International expansion may be a growing trend, but a lot of companies still lack the knowledge and resources to grow abroad successfully. Establishing a presence in new territories for companies can be challenging especially for companies that are not familiar with the local labour laws or guidelines that would make their operations seamless. Companies that are not familiar with global markets and their regulations are at risk of compliance issues that can lead to negative legal consequences; this is where Professional Employer Organizations (PEO) come in.
Companies looking to expand into new markets are increasingly partnering with International PEOs to mitigate international risks. Changes in employment laws, tax laws and health care reform pose a lot of compliance risks that make it difficult for companies to keep up when expanding into foreign countries.
Establishing a partnership with a local Professional Employer Organization (PEO) will help your company to reduce risks with labour-related compliance and liability issues.
From improved payroll processes to more attractive benefits, these companies can be a game-changer for attracting the best workers and expanding your companies. Before diving into what to consider before choosing a PEO as your partner, it’s essential to understand what a PEO is and how it can be of benefit to your company. In this article, we will be addressing the following questions:
- What Is A Peo?
- What Are The Key Benefits Of A Peo?
- How Do I Find The Right Peo Partner?
What Is a PEO?
A professional employer organisation, or PEO, is a company that works with employers to provide human resource services and expertise the employer may not be able to provide alone, especially with regards to expansion into a new market.
PEOs help companies expand internationally by providing various services such as HR support, payroll administration, guidance with employment law compliance, navigating taxation laws, securing work visas, back office outsourcing, and company formations.
In simpler terms, a PEO can be used to help you expand your companies into new markets and hire foreign personnel without having to form a legal entity within the country. While the concept sounds complicated, the truth is that it’s a simple process.
A PEO allows its clients to outsource many of their human resource functions, share employment liability, and provide improved benefits packages for their employees. PEO services vary in scope; however, most PEO’s offer services such as:
- Recruitment and Onboarding
- Payroll processing and tax compliance
- Benefit plans and administration
- Regulatory compliance
- HR management
- Insurance plans
- Workers’ compensation
- Training and development
- Risk management and workplace safety
What Are the Key Benefits of a PEO?
According to the National Association of Professional Employer Organizations (NAPEO), Small companies that work with a PEO grow 7 to 9% faster, have employee turnover that is 10 to 14% lower, and are 50% less likely to go out of companies.
However having a Professional Employer Organisation has significant benefits for the client, as they allow companies to expand with ease while keeping their needs at the top of the list. Highlighted below are the five major areas companies can benefit from leveraging PEO’s:
Easy Expansion into Foreign Markets
Companies expansion into foreign markets presents new opportunities for growth. Companies all over the world are weighing the costs and benefits of international expansion, knowing the challenges, but recognising the opportunities.
As a company puts together strategies to expand into new markets, a local PEO can provide some level of confidence in a few key areas. With a local PEO, managing and administering payroll and benefits, your company can ensure that it is compensating its international employees following local laws.
That means your employees will be satisfied and productive, and you’ll have the foundation for a good reputation with the local government and in the community.
Compliance with Local Regulation
Employment laws vary across different parts of the world and are complex and ever-changing. Companies are faced with compliance risks when expanding into foreign countries which might lead to serious consequences if not handled properly.
Local PEOs can help mitigate such risks, as they understand the employment law in their country. Instead of trying to manage the complexities of each country’s employment laws and regulations, a PEO will enable you to hire full-time employees risk-free without having to set up a legal entity in the country you are looking to expand to.
They can ensure that employees receive compensation according to local regulations and that employees are provided with a compliant benefits package.
Expanded Benefits Offerings
Partnering with a PEO makes your companies more competitive when sourcing for talented employees against other companies.
PEO’s can help companies offer the benefits that potential employees expect, improving recruitment and employee retention.
This can be crucial for a company expanding into a foreign country, as workers in a new market might expect a baseline benefit that the company doesn’t offer in its home market. A local PEO can help cost-effectively provide that benefit.
Setting up local entities in foreign countries is a process full of challenges as well as being expensive. With the right combination of talents and knowledge in your human resources department, you might successfully expand to one international market.
However, Human resources costs can quickly inflate as a company expands into more countries. It takes time and talent to appropriately research and administer payroll and benefits in a new market.
PEOs allow employers to hire local workers without going through the expense and hassle of setting up a local, permanent establishment and your business get to save about 35% on HR Administration.
Generally, company owners spend a percentage of their time on paperwork and other non-revenue generating tasks. PEO’s make it possible for you to save all that time by handling your HR challenges, which allows you to focus on what matters the most, such as strategy and company growth.
When you partner with a PEO, they become the employer of record and can process even the most complex payrolls.
The payroll team provided by a PEO can manage tax withholding and filing, so all clients have to do is complete the employment application process and track employee hours.
How to Find the Right PEO Partner
When it comes to looking for international market partners, finding the right PEO provider can be a very challenging task for company owners.
In evaluating international PEO providers, companies owners must be mindful of their expertise in drafting compliant employment agreements, structuring benefits, working through market norms, and being prepared for unexpected problems in local working terrain.
Finding a PEO provider with such expertise can significantly help any company mitigate the risks that come with expansion into foreign countries, as such PEO providers can properly advise companies on specific issues within each country they specialise in.
Companies owners should also make sure that the PEO provider they choose offers services that perfectly fit their particular global expansion needs. It is very dangerous for companies to enter unfamiliar markets without being aware of the risks and obligations that can greatly affect the success of the company in that country.
Also, company owners should consider leveraging the expertise of international PEO providers to maintain compliant operations when expanding into foreign countries effectively.
To ensure you find the right PEO partner, you should keep in mind PEO services like HR benefits, payroll, employee onboarding, and compliance. Highlighted below are the top 9 things to consider before choosing a Professional Employer Organisation (PEO) as your partner.
What to Consider Before Choosing a PEO for Your Business
Level of Experience and Expertise
Before choosing a PEO as your partner, it is essential to identify the experience level and expertise of the PEO Company as a whole.
Look at the qualifications of their staff members; be sure that the PEO is qualified to handle your companies by checking up on the PEO’s background and certifications, and making sure it is accredited.
Also, check to be sure that their risk management, operational, and ethical practices are certified and licensed by the country PEO licensing bodies and registration laws. These findings will reveal how qualified they are to adequately handle the specifics of your company, industry and HR needs.
Find out if the PEO has a history of adherence to the industry’s professional performance practices, especially responsible financial management of its companies and verify that a certified auditor independently audits the PEO’s financial statements.
The audited financial statements will show that the PEO has adequate net worth and working capital, including sufficient financial reserves for any loss-sensitive or self-insured insurance plans.
Also, PEO’s need to have audited financial statements because several PEO licensing and registration laws require it and these audits enhance internal controls and accuracy of financial information.
While independent audits don’t prevent fraud or financial failure, they confirm that the PEO’s financial statements are accurate, complete and well presented.
Expertise in Compliance
Compliance risks are a major concern for companies, and choosing a PEO with expertise in compliance can help mitigate those risks.
Compliance changes frequently occur, with new mandates coming down from federal, state, and local authorities; non-compliance with these changes can have expensive and time-consuming consequences for your companies.
A PEO should know how to help with your compliance concerns and have the ability to support your companies by developing systems and processes that make compliance easier, from monitoring changes to better-ensuring compliance with regulations.
Commitment to Customer Service
While excellent qualifications are vital, it is more important to be able to get in contact with your PEO account representative when you need them.
Be sure that you and your employees’ questions and concerns would be addressed promptly; find out the primary tool of communication, how many hours your main contact be available, and what happens in the case of an emergency.
As a business, you need to be sure that your HR functions will run smoothly and that your employees will be treated with respect, so it is essential to investigate the details about their customer service.
Benefit Plan Options
Another crucial area to consider is what benefits the PEO offers because a primary reason why companies prefer to work with PEOs is to get access to better benefits and a more extensive range of options.
Be sure to find out what programs the PEO offers, how those programs will be of benefit to your staff, and if they have access to multiple insurance carriers and networks that would accommodate the growth of your company outside of that province.
Also, professional development and employee training opportunities are relevant because they enable you to maximise the potential of your workforce. If this is an essential aspect of your organisational culture, you will want to make sure that the PEO offers these services as well.
Client and Professional References
Before choosing a PEO as your partner, be sure that they have an established track record of success working with companies like yours in terms of the industry, company size, or specific goals and business challenges.
Ask if the PEO can provide customer references, including real-life case studies or testimonials and data such as the organisation’s customer retention rates.
Getting another opinion will help you verify the information you’ve collected both from your conversations with PEO reps and by carrying out background research.
Case studies or video testimonials may also be found on the PEO’s company website; be sure to read online reviews critically and consider contacting the author for more information, if you’re going to make a choice based on their reviews.
Partnering with a PEO company should give your organisation access to advanced technology for increased efficiency.
Be sure that the technology solutions offered by the PEO should be standard, offer clients self-service features, have an efficient system for reporting, and simple to use; if the platform isn’t simple to use, the solution isn’t achieving its goal.
It is always important to request a demo for new technologies to fully understand what it’s like to use the platform, and to be sure that it is a platform everyone can operate efficiently.
Cost of Services
A large extent of your decision when you choose a PEO will come down to price. The price breakdown can vary from PEO to PEO, and comparing price is an important consideration.
Some PEOs may charge percentages while others may charge one-off payments. However, most PEO’s charge an administration fee on a monthly or an annual basis, and it is necessary always to request a quote to get a clear picture of their pricing.
Before signing an agreement, make sure you know what you’re getting; request for the package to be broken down into line items so that you can see what services you will and will not be getting and be sure that the essential services you need are included in the package.
Before choosing a PEO as your company, be sure to know if the PEO uses a one-size-fits-all approach or offers customised HR solutions.
Look for a PEO that provides tailored solutions to your companies needs in terms of the context and culture. The PEO should be able to offer you more help as your company grows and becomes more complex.
The expectation is that the PEO you partner with will be able to help your companies where it is now, and also help it achieve the level of growth it needs.
Ultimately, before choosing a PEO as your partner put into consideration, your unique employee and organisational needs. The best Professional Employer Organisations will work with you closely to determine exactly how they can fulfil your requirements.
Choosing the right PEO is all about vision; it is vital that the PEO you choose understands the vision for your company, and has presented a strategy that will help you achieve those goals.
Expansion into new territories isn’t an easy process, but we are here to help your companies overcome the challenges. For more inquiries on how a PEO can help your company expand internationally click here, we would love to hear from you.