Global Professional Employment Organizations (PEO) vs. Global Employer Of Record (EOR) Solutions
When it comes to finding a way to legally engage an international workforce, it’s essential to have a concrete and organized plan in place. The stakes in terms of fines and tarnishing a public image can be huge when it comes to not properly classifying and servicing your employees. However, on the other end of the equation, setting up a local entity can take a heavy toll in terms of expense and time, making it a non-feasible option for everyone.
The two options that generally come up as an intermediate solution are a global PEO (professional employment organization) service provider or global employer of record (EOR). While they may sound similar, they are not interchangeable. Here’s a closer look at the differences, and what may be best for which situation.
The Fundamentals On PEO
In the U.S., your average PEO service functions as a co-employment arrangement form. Essentially, this allows smaller or medium-sized businesses to provide benefits at the same level as larger organizations. This manifests as:
- Better rates on health insurance
- Worker’s compensation
- State unemployment
Your PEO partner in this case, would also have shared employer risk with you. As an example, PEOs can ensure that when you terminate an employee, you are on safe legal ground when doing so. They can also help provide added legal protection if a business is dealing with employee lawsuits.
Global PEOs were invented as an expansion of this concept to apply to an international workforce. The scope is also wider regarding function, as it can also cover on-site employment as well as the provision of employee benefits.
So, with that in mind, what separates a PEO service from a global PEO solution? For one, PEOs become a co-employer of a company’s given workforce, meaning that the factual employer ultimately has partial legal liability for employer responsibilities, like reporting unemployment claims. However, for a global PEO, the employer doesn’t share a legal bond with the employees hired. Instead, the third party PEO provider acts as a legal employer on behalf of the factual employer. However, that same employer (the client) has full control over their global workforce.
However, in both cases, there are some issues that may arise when using a PEO service. Major drawbacks include:
- Losing control due to the terms of the co-employment arrangement
- Risks regarding cash flow. As a client, you would be reliant on how the PEO provider handles pricing, and have no say in the matter. You may have to end up suddenly paying more to maintain your work team
- All PEOs have their own sets of policies and benefits. This means you need to rigorously research a provider before committing
EOR Services As A PEO Alternative
Because of those drawbacks we mentioned earlier, there may be companies that need some support with international employment but don’t want to enter co-employment arrangements. Global EOR companies serve as the ideal fit here.
How do EOR companies work? These become the full legal employer of your business’s payrolled workers, rather than entering a co-employment relationship. As a result, the global EOR company is completely responsible for items including:
- Payroll compliance
- Administration of benefits
- Reporting unemployment claims
It’s important that you understand the different terminology that you may see while looking for these services. A global PEO and a global EOR service are terms that can be used interchangeably. These describe the same processes in terms of international workforce onboarding, compensation, and termination if needed. An EOR service can take place both internationally and domestically. If the employer has no legal ties to the employees, it counts.
With this in mind, what are some of the ideal fits for a global EOR? These are ideal for growing companies, specifically:
- Companies expanding globally and looking specifically for skilled talent, as opposed to immigration services that only use unskilled talent.
- Teams looking to enter new markets for extra revenue/taking advantage of global business trends.
- Companies working to deploy an overseas workforce/send expat teams abroad to give tech support for their international clients.
How Should You Outsource A Global Workforce Management Function?
A global EOR service can be a key for powering and facilitating your international expansion and operations. However, this only happens if you find a strong partner to do so. In terms of a global EOR solution, Acumen International is your ideal choice. We’re the fastest on the market when it comes to international employee onboarding, handling both expats and locals in 190+ of our covered countries.
Counter to other global EOR solutions, we offer great flexibility regarding the number of employees able to handle even the smallest jobs (1 employee for a 1-month project duration). Combined with this flexibility, we also offer a wide range of employee benefits, including:
- Rental cars
- Office rentals
- Relocation for dependents
- Internet provision on-site
- Medical insurance and others
These factors combine to help ensure independent contractor compliance and payroll, as well as creating a benefits package that will help you entice the top international talent internationally.
Reach out to us today for more information.