Professional Employer Organizations are just one way to expand your business and your talent pool.
Companies expanding into new territory–whether across state or international borders–or hiring virtual workers, need an effective way to hire, onboard, train, pay, and protect employees. They must navigate the complicated and ever-changing tax and labor regulations, file paperwork, negotiate with benefits companies, and stay abreast of changes to labor laws. Failure to comply can subject the company to significant fines and penalties.
As many companies have discovered during the pandemic, managing employees across multiple jurisdictions can be difficult and time-consuming to handle internally. Partnering with a professional employer organization, employer of record, or global employment organization may enable a company to build cross borders without having to invest in a physical presence or hire local human resources or legal expertise.
What is a Professional Employer Organization (PEO)?
A professional employer organization (PEO) is one solution to complicated human resources issues. Organizations can use a PEO to act as a co-employer, providing services for the company and its employees. The National Association of Professional Employer Organizations (NAPEO) defines co-employment as “a contractual allocation and sharing of certain employer responsibilities between the PEO and the client.” In other words, co-employment implies that the hiring organization and the PEO employ its employees.
The PEO typically processes the co-employed worker's wages, benefits, withholdings, and taxes under the company's federal employer identification number (EIN).
The managing company serves as the worksite employer, retaining full authority over the workers, including their hiring, performance management, and wage rates. The managing company will also continue to oversee its firm's overall strategy and operational functions.
A PEO can be advantageous for small businesses that lack the human resources expertise to manage multiple jurisdictions in-house. PEOs also offer small businesses access to comprehensive, affordable benefits packages for their employees, enabling them to attract talent they may otherwise be unable to get.
Who Uses a PEO?
PEOs provide a more broadened scope of HR services in comparison to other third-party employment organizations. PEOs are a great solution for small and mid-sized companies that do not have the internal resources to manage HR on their own. A PEO may be the ideal solution for an organization seeking to develop a staff without understanding how to handle payroll services, employee benefits, or payroll.
What is an Employer of Record (EOR)?
Employer of record services provide companies the ability to employ workers legally in other countries, even if the company does not have a local legal entity. An employer of record (EOR) is a company that employs workers in another country on behalf of a company. For example, if a U.S.-based company wants to employ a worker in France, the American company can utilize an EOR.
The notion of "co-employment" (dual employment) is not typically used in EOR services. In the employee's country of residence, the EOR is their only employer on paper. However, in practice, the EOR has no further involvement other than HR duties like payroll and benefits administration.
An EOR may also assist firms in finding employees from other parts of the country or the same nation. For example, a business in Texas may use an employer of record for hiring a worker in Colorado.
Who Uses an EOR?
EORs not only help expand a business rapidly, but they also save the time and money of opening a subsidiary in every country where an organization needs to hire local talent. Sometimes, creating a local legal entity makes sense, such as if expansion is only planned for one country. However, expanding into several new markets would require significant research on each country's regulations.
Marc Pavlopoulos, the founder and CEO of Syndesus, explains that hiring through an EOR (or GEO as explained below) may save the expanding company money and stress by ensuring that they avoid any legal issues regarding employment standards in foreign nations.
In addition to saving time and money, Pavlopoulus explains that EORs ensure that “company IP is protected abroad, while also providing a better employee experience.” He also adds that EORs are “best suited for companies that need to hire 10 or fewer employees.”
What is a Global Employment Organization (GEO)?
A global employment organization helps companies find qualified employees from all over the world. Many businesses are presently seeking to increase their operations and hire foreign workers. By 2025, it is expected that half of Fortune 500 businesses will have operations in an emerging economy.
A Global Employment Organization (GEO) is a company that assists other businesses with staffing international employees. GEOs exist to help ensure that companies follow both employment and tax laws when hiring, making global human resources more manageable.
GEO is an excellent choice for enterprises looking to expand outside their country and that need a comprehensive package of services. For example, UK businesses that are struggling to hire EU workers post-Brexit may find relief in different recruitment strategies that GEOs have in various EU countries.
When an organization partners with a GEO, they gain access to worldwide recruitment sources. By considering candidates from all over the world, businesses gain access to a more diverse and larger pool of employees that may be better suited for open positions.
Who Uses a GEO?
GEOs can assist businesses in reducing risk, centralizing administration, streamlining processes, and providing benefits and a better employee experience. A GEO is more akin to a PEO than an EOR, but still has some qualities of the latter. GEOs may function as EORs for an organization's workforce as it expands internationally and performs comparable HR duties to PEOs.
PEOs, EORs, and GEOs are useful resources for businesses seeking to expand into new markets. They can help a business expand in different ways. Whether an organization is looking for a one-time test of its market viability or wants to take the plunge and establish a long-term presence in a new country, a PEO, EOR, or GEO can help.