A global professional employer organization (PEO) is a global employment solution that enables companies to hire and pay supported employees anywhere in the world quickly, compliantly, and without the burden of establishing a foreign legal entity.
Companies hire global PEO providers to outsource international hiring. A global PEO is a legal entity that employs global employees on a company’s behalf, managing global payroll processing, benefits administration, immigration services, and tax compliance.
The term global PEO is interchangeable with international PEO and global employer of record (EOR).
Global PEO vs. PEO
The main difference between a global PEO and a non-global (or domestic) PEO is that a global PEO serves as the legal employer of a company’s distributed workforce. In contrast, a PEO serves as a company’s co-employer to perform HR services.
PEOs typically partner with small and medium-sized businesses that need help with HR services, such as hiring, payroll processing, benefits administration, and tax filings. The two entities enter a co-employment relationship and share the employer status of the workers. They also share all legal responsibilities and risks.
In contrast, a global PEO becomes the legal employer of a company’s workforce and takes on all legal responsibilities and risks. Global PEOs handle all employment responsibilities on a company’s behalf, including onboarding to payroll, taxes, benefits, talent relocation, and compliance. A global PEO has established foreign entities and can hire foreign workers.
Global PEO vs. global employer of record
Global PEO and global employer of record (EOR) are interchangeable terms for the same solution or service. Companies can use either term when partnering with a legal entity to hire and manage their distributed workforce—although EOR is technically the more accurate term.
However, a non-global PEO and EOR are not the same thing. Learn more in our guide that discusses the differences between EOR and PEO.
What do global PEO companies do?
Global PEO companies allow companies to establish a presence in foreign markets and hire internationally without establishing a legal entity.
A global PEO company serves as a company’s employer of record and hires employees on its behalf through local, compliant employment contracts.
Global PEOs handle all employer-related responsibilities while the company maintains day-to-day operations. Some global HR management tasks that a global PEO provider manages include the following:
- Employee hiring and onboarding
- Employment contracts
- Global payroll
- Global benefits administration
- Tax filing
- Contractor conversion
- Global immigration and relocation services
- Employee management and support
- Global compliance
What are the benefits of global PEO services?
Some key benefits of partnering with a global PEO include:
- Fast market entry. Entity establishment is time-consuming and can strain a company’s HR resources. Global PEO services allow companies to quickly expand into new markets without setting up an entity to test new locations and easily hire international employees.
- Cost savings. Entity establishment is also a long-term financial commitment that requires significant financial and legal resources. Global PEOs help companies save on costs toward establishing and maintaining a foreign entity as well as save on payroll administration and global benefits packages.
- Risk mitigation. Employment laws vary from country to country, so global PEO companies ensure compliance with all local laws, tax requirements, and benefits regulations for a distributed workforce. Global PEO services also enable companies to secure intellectual property and sensitive employee data and protect their supported workforce from misclassification risks.
- Talent attraction and retention. Global PEOs open the door to hiring the best talent, regardless of their location. Through a global PEO, an organization can compliantly hire top talent worldwide and support a distributed workforce with compliant contracts, international payroll, and market-specific benefits.
- Streamlined support. Global PEOs manage all HR-related tasks on a company’s behalf, including onboarding, payroll, benefits, and compliance. This streamlined management ensures tailored and ongoing support for distributed employees while company leaders can focus their time and energy on core business needs.
When to use a global PEO provider
Global PEOs provide significant value to growing companies seeking international expansion. Companies benefit by using a global PEO provider when they want to achieve some of the following goals:
Quickly enter or exit new markets
A global PEO provider makes it easy for companies to enter or leave international markets. If an organization is unsure how long it plans to be in a market but wants to reach new customers, it can test out the new location through a global PEO without setting up an entity. This low commitment makes for seamless market entry and exit.
A company may also not have the financial or internal resources required for global expansion. A global PEO partner handles hiring, onboarding, and payroll so companies don’t have to endure the costs and time-consuming process of establishing legal entities overseas.
Hire talent during entity establishment
For companies already working toward entity establishment, a global PEO makes it possible to hire talent during the entity establishment process.
Setting up an entity takes time, causing some companies to delay hiring and stall business expansion. However, a global PEO has a legal understanding of local employment laws and can help companies quickly become operational in the interim.
Engage and retain top talent
Global PEOs help companies easily find and quickly hire a wider talent pool worldwide. International borders are no longer a barrier; companies can engage the best talent for the job, regardless of location. Global PEO partners swiftly and compliantly handle onboarding, global payroll, benefits, and HR support on the company’s behalf.
Convert international contractors to employees
Companies often engage international contractors for short-term or specialized projects to save money or logistics on hiring full-time employees. However, companies hiring contractors rather than employees risk worker misclassification that could lead to fines, severe penalties, and legal headaches.
While contractors may provide benefits in the short term, companies may choose to convert their contractors to employees to retain talent and avoid long-term worker classification risks.
Global PEOs expedite the conversion process by verifying worker classification, crafting compliant employment contracts, managing payroll and benefits, and ensuring compliance with local employment laws.
Expedite cross-border transactions
Global PEOs also assist companies facing acquisition or cross-border transactions.
A global PEO partner can help a company with country-specific employment compliance, onboarding multiple foreign employees at once, and transitional services agreements to make it easy for merging companies to onboard international talent quickly and ensure compliance during the expansion.
How to select a global PEO service provider
Companies must carefully vet their global PEO partner to ensure reliability, transparency, and success. Consider the following factors when partnering with an international PEO:
- Transparency. A trustworthy global PEO partner should provide transparent pricing for their services and fees, accurately calculate employer burden costs, and clearly communicate all appropriate information.
- Comprehensive talent solutions. A global PEO provider should offer hiring and payroll solutions for supported employees and locally-tailored benefits administration, global mobility, and relocation services.
- Established global infrastructure. Partner with a global PEO with extensive expertise and knowledge of the markets where you seek to hire talent. A global PEO with an established global infrastructure will ensure total compliance and save you time and money during expansion.
- Full-service support. Choose a global PEO partner that offers comprehensive support for distributed talent no matter where they live and work. These services include localized, real-time legal, finance, and HR support.
Read more: How to Choose an Employer of Record
Global PEO FAQs
The below discusses some common questions regarding global PEOs.
How much does a global PEO cost?
The cost of a global PEO partner depends on many variables, including the specific services you require, your current workforce, the types of workers you want to engage, and the markets in which you plan to expand.
A reliable global PEO partner also accurately calculates employer burden costs for your supported employees, payroll, and social contributions, such as paid leave entitlements, social security, and other public programs. The global PEO provider ensures you pay in compliance with local employment laws.
Contact Velocity Global to learn more about our global employment solutions.
What is the difference between global PEO services and a payroll company?
A payroll company takes care of an organization’s payroll needs, including understanding and ensuring compliance with the local employment laws and regulations and managing taxes and benefits that affect payroll. A payroll company, or payroll service provider (PSP), does not handle other HR services or share legal liability.
A global PEO, however, manages more than just payroll and takes on the company’s legal liability. A global PEO partner performs all HR functions for companies with distributed employees in multiple countries. A global PEO is the legal entity that hires international employees on a company’s behalf and acts as the HR department to manage global payroll processing, benefits administration, tax compliance, and employee support.
What is the difference between global PEO services and HR?
HR, or human resources, is the department within a business responsible for finding, recruiting, screening, and training job applicants. HR also handles payroll, benefits, termination, and ongoing employee support.
A global PEO is a third-party organization the company hires to handle all employment responsibilities on their behalf, such as hiring, onboarding, payroll, taxes, benefits, and compliance.
While global PEOs and HR have similar duties and tasks, including staying up to date with laws that affect the company and employees, global PEOs are legal entities that allow companies to compliantly hire and pay talent in other countries with establishing entities.
Who should use global PEO services?
Any company seeking to grow its workforce or expand into new foreign markets should consider a global PEO partnership to ensure a quick, streamlined, and compliant transition without worrying about legal entity setup, international regulations, or administrative tasks.
Businesses that partner with global PEOs often wish to hire international employees, reduce their administrative workload, improve access to employee benefits offerings, and ensure compliance with local and international regulations.
Why use a global PEO provider instead of paying contractors?
While contractors can be beneficial for short-term projects, specialized tasks, or even to gain insight into new markets, companies face substantial misclassification risk when engaging contractors.
Worker misclassification penalties result in fines, back pay, tax and labor violations, legal disputes, and even reputational damage. A global PEO provider ensures compliant hiring and worker classification and helps companies convert contractors into employees easily.
Hire talent in 185+ countries with Velocity Global
Engaging talent in global markets offers ample opportunities for expanding businesses. While the logistics of managing a global workforce present risks, a global PEO partner simplifies the process and can help you grow quickly and cost-effectively—while mitigating those risks.
Velocity Global expedites market entry in more than 185 countries without entity establishment. Our Employer of Record (EOR) solution and in-country expertise simplify employee onboarding, global payroll, benefits administration, immigration services, contractor conversion, and compliance so you can focus on your business goals.
Contact Velocity Global today to get started building your global team.
