What Is an International PEO?

What is a PEO?

A PEO, or professional employer organization, is a type of HR outsourcing firm that takes on some or all of a business’s HR functions under a co-employment model. Small businesses typically hire PEOs to handle benefits, payroll, legal compliance and taxation. It can sponsor health insurance, workers’ comp and other types of business insurance. [Related content: Learn the differences between a PEO and traditional HR outsourcing.]

Taxation is an especially notable PEO service. A PEO handles taxes under its employer identification number (EIN) instead of yours. If your PEO’s state unemployment tax rate is lower than yours, you’ll pay less in taxes. 

Your PEO co-employer agreement is mostly a formality, as you’ll experience no changes in how you manage your employees day to day. Your workplace won’t change significantly, but if you are worried about changes, you can choose a PEO that’s certified by the IRS or the Employer Services Assurance Corp. These PEOs adhere to rigid standards that all but guarantee no serious modifications to your operations.

What is an international PEO?

An international PEO is a PEO that specializes in offering HR services to domestic clients that are expanding internationally. International PEOs can assist with payroll and all of the regulations involved in tax, insurance and risk management that come with expanding into a foreign market. As a result, you’ll save time and money by not having to navigate the complexities of expanding beyond your borders.

Note that, despite their very similar names, international PEOs are different from global employment organizations (GEOs). [Read related article: PEO vs. Insurance Broker]

The following chart highlights some of the differences between an international PEO and a global employment organization.

How do PEOs help you expand internationally?

International PEOs can help you lower your compliance risks as you venture into new territories where you’re likely not familiar with the laws and regulations. Similarly, your PEO can keep you informed of statutory changes that come with expanding into new markets. Your international PEO can also help you register your company in each of its new foreign locations.

To offer these functions, PEOs sign a co-employment agreement with your company. Through this contract, you can designate which international employment duties you delegate to the PEO and which you prefer to handle yourself. No matter which tasks you contractually assign to your PEO, you’ll remain responsible for day-to-day employee management and all salary negotiations.

What is an employer of record?

Earlier, we mentioned that international PEOs are not global employment organizations. That’s because a PEO is a co-employer, but a GEO is an employer of record (EOR).

An EOR is a third-party company that takes on all of your employment administrative work. Your international employees thus sign employment contracts with your GEO instead of with your company. Although you retain day-to-day operational control and can set employees’ schedules and salaries, the GEO is recorded as their employer.

The EOR arrangement of GEOs means that you don’t have to register your company in every new location into which you expand, which isn’t true with international PEOs. Additionally, the GEO obtains work visas for your team, advises you on international labor laws, protects you via international business insurance and runs international payroll for your team.

Pros and cons of international PEOs

Although PEOs and GEOs may seem necessary for launching operations in another country, they aren’t exactly mandatory. They offer many advantages that streamline international growth and minimize liability, but there are some potential drawbacks as well. Before you contract with an international PEO, consider the pros and cons below.

Pros of international PEOs

Here are some of the reasons you might want to hire an international PEO:

• Built-in international HR: Like domestic PEOs, international PEOs give you access to HR services. This access is perhaps even more important internationally, as tapping into experts based in the areas where you need assistance minimizes your chances of misunderstanding (and thus failing to comply with) regional laws.
• Time savings: Even if you’re enthusiastic about expanding beyond your borders, you’re probably not thrilled with the necessary paperwork. Plus, all that hassle will come after you spend hours trying to master the ins and outs of international labor and tax laws. Hiring a PEO to handle these tasks on your behalf may be well worth it.
• Easier legal compliance: With an international PEO, you don’t just get back all that time you might have planned to spend on mastering international labor laws; you also get an HR partner that specializes in keeping your company compliant with those laws. As a result, you can enter international markets with less risk of government fines, employee lawsuits and financial loss.
• Good value: PEOs set up your international payroll, obtain the appropriate insurance for your company and help to manage your risk. For the amount you pay for your PEO services, what you get is often quite a good deal.
• Co-employment structure: Compared with choosing a GEO when you expand internationally, PEOs take on fewer tasks. Perhaps this could translate into more work for you, but you will retain more control over your HR operations.

Cons of international PEOs

These are some potential drawbacks of using an international PEO:

• Less comprehensive business registration: If you choose a GEO over a PEO, you won’t need to register your company in every new location into which you expand. The same isn’t true for PEOs, but they may make up for this gap somewhat by assisting you with registration.
• No EOR arrangement: Unless you fear a loss of control over your employment practices, the lack of EOR arrangements that accompany international PEO contracts may be a concern. Without an EOR arrangement, you retain most legal employer responsibilities. If your employment terms violate international labor laws, you’ll be primarily liable.
• Higher financial risk: The absence of an EOR setup sets your company up for troubles beyond compliance violations. If an international government levies fines on you for your violations, your PEO shoulders only part of this burden as your co-employer. A GEO, on the other hand, accepts the entire responsibility.
• Potential loss of control: Although international PEOs do not get involved in your day-to-day affairs, some small business owners may still feel reluctant to make a third party a co-employer. The only solution to this concern is to go entirely DIY when expanding internationally, as GEOs take even more control of your affairs.
• Fees and other costs: Sure, the quantity and quality of services you get from international PEOs for what you spend is a great deal, but you’re still spending considerable money to hire a PEO. If you’re hesitant about this, PEOs might not be a viable option. In this case, only the DIY route would work.
• Legal questions: Co-employment is a common arrangement in the United States, but in some other countries, it’s illegal. Because a PEO acts as your co-employer, your PEO arrangement might not be valid in the territory into which you’re seeking to expand. Additionally, both you and your PEO must be registered as businesses in the territory in question. If not, there could be compliance consequences.

Who are international PEOs for?

International PEOs are for companies that want to expand internationally. Typically, businesses that use international PEOs want to outsource key HR functions, like payroll, benefits administration, compliance, hiring of top talent and onboarding.

International PEOs are for businesses that are comfortable setting up their own local business entity in each country where they want to operate. They’re also for businesses that are comfortable entering into a co-employment agreement. Businesses that would prefer not to set up their own local business entities internationally or that want to outsource most or all of their HR functions should consider an EOR service instead.

How to choose an international PEO

Researching international PEOs can be confusing, especially because the features each service offers vary so widely. Below, we’ve outlined several key features to take into account when you’re searching for an international PEO partner. (For more information about choosing a domestic platform, check out Business News Daily’s guide to choosing PEOs.) 

Local compliance 

Expanding into a new country can be daunting for any business; employment regulations can vary widely depending on the country, and regulations can change. It’s important to choose an international PEO that provides experts with country-specific knowledge.

These experts can help your company stay in compliance with local regulations and, oftentimes, alert you to any regulatory changes that could affect your business. Ensuring that your international PEO is set up to stay on top of local regulations can help you avoid potentially costly missteps and fines down the line.

Excellent customer support

Before you partner with an international PEO, it’s important to ask what kind of customer service it provides. Will you have a designated point of contact you can reach out to if you run into issues? Is customer support available by phone, email and/or mobile app? During what hours do they operate? Ensuring that your business will have fast and accurate support in the event of an unexpected problem can go a long way in determining the right PEO partner for you.

Robust payroll functionality 

A core function of an international PEO is to ensure that your workers get paid on time, no matter where they’re located. Ask whether the PEO’s payroll platform can support payments in the countries and local currencies where your workers are located and whether it handles payroll taxes that are compliant with local regulations. 

In addition, you can ask for a free trial or a demo to test out the PEO’s payroll functionality to ensure it’s easy to use. For example, does the product allow for automated payroll? Can the payroll platform be accessed via a mobile app? Asking these questions ahead of time can help you avoid headaches later.

Country-specific availability

It’s crucial to know whether the countries where your business is seeking to operate will be supported on your PEO’s platform. Many international PEOs boast widespread availability, but some offer international services only in select countries.

You should also be sure to ask what kinds of employees the platform supports for each country where you’ll be setting up shop. Even if a PEO advertises its availability in a specific country, it’s possible that they’re referring to global payments for independent contract workers, not for full-time employees. Depending on your hiring model, this may cause problems down the line.

Best international PEO companies

If you’re ready to start researching your options, consider our picks for the best international PEO services below. For more information, check out our reviews of the best PEO services.

TriNet

TriNet’s customizable, proprietary PEO platform boasts a wide variety of features, including benefits administration, payroll, HR administration, recruitment, training and development, and compliance guidance. Like other PEOs, TriNet offers premium benefits that would typically be cost-prohibitive for small businesses, and its excellent customer service makes this PEO stand out.

When it comes to international options, clients using TriNet PEO for domestic employees have a few choices. If you prefer to expand internationally using an EOR model, you can use TriNet’s partner, G-P, which provides full-service international HR solutions for the recruitment, hiring and onboarding of new employees; payroll; benefits administration; and compliance for all employees, no matter their country. You can also opt to use TriNet Contractor Payments to pay international independent contractors and house their data in one central location.

We like that a unified view lets you access and manage data for both domestic and international workers. Learn more in our TriNet review.

Deel

Deel is a PEO service with robust options for businesses seeking to expand internationally. International payroll is a central feature of the platform, which offers the ability to pay employees and contractors in more than 150 countries. Compliance is another key offering. Deel has in-house payroll experts in countries across the globe and a Compliance Hub where you can view regular updates about regulatory changes in the countries where you operate and receive notifications of possible violations. 

Deel can reduce the costs and paperwork associated with registering business entities in new countries, and its useful automation features help you save time on common HR tasks, like payroll processing. Deel provides other useful services, like hiring; relocation and visa support; compliant contract generation; and worldwide equipment delivery. The intuitive platform lets you manage all of your workers, no matter where they’re located or how they’re employed, in the same platform. Read more in our Deel review.

Rippling

Rippling is an incredibly scalable and customizable platform that provides a wide variety of services for expanding internationally. Although Rippling’s PEO service is available only in the U.S., you can choose Rippling’s global EOR service to hire and pay workers without setting up your own business entity. Or, you can run payroll for employees or contractors globally using the Rippling platform through the business’s own entities abroad. 

We like that the system expands with businesses as they grow and that businesses have the flexibility to choose among different types of employment models. Rippling operates in more than 150 countries and can pay workers in over 50 currencies. 

Rippling boasts some impressive perks, like 90-second payroll runs, time-saving automations, unified reports for domestic and international employee data, customized policies by country, a central expense management system, and affordable, country-specific benefits. Plus, Rippling’s impressive compliance features include global minimum wage, overtime and leave enforcement, global compliance training, and HR advisors with country-specific expertise. Find out more in our Rippling review.

Justworks

Justworks is a one-stop shop for payroll, compliance, HR and benefits; it offers features such as payroll tax reporting and workers compensation, as well as 24/7 customer support. While Justworks’ PEO service is available only in the U.S., its global EOR service allows businesses to hire, pay and provide benefits to workers in more than 100 countries via Justworks partners, without setting up separate business entities. 

The EOR product also provides international compliance support, with country-specific experts to help mitigate the risks associated with expanding internationally. Other key features include onboarding, paid time off and employee document tracking, along with support for work visa sponsorship and immigration in select markets. 

In addition, Justworks clients can use the platform to hire and pay international contractors in over 30 countries in the same platform where they manage their domestic employees. The international contractor product allows businesses to make contractor payments in local currencies, and contractors can complete onboarding using a self-service tool. Discover more in our Justworks review.

Papaya Global

With robust payroll, compliance and HR features, Papaya Global’s PEO service stands out for its focus on international support. Papaya offers a suite of products that support workers in more than 160 countries under a variety of employment models, including international PEO, global EOR and international contractor support. 

For employers that are not sure where to start their international hiring, Papaya offers local talent acquisition and employee onboarding services. Papaya also provides immigration support, global health benefits and country-specific experts for payroll support.

Papaya Global is a regulated fintech, meaning it can process global payroll and payments in the same system while remaining compliant with local regulations. Because payments are housed within the platform, rather than being outsourced, Papaya also offers robust data and analytics features. The platform allows clients to view time off, expenses, benefits, time and attendance, and more, all in a single view. Learn more in our Papaya Global review.

Go global with an international PEO

There are many benefits for companies that expand internationally, including access to a worldwide talent pool. But hiring in a country where you’re unfamiliar with local regulations can mean you’re more at risk of breaching employment rules. Using an international PEO ensures that you have a knowledgeable partner to help you remain in compliance as you expand.

What’s more, an international PEO can help shoulder some of the day-to-day burden of time-consuming HR tasks, like payroll. Many international PEOs allow their clients to view employee data for both domestic and international workers within the same platform, which can save time and streamline the process.

Max Freedman contributed to this article.