So, your organization is contemplating global expansion, but as an HR leader, the notion of HR and workforce management in foreign countries is giving you pause. You already know of the complexities involved in workforce management here at home where the laws and regulations are complicated but known quantities.
Dealing with unknown legal and regulatory environments in countries abroad represents challenges orders of magnitude more daunting. It may be time to consider using an international PEO.
Many domestic hiring organizations already leverage professional employer organizations or “PEOs” to help mitigate risk and reduce the administrative burdens associated with HR and workforce management. The PEO shoulders a great deal of the load in this regard. For organizations pursuing global expansion initiatives, the utility of an international PEO are undeniable. Let’s examine some of them.
Consider this: if an organization were to hire even a single worker in another country, they’d first have to set up a business entity in that country. This alone is a costly and fraught endeavor. To be an employer in another country, an organization needs to address such factors as locally compliant employment contracts, business entity and office location registrations, local bank accounts and bookkeeping resources, locally notarized documentation and adherence to and mandatory pension/retirement requirements. The employer would also have top study up on local labor laws, taxes, payroll withholding and other critical functions. Worse yet, they’d have to repeat this process for every country in which they sought to expand.
This is why, for many organizations, it is a prudent step to seek expert help in sourcing ICs and administering the appropriate tax and benefits structures involved. The ongoing value of an AOR is that these services maintain the relationship with the ICs they place within a hiring organization, instead of leaving the process to be addressed by the client. The AOR controls the dynamic so that the client does not inadvertently change the nature of the relationship or take other actions that could potentially push the arrangement with an IC out of compliance with IRS regulations. In short, the AOR provides an added, extra layer of protection for the client to utilize 1099 contractors, secure in the knowledge that IC experts are ensuring compliance on an ongoing basis.
Once up and running in a new foreign market, the hiring organization would require teams of accountants, payroll managers, HR specialists and lawyers to keep operations running smoothly in each locale. This adds another significant layer of cost to the equation.
Instead, nimble companies with global expansion plans find international PEO services with whom they partner to support workforce management abroad. A good international PEO has boots on the ground with native expertise in all the factors listed above. They have a ready global infrastructure which is deployed on behalf of the hiring organization. Just like a domestic PEO, the international PEO assumes the duties and responsibilities as employer of record in each country while the hiring organization manages the day-to-day activity of the labor resources delivered by the IPEO. They also provide all the accounting, legal, payroll and HR service on behalf of the hiring organization, so that these costs are not shouldered by the customer.
A proven-effective international PEO delivers risk mitigation, compliance management, payroll and benefits administration and consolidated monthly billing for operations in each and every country where they’re engaged to support their customers’ international expansion plans. The best part? Using an international PEO instead of managing these processes internally, typically saves as much as 50% of the cost associated with standing up workforce operations abroad.
For more information on international PEO solutions, contact us today! to learn more.