In the world of international employment, there are plenty of similar-sounding acronyms and jargon to get your head around.

But when you’re busy planning your global expansion, the last thing you want to be worrying about is what all the technical lingo means.

Never ones to let a small technicality hold you back, we thought we’d clarify the most confusing term of them all: Professional Employer Organisation.

What does PEO mean?

A Professional Employer Organisation (PEO) is an outsourcing firm that offers comprehensive HR support and international employment services. These services can include anything from recruitment, payroll processing, benefits scheme management and other admin operations to assisting with local employment law and tax compliance.

Essentially, the PEO becomes the registered employer of your workers through a process called co-employment or joint employment (more on that in a bit). This makes processing payroll, tax, benefits and insurance far easier for the original employer, while still allowing you to maintain all supervisory and management control. In many cases, but not all, PEOs will also assume the legal risk for the employees they hire.

This is where it gets confusing…

You’ll often hear the terms ‘Professional Employer Organisation’ and ‘PEO’ used interchangeably with an EOR (Employer of Record), GEO (Global Employment Organisation) or Global PEO. But while they are all similar, there are some subtle differences — most of which depend on your geographical location.

Generally speaking, ‘PEO’ in its original form is only used in the United States, where providers operate a “co-employment” model. This means there’s a contractual agreement in place, whereby both the client company and the PEO have rights and obligations as an employer. The client organisation will continue to manage the employee’s day-to-day duties and activities, while the PEO providers will take responsibility for the legal employment and personnel-related functions such as payroll.

The key difference to remember between the various types of Professional Employer Organisation models is that, with co-employment, the client company is required to be a legally registered entity in the country where the employees are based.

Do I need a PEO?

PEOs provide a crucial service to businesses hoping to grow overseas. Global expansion is no mean feat. There are hundreds of administrative, regulatory and cost hurdles to jump through first, which can be a daunting task.

Every country (and some regions or states) has its own employment requirements for non-resident companies to contend with. And if you’ve never even heard of things like 13th-month or 14th-month payments, then the challenge of meeting those rules can be a major obstacle to international expansion.

A Professional Employer Organisation takes care of all these challenges. Whether it’s shouldering HR responsibilities, managing benefits like health insurance, assisting with recruitment and visa applications or keeping tabs on local rules and regulations, your PEO will take it all off your plate. Leaving you to focus on your day-to-day business operations and doing what you do best…

Plus, in the international business world, companies that work with a PEO grow faster, have lower employee turnover rates and are far less likely to go out of business!

If you want to escalate your growth plans quickly and employ workers in a different state or country, engaging a PEO will be the best decision you make during your global expansion journey. To find out more about our international PEO services, get in touch today.

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Published On: 09/10/20Last Updated: 14/09/22

About the Author: Sam Barnes

Sam is our Global Business Development Manager for Employer of Record services. For the last 10 years, he has assisted companies in the successful execution of their international expansion plans. Sam tells us “There’s something inherently exciting about growing a business into overseas jurisdictions. Each country does things slightly differently and it’s great to be able to share learnings on statutory requirements and cultural nuances”. Email: sam.barnes@topsourceworldwide.com

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