The Ultimate Guide to International PEO

The use of a PEO (Professional Employment Organization) is becoming a popular employment option for companies with operations in countries such as the US, where there is wide difference between state laws on corporate registration, employment and payroll. The PEO is useful where a company (foreign or domestic) wants to assign or employ staff in multiple states, but wants to avoid the expense and administrative tasks of complying with diverse state laws and regulations.

Go to the profile of Tim Burgess
Mar 06, 2019
0
0

The use of a PEO (Professional Employment Organization) is becoming a popular employment option for companies with operations in countries such as the US, where there is wide difference between state laws on corporate registration, employment and payroll.  The PEO is useful where a company (foreign or domestic) wants to assign or employ staff in multiple states, but wants to avoid the expense and administrative tasks of complying with diverse state laws and regulations.

This service can also be used in some foreign countries for basic employment and payroll support, and act as a ‘co-employer’ for the client-company.  Sometimes the term is used interchangeably with GEO (Global Employment Organization), but there are a few key distinctions between these two employment outsourcing services which are outlined in this guide.  Basically, the GEO is a sole and legal employer of record, whereas the PEO simply shares some of the employment and payroll tasks with the client.

What is an International PEO?

A PEO is a HR outsourcing service, that can assist a company with the management of employment related tasks, including employee benefits, compliance with state and federal regulations, servicing payroll and risk management.  It is essentially a ‘co-employment’ relationship between the PEO and the client-company, where the employees are employed by both, so that the PEO can assume some of the employer responsibilities for the client.

Why Use a PEO?

The question does come up of why a company would use this service for their employment needs and administration. The primary reason is that the PEO has a built in HR support structure that includes:

  • Risk Management and Worksite Safety
  • Payroll Servicing
  • Insurance and Workers Compensation Coverage
  • Regulatory Compliance
  • Withholding and Taxation

The PEO may take on any or all of these functions for the client, saving the HR department time and money as an efficient solution to complex payroll and employment regulations.

How Does a PEO Arrangement Work?

The PEO contracts in a business-to-business arrangement with the client to handle defined aspects of the employment duties to the employees.  This can be a comprehensive service, or in some cases may be scaled down to suit the client’s specific needs.

The client-company still has the employment contract with the employee, and will both negotiate compensation and manage the work activity.  The employee will probably not even notice the PEOs role, except if they have concerns about any administrative issues that come up.

Pros and Cons of Using a PEO

There are pros and cons to using a PEO as with any professional service, and each company will need to assess their own needs and weigh any disadvantages in their decision.

Pros 

  • A ‘ready-made’ HR support infrastructure, that a company can plug into at any time and with different degrees of service
  • Frees up time for recruitment and management of key employees
  • Reduces compliance risk across state and national borders when expanding
  • Brings an efficient ‘co-employment’ partnership to set the company apart from others

Cons 

  • Additional expense of the service fee, which may be seen as a normal HR function not needing to be outsourced
  • Limited insulation from liability or penalties for the client-company
  • Perception by senior management of a ‘loss of control’ of some business or HR functions
  • Registration is still required of the company in each business location
  • The PEO does not take on any legal employer responsibility, which still rests with the client

Common Myths About PEOs

There are a few myths and misconceptions about PEOs, and if you are considering using this type of service you need to know the facts:...read more

Shield GEO makes international employment simple. Our customers use Shield GEO to employ and payroll hundreds of workers in over fifty countries. Find out more. 

Go to the profile of Tim Burgess

Tim Burgess

Director, Shield GEO Services Ltd

No comments yet.