PEOs offer a great way to expand your business abroad and into new markets. Start by reading our list of PEO pros and cons to determine which model could be the right employment option for your business.
Professional Employer Organisations (PEO) help companies employ new talent by offering key HR services. While they are often confused with Employers of Record (EORs), PEOs generally do not employ talent on anyone’s behalf. Instead, they can help you hire and manage tasks like payroll, taxes, or benefits. At the end of the day, you are still the legal employer.
PEOs are often locally based. So, for example, if you want to hire a new employee in the UK, you could go through a PEO based there. However, your company may still need its own foreign subsidiary in the UK to be able to employ compliantly. Global or international PEOs operate overseas and can potentially work around this caveat by employing on your behalf. Like an EOR, they can become the legal employer of your employee.
Here we’ve outlined the main PEO benefits, what you need to watch out for, and how Omnipresent’s global EOR service can help you cover all your employment needs abroad.
Below are just some of the potential pros a PEO can offer your business.
A simple but crucial benefit of the PEO model is lower HR costs. The fee you agree to in your contract with your chosen PEO covers all the necessary HR services for seamless employment. This makes scaling up locally and internationally very cost-effective.
Many PEOs manage the payroll process for you. This includes paying salaries, as well as income tax and social security contributions to the relevant authorities. Payroll is a notoriously bureaucratic process, so having it handled externally can save you a lot of time and expenses.
PEO services will make sure your employees are getting the benefits they are legally entitled to in their jurisdiction. This includes things like healthcare and pension plans. You may also want to top these off with your own tailored benefits offers, like remote work allowances or additional healthcare plans.
While local PEOs won’t necessarily set up compliant employment contracts for your employees, they can offer you extensive advice on how to employ compliantly. This includes compliant employment contracts, different types of paid leave, what salaries to pay, and how to avoid Permanent Establishment (PE) risk.
In sum, PEO benefits cover a wide range of HR functions, significantly reducing your company’s bureaucratic burden. While they sort out the nuts and bolts of employment for you, you can focus on growing your business, testing new markets, and engaging your new employees.
Here is a small selection of limitations when it comes to using a PEO for your employment needs.
Local PEOs do not take legal responsibility for your employee. You may have to set up a local entity, which can be a hassle at best and a bureaucratic nightmare at worst.
Global PEOs are more likely to be able to employ on your behalf by setting up a legal entity of their own wherever your employee is based. But not all PEOs will offer this service.
One of the greatest disadvantages of using a PEO is that the PEO model is not recognised everywhere. France, for example, is well known for not allowing PEOs. Instead, they have a local EOR model called portage salarial. Germany also only allows EORs, though they cannot employ client employees for more than 18 months.
As a rule of thumb, PEOs generally do not set up compliant employment contracts for you. Their service tends to be limited to legal advice. Again, international PEOs may cover employment contracts, but you will need to ask before signing up to their service.
In many countries, employment relationships are regulated or mediated by collective agreements. But many PEO services don’t cover these. Ignoring collective agreements could put your company at risk of non-compliance or create an unwanted bureaucratic mess.
Additional contractual obligations include things like intellectual property (IP) rights, data protection, health and safety. Most PEOs won’t check for these, leaving your company at risk, for example, of losing your IP rights for any products made on your company’s behalf.
PEOs can provide a great way to scale your business and branch out into new markets, especially when you’ve yet to establish a significant presence in a new market. PEO benefits include key HR and payroll functions, plus legal employment advice. Employing with a PEO can be your ticket to cost-effective global growth.
Yet the disadvantages of using a PEO can be deterring. The PEO model is not recognised everywhere and services can vary. International PEOs offer a wider range of services, but you will have to read the fineprint and be clear about where their responsibilities start and end before signing on. You may find yourself using multiple local and global PEOs to cover different services and jurisdictions which is an additional administrative burden.
Luckily, Omnipresent can employ all your employees wherever they are. Better than a typical PEO or traditional EOR, we offer a global EOR service that covers all PEO pros and cons. We take over legal employer responsibilities, employment contracts, additional contractual obligations, and many more PEO benefits.
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