Planning your global employment strategy is complicated enough without throwing in the industry jargon and similar-sounding acronyms.
PEO, Global PEO, EOR, GEO — why are there so many Es and Os in everything?!
But we don’t want confusing terminology to hold you back from your global expansion journey. To help keep things clear and straightforward for you, we’ve broken down some of the key terms associated with international employment services.
Table of contents:
Let’s start by looking at a PEO
A PEO (or Professional Employment Organisation) is an outsourcing firm that provides various HR support — from payroll administration and benefit schemes to guidance and assistance with local employment law compliance.
The term is generally only used in the United States, where providers operate what is referred to as a “co-employment” model…
Co-employment is a contractual arrangement where two companies both have rights and obligations as an employer.
In this model, the business manages the worker’s day-to-day duties and activities, while the PEO provider (the co-employer) becomes responsible for the legal employment and personnel-related functions such as payroll.
One crucial — but often overlooked — feature of the co-employment model is that the client organisation is required to be legally registered as a company or entity in the country where the employees are based.
What about a Global (or International) PEO?
Beyond the US, things then look a little different because the co-employment format doesn’t exist outside the United States. In fact, in some countries such as Switzerland and France, co-employment is viewed as illegal.
It’s easy to see why some providers choose to refer to themselves as Global PEOs instead. After all, there are certainly similarities between a PEO and Global PEO, such as taking care of the administration, HR, benefits and payroll in the host country. But unlike a PEO, a Global PEO employs individuals through their own local entities.
In most cases, you won’t have your own legal entity in the host country. Leveraging the help of a Global PEO partner means you can compliantly employ and pay employees without needing to establish one.
But what’s an EOR then?
An EOR (Employer of Record) is essentially the same thing as a Global PEO. Some people just prefer to reference the PEO model as it’s a more familiar concept.
Sometimes known as a “local employer”, “local partner”, “local EOR” or “FESCO (Foreign Enterprise Service Company)” in China, an Employer of Record is third-party contracted to take responsibility for all formal employment tasks.
They employ individuals on their own infrastructure and manage the HR, benefits, payroll, taxes, insurance and all the legal and regulatory requirements of immigration. However, although an EOR is the registered employer of the worker, they don’t take any supervisory or management role in daily activities.
And a GEO?
You may hear some firms referring to themselves as a “GEO” (Global Employment Organisation or Global Employment Outsourcing) but there is no real difference between a GEO, an EOR or a Global PEO — it just helps to distinguish services offered globally from the US PEO model.
A GEO will still allow you to employ people in a country without establishing an entity in it first, helping to streamline the hiring process and ensure you remain compliant at all times.
Across the pond in the UK, you may then hear the term “umbrella companies” used. These companies are also a type of Employer of Record — although they act as an EOR for independent contractors rather than permanent employees. With this approach, the contractors become employees of the umbrella company rather than your organisation.
The growth in umbrella companies in the UK is largely attributed to the IR35 legislation (more on that another time) targeting “disguised income” by contractors who are hired via intermediaries but perform the same duties as full-time employees.
Finally, let’s take a look at two other terms you might come across when looking for international employment services…
What exactly is HR?
Human Resources (HR) refers to the people who make up the workforce of an organisation. HR is sometimes used synonymously with “human capital”, although human capital tends to be used in association with economic growth. You may also see terms such as “manpower”, “personnel”, “labour” or “associates” used instead.
The term ‘HR’ is often used to describe the human resources department of an organisation, too. HR departments oversee various aspects of employment — from administration and employee benefits to labour law compliance, recruitment and offboarding.
When running any business, it’s essential to understand what you are (and aren’t) liable for. An EOR is responsible, at all times, for maintaining its business registration in the host state or country.
Because an EOR becomes your worker’s legal employer, they also assume all liabilities and responsibilities for that worker. This means covering the employee under their insurance policy, maintaining compliance with all mandated regulations connected to that worker (including health), fielding contract complaints and managing resolutions. In the event termination of an employee is necessary, an EOR will also handle all aspects of this process.
However, a PEO won’t offer the same level of liability cover as standard. For example, you will most likely need to opt-in and pay an additional fee for insurance to be covered by the PEO.
Are you keen to expand into new global markets? We make it simple. Get in contact today to find out more about our expert employment solutions.
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