What is an international PEO?
As a growing company, you may want to venture beyond your backyard and hire a global team. After all, international expansion has its perks—businesses can access a diverse cohort of talented workers in new markets working to solve your biggest problems.
The snag? If unprepared, you're in for dicey administrative hassles when keeping track of conflicting local labor laws within every country you hire, managing international payroll, and spending months setting up new legal entities…thereby missing out on stellar candidates.
But for international businesses who want to expand quickly, there's a way to have the good without the bad: tapping a global Professional Employer Organization (PEO). In this post, we'll explain the services an international PEO provides, why it differs from a domestic PEO, and how outsourcing your most finicky HR tasks can support global expansion for your workforce.
What is an international PEO?
An international PEO is a service that hires foreign employees on a company’s behalf. Also known as a global PEO or Employer of Record (EOR), this service acts as the legal employer of its global workforce. It allows companies to hire abroad without setting up a legal entity (which can be costly and time-consuming) or mastering niche local employment laws.
In addition to assuming legal liability for employing workers overseas, an international PEO acts as a handy extension of a company’s human resources department by managing global payroll, employee benefits, employment contracts, and taxes. By doing your administrative heavy lifting, the service minimizes your compliance risk in global markets while letting you focus on your core business.
If you’re thinking an international PEO sounds similar to other three-letter employment acronyms, here’s a quick breakdown of what they all mean.
- International PEOs: Serve as a company’s legal employer for a workforce overseas. They can handle onboarding, legal compliance, tax withholdings, benefits, and payroll on a company’s behalf.
- PEOs: Serve as a company’s co-employer and share workforce management responsibility. PEOs allow companies to offload administrative HR tasks like tax filings and benefits administration for domestic employees, but can’t help internationally (more on this in the next section).
- EORs: The more commonly used term for international (or global) PEO. Both are services that officially employ international workers for a company.
- Global Employment Organization (GEO): Another term for an international PEO or EOR.
Standard PEOs vs. international PEOs
Standard PEOs and global PEOs can each relieve administrative burdens for your HR team. And they can often work well in sync with one another, as the same company can use both services simultaneously. But they have crucial differences to keep in mind: the former co-employs your workforce and supports domestic hiring; the latter is the legal employer of your workforce and supports international hiring.
The table below spells out more of the key distinctions:
Standard PEOs
International PEOs
Relationship
Your co-employer; hires with you
Your legal employer; hires for you
Responsibilities
Streamlines HR tasks for your domestic workforce, including payroll, tax withholdings, benefits administration, and compliance
Streamlines HR tasks for your international workforce, including payroll, tax withholdings, benefits administration, and compliance
Business structure
Is not a replacement for a legal entity
Eliminates the need to immediately set up a legal entity overseas
Compliance
Can monitor domestic compliance issues for taxes, payroll, and benefits, but isn’t legally responsible
Assumes legal liability for ensuring compliance with labor laws for local taxes, payroll, and benefits
Growth plans
Can support your business as you scale within your current market
Good for hiring in a new market but costs outweigh setting up a legal entity as your headcount grows
HR staff
Can relieve administrative responsibilities for an HR manager, allowing them to focus on more strategic projects
Can use instead of an in-house HR manager for your international employment
Keep in mind that you don’t have to make a zero-sum decision between a PEO and EOR. Companies often use PEOs for their domestic staff (even if their workers are spread out within that one country) and separate international PEOs for their global teams.
But if you’re using an international PEO as your global team expands, it eventually becomes more cost-effective to set up a legal entity and hire local HR experts instead of using the EOR (since the service usually charges per employee). That’s why standout platforms let you switch from an EOR into your own business structure without ripping out systems and starting from scratch.
And of course, PEOs and EORs are easier to manage in unison if they’re under the same system. Rippling offers both solutions, giving you full visibility into your entire workforce—all while allowing you to quickly run payroll, automatically withhold taxes, and monitor global compliance at every turn.
Common global PEO services
Hiring, managing, and retaining marquee talent is hard enough in your company’s native country. It gets even more complex internationally, where you have to navigate a tangled web of labor and tax laws that likely deviate from the regulations you’re used to at home.
So if you want to expand into a new global market quickly—without opening yourself up to compliance risk and waiting months for legal entity approval—a global PEO can be your perfect entry point. The service expertly tackles all the logistical issues so you can manage your new team’s day-to-day processes.
Which exact issues can a global PEO handle? This list is long. Highlights include:
- Employment contracts: Distribute locally-compliant employment agreements, ensuring offer letters have the essential, up-to-date employment information that adheres to local labor laws.
- Background checks: Run legal background checks (including employment verification, criminal history searches, and more) and e-verify the results. The services will ensure you have proper consent before running the check.
- Onboarding: Collect necessary new hire information, distribute contracts for e-signature, and get employees up and running quickly.
- Benefits: Offer competitive benefits packages (different types of paid leave, pension, and more) that adhere to statutory minimums in the new hire’s jurisdiction.
- Insurance: Handle group plans for health insurance, unemployment, and worker’s compensation.
- Timesheets: Standout EORs automatically track time and attendance and review and approve hours for employees and independent contractors—without the need for manual data entry.
- Payroll: Pay global employees in their native currency without worrying about exchange rates or delayed processing times.
- Taxes: Automatically withhold and file taxes for international employees—ensuring all tax rates, mandatory contributions, and filing dates are compliant with local laws.
- Regulatory compliance: With the right solution, access round-the-clock HR expertise to review contracts, assess employment conditions, and preemptively flag any potential infractions.
- HR management: Automate administrative tasks like approving paid time off, triggering a bonus, and filing deductions.
- Data protection: Comply with local privacy regulations. The best platforms also have secure infrastructure and only give employee data access to carefully vetted personnel, to mitigate risk of a breach.
- Offboarding: Comply with all local termination policies, such as severance pay and mandatory notice periods.
Why offload tasks to an international PEO?
You don’t need an international PEO to hire a global team. But here’s why you may want one.
More time for strategic work
Time spent immersing yourself in the nuances of a foreign country’s labor laws is time yanked away from growing your business. Global PEOs have built-in expertise, and can automate processes in seconds that could take weeks manually. HR employees can prioritize day-to-day management and one-on-one interactions instead of triple-checking whether they made the right mandatory social security contribution.
Nimbler international expansion
Setting up a legal entity can take up to six months, which isn’t to mention all the registration fees, and the need to hire local HR and tax experts to monitor compliance. But top talent worldwide can be in and out of the job market in a matter of days. An international PEO allows you to build a global team quickly and support it as it scales. You can also recruit from a talent pool that spans continents and offer competitive benefit packages without fretting over logistics.
Fend off compliance risk
You may have tax withholdings, statutory benefits, and labor laws down pat at home, but it’s much harder to gain that expertise abroad, especially if you have a presence in multiple foreign countries. Fines for missteps can be steep—Ontario charges up CAD 100,000 for paying below minimum wage. Whether it’s making the right tax withholdings, following overtime rules, or giving proper advance written termination notice, EORs ensure you’re never unwittingly violating local laws.
Rippling EOR allows you to take advantage of all these perks and more, including:
- Paying employees alongside contractors in local currencies—in one single pay run
- Building custom workflows to alert employees of changes in payroll
- Onboarding new hires across the globe in just 90 seconds
FAQs about international PEOs
Does an international PEO co-employ its workforce with a business?
No. While a standard PEO has a co-employment relationship with a company's domestic workforce, an international PEO serves as its workforce's sole legal employer. With standard PEOs, the company and the service are jointly responsible for employees. International PEOs assume full liability.
How much does an EOR cost?
EORs typically use one of two pricing structures:
- Fixed monthly fee per employee
- Percentage of payroll plus taxes
Both methods can also come with administrative fees, onboarding charges, and other costs for extra features.
Keep in mind that you don’t need to use an EOR for your entire workforce. If you want to segment its use, you’ll only be charged for the employees you employ through the EOR.
How should you choose a global PEO provider?
Since there are plenty of available global PEO solutions, you should think about the unique needs of your business. Key considerations to keep in mind when choosing an EOR include:
- Whether the provider has a global PEO solution in the country where you're hiring
- What the solution’s data protection policies are
- The slate of integrations and automated solutions (such as payroll processing)
- In-country expertise to monitor compliance
- Costs of using an EOR vs. setting up your own entity (based on your headcount and growth plans
Can you use an EOR in different countries?
You generally need to buy separate EOR services for separate countries, as each product will have its own local expertise. A global PEO company like Rippling has EORs in countries across the world and continues to launch in new markets.
Who should use an international PEO?
Global PEOs are ideal solutions for any company keen on quick expansion into international markets. That could mean lean startups who want to cut back onboarding times. It could also mean larger companies who want to make an initial foray into an international talent pool before committing to setting up a legal entity.
Just keep in mind that at a certain staff size, the cost of international PEO services will outweigh the cost of setting up an entity. Rippling can help global business owners make the transition as they scale, without overhauling payroll services.
Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any related activities or transactions.
