom to operate locally without the burden of legal administration from having a subsidiary, branch, or the like. For many people, it is also a way of following the rules of local employment regulations without having to learn it all and to stay current on regulatory changes as they occur. It is simply easier. However, this does not necessarily preclude you from triggering permanent establishment and research should be performed in each case.
There are several groups of people who benefit from these services, the most common of whom are entrepreneurs in an early phase of their business. Other groups are freelancers (who do shorter projects for many customers) and permatemps (who do longer projects for few customers). For employers who are not able to keep employees as employees but still want them around, Umbrella Employment is an alternative to just letting the experience of their staff leave the organization completely. It also greatly speeds time-to-market in advance of setting up an entity in each country.
PEO is often associated with an Employer of Record. An Employer of Record takes on even more of the responsibility by becoming the full legal employer of your global talent.
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What does this mean for you, the business owner? You don’t have to think so linearly when it comes to your overseas expansion. There are a time and a place to set up an entity, and don’t be railroaded into thinking one size fits all. Quick side note: it never makes sense to use “contractors” and pay them from your home country—but that is the fodder for a future blog post.
I hope this helps—we are more than happy to talk through what options make the most sense for you and your individual business needs.