When looking for ways to hire international employees, businesses often stumble across various acronyms that describe different global employment solutions, one of them being PEO. PEO stands for Professional Employer Organization.
But what kind of service can businesses expect if they contract a PEO? What does a Professional Employer Organization do? And is there a difference between a normal PEO and a global PEO?
A Professional Employer Organization (PEO) can be defined as a company that provides employment management services to businesses that need support with administrative and HR-related tasks.
However, it should be noted that the definition of a PEO and the range of services it offers can vary depending on the context.
The PEO model has its origins in the US, where Professional Employer Organizations act as co-employers to small and medium-sized businesses that either cannot afford to hire a full-time employee to handle their HR and payroll or wish to employ someone in another state where they lack the necessary knowledge regarding employment and payroll rules. In this sense, the PEO can be seen as an extension of the HR department.
In recent years, the concept has made its way into the global employment solution space, with service providers using it to describe employment outsourcing services aimed at expanding businesses that hire employees in new markets where they have a legal presence, but not the necessary HR and compliance knowledge to handle things like payroll, onboarding, and more.
In the context of global expansion, the acronym PEO is also frequently used in combination with the adjectives “international” or “global”. Global PEOs (or international PEOs, whichever term one prefers) take the idea of a PEO one step further and not only provide employment management services, but take over full legal liability for the employment.
An international PEO hence provides a full employment outsourcing solution for businesses hiring overseas. Another term that is often used interchangeably is Global Employment Organization (GEO).
Within the US, PEOs follow the co-employment model. This means that the business that contracts the PEO service has a fully operational legal entity through which the employees are employed, but outsources its HR and payroll responsibilities to the PEO—which also has a registered legal entity. The employer responsibilities are hence shared between the PEO and the client.
Now, let’s take a look at so-called global PEOs. Co-employment is common in the US, but not really in other countries. In fact, co-employment arrangements are even a legal gray area in some jurisdictions. Sharing employment liabilities with a third party that provides compliance support and handles payroll and employment matters therefore often does not work in cross-border employment.
What international PEOs offer instead is to hire employees in a foreign country on behalf of their clients who are hence relieved of the need to establish a local legal entity. The employees are hired under the legal entity of the PEO, the latter becoming the official employer in the eyes of the law. Therefore, the purpose and service of a global PEO rather follows the idea of an Employer of Record (EOR).
What’s important to remember is that the employee’s day-to-day activities are still managed by the organization that contracts the PEO service. The employee exclusively reports to and receives instructions from the client business.
Also read in the Lano Employment Academy: PEO vs EOR - What is the difference?
Under the co-employment model, a Professional Employer Organization may offer the following services:
Payroll processing
Benefits management
Compliance support
Payroll tax administration
Recruiting, hiring and onboarding
Employee registration
Employment contracts
Other HR-related tasks (e. g. complaint management or dismissals)
International PEOs usually have a similar service offering, but may extend it by additional services that facilitate global expansion, such as:
Arranging work visas and permits
Acting as an intermediary between the foreign organization and local authorities
Supporting legal entity creation
PEO services can be useful to businesses of any size. Their use is typically linked to one or several of the following factors:
Lack of resources and/or knowledge to handle employment and compliance
Need to enter new markets fast
Reluctance to establish a local legal entity in a new geography
Higher flexibility and lower risks in global expansion
Cost savings compared to incorporation
The Lano Academy is for informational purposes only and should not be construed as legal advice. Lano Software GmbH disclaims any liability for any actions you take or refrain from taking based on the content contained in this article.
CONTRATA DONDE SEA
Contrata e incorpora empleados en el extranjero sin abrir entidades
Contrata, gestiona y paga a autónomos en todo el mundo
PAGA EN TODAS PARTES
Consolidación global de nóminas
Unifica las operaciones de nómina en todos tus países
Gestión de nóminas en varios países
Paga a tus empleados en otros países
HÁGASE SOCIO
Únase a la red Lano de socios locales de nómina
X
Hágase socio afiliado de Lano para empezar a ganar comisiones
Explora el ecosistema de integraciones y socios de Lano
Descubra cómo Lano puede ayudarle a crecer y pagar a su equipo internacional
EMPLEO GLOBAL
Contrata a los mejores talentos en cualquier lugar
Contrata empleados en países donde no tienes entidad jurídica
Prueba nuevos mercados sin el riesgo ni el coste de abrir entidades locales
Reubica y fideliza a tus empleados
Mantén el talento que se marcha a otros países
Convierte a los autónomos en empleados
Incorpora a los autonómos a tiempo completo de manera legal
NÓMINA GLOBAL
Gestiona las nóminas de todas tus entidades y proveedores en un único lugar
Implanta nóminas en nuevos países
Establece y gestiona nóminas en conformidad en cualquier país
Cambia los proveedores locales de nóminas
Sustituye a los proveedores de bajo rendimiento por partners de Lano
Realiza pagos transfronterizos
Paga a tus empleados en todo el mundo en moneda local
CASE STUDY
Descubre cómo PrestaShop se expandió en cuatro países en sólo seis meses con Lano
RECURSOS
Todo lo que necesitas saber para contratar en el mundo
Conoce las mejores prácticas para gestionar las nóminas de forma global
Todo lo que necesitas saber para contratar en el mundo
Compara los costes de pagar en todo el mundo con Lano
APRENDIZAJE
Aprende a utilizar y sacar el máximo partido a Lano
Mantente al día de las noticias, contenidos y mucho más de Lano
Explore nuestro glosario de términos de recursos humanos y de nómina
Learn all you need to know about global payroll and hiring
ACADEMIA
Conviértete en un experto en contratación global y nóminas
Gain insights into how much it costs to hire remotely in a country
Precios
CONTRATA DONDE SEA
PAGA EN TODAS PARTES
HÁGASE SOCIO
EMPLEO GLOBAL
NÓMINA GLOBAL
RECURSOS
Precios
English
Français
Deutsch
Español
© Lano Software GmbH 2024
English
Français
Deutsch
Español