The Ultimate Guide to EOR, PEO, and GEO

The Three Global Employment Solutions. How to Mix and Match Them

What are the key differences between EOR, a PEO, and a GEO? This Ultimate Guide to EOR, PEO, and GEO provides a brief overview of some critical differences between three of the most popular global employment solutions helping you decide which option is best for your company. 

EORs, PEOs, and GEOs are global employment solutions that help companies hire and retain talent around the globe faster and more efficiently. Each operates differently and suits a unique set of hiring and business needs. Each solution has advantages and disadvantages, making it better suited for specific businesses strategy. 

Your company needs to grow its global presence, and you’re wondering how you can do it without risking your current business model, resources, and capital.

Hiring employees worldwide is a big responsibility, so some businesses choose to engage talent through third parties. You could try to go it alone and hire an international team from scratch. Or, you could partner with a professional employment organization, such as PEO (Professional Employment Organization), GEO (Global Employment Organisation), or EOR (Employer of Record). Payroll, HR, legal, and immigration processes are often complex for businesses, but these third-party options can take the administrative burden off companies. So why might a business want to hire through one of these solutions providers?

The Ultimate Guide to EOR, PEO, and GEO covers different aspects of global employment models. It provides a brief overview of some critical differences between PEOs, EORs, and GEO — three of the most popular hiring solutions helping you decide which model fits your company best. Finally, it outlines the services Acumen International can offer — from the initial planning stages to implementing any employment model.

Employer of Record: What, Why, How, and When?

What is an employer of record (EOR)?

A professional employer organization (PEO) helps businesses by taking on many employee responsibilities and liabilities. This includes payroll, compensation, benefits administration, and employment taxes. A PEO allows businesses to outsource their human resource functions and focus on their core competencies while accessing their needed workforce.

Why Use an Employer of Record Solution?

Now, more than ever, startups and large corporations alike are struggling with how to hire remote employees and scale their teams globally without running into local labor and tax laws. Employers of Record can help companies achieve their goals while avoiding these legal and HR compliance risks – foreign specialists and knowledge workers fill positions as a service, which gives companies flexible access to talent without hiring them directly.

An Employer of Record (EOR) can also provide a registered entity for running a local, compliant payroll, managing payroll taxes, benefits, deductions, and employee information. An EOR can advise the client on the host country’s required notice periods, termination rules, and severance pay.

An Employer of Record (EOR) like Acumen International can take on all of the responsibilities of hiring an employee for you, including the legal and bureaucratic hurdles, and manage the entire employment process.

The EOR is solely responsible for paying salaries and benefits to employees and ensuring compliance with the host country’s local labor and employment laws. All HR aspects related to hiring an employee abroad get handled by an employer of record, which means that the client company does not have to establish a subsidiary or branch office in the target country where it needs to place its employees or contractors. EORs facilitate immigration policies, permits, and work visas for both employers and employees, depending on the conditions of the engagement.

What Services Does Employer of Record (EOR) Provide?

Summing up, the employer of record usually handles part of BPO services, particularly human resources-related issues regarding global remote personnel. These issues include but are not limited to:

  • Payroll management;
  • Compliance with local tax rules (file & deposit) of the country where the EOR company is located;
  • Handling employment contracts: 
  • Background, education, and other checks; 
  • Onboarding and termination processes, as well as employee’s compensation;
  • Arranging visas and work permits for employees;
  • Ensuring the working process is organized under local labor laws;
  • Processing workers’ medical insurance and other benefits (day-offs, bonuses, and more);
  • Process maps, employment guides, and other documentation.

What Services EOR Does Not Provide? 

On the other hand, here are the services not included in EOR solutions:

  • Quality control of employees’ work and their promotion;
  • Decisions regarding contract termination and compensation, except for legal document processing;
  • Project management.

Who Can Use EOR Services? 

An EOR can be hired by any company that wants to expand internationally but does not want to establish a legal entity abroad due to time constraints or high costs associated with setting up an office abroad. International businesses without subsidiaries may also use this service if they hire only one employee abroad for specialized roles, such as business development managers who scout for new business opportunities in foreign markets or sales directors who manage sales teams working remotely from other countries. 

Companies that want to hire contractors outside their home jurisdiction can also use employers of record to handle contractual obligations such as compensation packages, tax or benefits administration, and immigration permits required by employees worldwide.

Benefits of Using an Employer of Record

1. EOR Allows to Skip Incorporation Avoid The Pitfalls Of Setting Up A Local Subsidiary

So you can’t be bothered with local incorporation in your target countries. There is no need to go through the hassle and expense of setting up a local entity via incorporation and registration when you can utilize an Employer of Record. The EOR already has a legal entity that can handle all aspects of payroll, employment, and immigration requirements in the host country, negating the need for your company to do so. In addition, the EOR has the network and in-house expertise to ensure full compliance with local labor laws and regulations, making it the best choice for handling these matters.

2. No Immigration Compliance Issues

Immigration compliance is a top concern for multinational companies. With constantly changing immigration policies and increased scrutiny from foreign governments, it is essential to maintain compliance to avoid legal consequences. 

If you want to avoid the hassle and stress of constantly changing immigration laws and regulations, consider using a GEO solution with a local EOR. The EOR eliminates any risks associated with remote payroll, overuse of business visas, or multiple entries into the country. The EOR takes care of all work permit and visa requirements, ensuring a hassle-free experience with no complications from immigration authorities.

3. EOR Runs Local Payrolls in The Host Country

As an employer, it is crucial to follow local standards for running payroll and withholding deductions for pensions, health insurance, and taxes. Assigning employees abroad requires setting up a registered entity in the host country to comply with these regulations. The EOR can help ensure a smooth transition for employees.

EOR Solution by Acumen International: Global Employment Done Right and Fast

Acumen International’s EOR solution lets customers tap into the local workforce without setting up a new office or bank account. Acumen will take care of the employee onboarding, payroll, and compliance with local tax laws and regulations, freeing customers to focus on the employee’s day-to-day tasks. 

Our global employment cost estimation technology, coupled with our global presence, experience in managing global payroll & local compliance and immigration regulations, and knowledge of local benefits and taxes, allows our clients to optimize the management of their extended workforce. Acumen’s global  EOR services are delivered leveraging a single global platform that ensures data accuracy across all countries of operation.

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Drawbacks to Using an Employer of Record

A few potential drawbacks to using an EOR may depend on a company’s employment needs and business strategy. Despite the advantages, companies should be aware of these potential limitations before deciding whether or not to use an EOR.

1. It May Not Be Suitable for More Than 10 Employees or Generating over 100K in Sales

A company expanding into a new country may find that an EOR is not the best solution for more than 15 employees. It may consider incorporating an entity and hiring local experts to help manage the payroll process. In that case, the EOR may only be an interim solution to get employees hired quickly.

Suppose you plan on hiring foreign workers to provide services or generate sales over $100,000 annually in any country. In that case, you should consider setting up an overseas subsidiary or branch office. Doing so will help to mitigate the risk of permanent establishment.

2. Employers Give Up Control of Host Country Payroll Process

Many employers are reticent to cede control of payroll processes in the host country to a local EOR, although this is purely for administrative reasons. This may be a completely novel concept against conventional business thinking regarding direct employment for some companies. While it may be a new concept for some companies, using a local EOR can provide greater business flexibility and freedom. 

3. Indirect Relationship between Company and Its Employee

The company relies on the EOR to handle claims since the employment contract is between the EOR and employee, rather than between the company and employee. While the company does have the rights under its agreement with the employee, these rights are secondary.

Impersonal

PEOs can give your business the personalized attention and care needed to thrive. However, many PEOs are large companies that serve thousands of small businesses. This means that your company and employees could potentially get lost in the shuffle. When looking for a PEO, choose a company that treats its clients right — and gives them the tools, support, and services they need to grow their business. Remember, you always have the option to cancel your services if unsatisfied.

PEO (Professional Employer Organisation): What, Why, How, and When?

What is PEO (Professional Employer Organisation)?

A professional employer organization, or PEO, is a company that provides human resource management services and managed solutions to small, mid-size, and growth businesses. PEOs help businesses grow by taking on many HR-related tasks and responsibilities. Their services include payroll, benefits, HR, tax administration, and regulatory compliance assistance.

PEOs typically enter into a joint-employment relationship with an employer, which gives the PEO responsibility for many employee-related functions such as employee benefits, compensation and payroll administration, workers’ compensation, and employment taxes. PEOs allow businesses to outsource their human resources functions and gain economies of scale by having more benefits options, sometimes at lower rates.

With PEOs, your HR department can function at total capacity. Rather than limiting its scope to the traditional functions of HR, a PEO provides a comprehensive range of HR services tailored to your business needs. With a professional workforce of experts in multiple locations, PEOs ensure that employees work compliantly according to host country laws.

PEO Differentiator

PEOs typically enter into a joint-employment relationship with an employer and generally operate within a single jurisdiction or country, such as PEOs located in the United States. A crucial part of PEO services is assuming responsibility for complying with the laws and regulations governing the payment and reporting of federal and state taxes paid on employee wages.

What Services Does PEO Provide?

If you’re planning to expand your business, you’ll need the help of an expert services partner that can guide you along the way. The team at PEOs usually provides strategic guidance and a wide array of high-quality, cost-effective services tailored to your specific requirements that can help your company grow and scale up safely. Here are some of them:

  • Human resources administration, including payroll, taxes, and benefits administration; employee training and development; recruitment; employee relations; compliance training; background or education checks; timekeeping services; 
  • Regulatory compliance assistance, including payroll tax law and reporting requirements;
  • IP protection and offboarding;
  • Hiring and HR compliance services, helping you navigate through local regulations and avoid prohibited HR practices, including discriminatory job listings, Illegal criminal background checks, misclassified workforce, inaccurate payroll, and tax payments;
  • Human resource support;
  • End-to-end talent management, including recruiting, onboarding, engagement, performance management, and termination (upon employer approval); 
  • Liaison with legal counsel on employment issues such as discrimination, wrongful termination, sexual harassment, whistleblower protection, non-compete agreements, severance agreements, and other employment law matters.

Benefits of Using PEO (Professional Employer Organisation)

There are many benefits to partnering with a PEO for businesses expanding to new locations. Perhaps the most significant benefit is that PEOs can provide access to cutting-edge global employment solutions that are usually beyond the reach of many organizations. This can give your organization a significant competitive advantage.

Businesses can benefit from the value propositions that PEOs bring to the table in five different ways

  1. Improving clients’ ability to attract and retain talent.
  2. Enabling clients to focus on their core businesses while PEOs handle HR matters.
  3. Expert HR knowledge and resources to improve their overall business performance.
  4. Reducing HR-related overhead costs. 
  5. Eliminating the need to deal with legal compliance and HR issues.
  6. Legal protection
  7. Reduced payroll administration costs.

The primary benefit of partnering with a PEO, Professional Employer Organization, is a co-employment relationship that gives you the flexibility to focus your attention on the direction and growth of your business. 

A PEO assumes administrative and HR compliance tasks, enabling you to invest more time in strategic decision-making. Professional employer organizations can provide services to business owners and management teams that they wouldn’t otherwise have the time or expertise to run independently.

Co-employment is an excellent way for growth companies to enjoy the benefits of a professional HR solution on a long-term basis while maintaining direct control over day-to-day operations. A PEO is an organization that provides HR and payroll services but doesn’t hire or terminate employees independently. Those responsibilities are shared between the employer and the PEO.

PEOs typically offer Employment Practices Liability Insurance (EPLI) to their clients, which can offer protection if a former employee sues for wrongful termination or discrimination. This type of insurance can be invaluable for businesses, as it can help cover the costs of litigation and potential damages that may be awarded.

Statistically Proven Benefits of PEO

The National Association of Professional Employer Organizations (NAPEO) has shown in its whitepaper that:

  • Businesses in a PEO arrangement grow 7-9 percent faster, have 10-14 percent lower turnover, and are 50 percent less likely to go out of business.
  • PEOs can offer a broad array of HR services at a lower cost and offer access to retirement plans to small businesses that may not otherwise sponsor them.
  • PEOs provide services to 173,000 small and mid-sized businesses, employing 4 million people.
  • There are 487 PEOs in the United States.
  • The total employment represented by the PEO industry is roughly the same as the combined number of employees for Walmart (the United States only), Amazon, Kroger’s, and Home Depot.
  • The PEO industry’s 173,000 clients represent 15 percent of all employers with 10 to 99 employees.
  • The ROI of using a PEO (in cost savings alone) is 27.3 percent.

Drawbacks to Using PEO (Professional Employer Organisation)

PEOs can be a good fit for businesses of all types and sizes. While this model offers many benefits, it also has drawbacks. Here are some of the disadvantages of using PEOs:

Higher costs 

The main reason why PEOs cost more than traditional employment is the administrative fees they charge. These fees cover the cost of managing your payroll and other expenses related to hiring employees. On average, these fees range between 10 and 15 percent annually.

Lack of control of HR processes and employees

PEOs can be very helpful in managing employee-related activities, but they also lack the flexibility and strength of an in-house team. If you need to change processes or policies, you may have to go through multiple levels of approval before implementing them.

No influence on your company culture

A PEO might be able to help you with HR issues, but it probably won’t be able to solve cultural problems that arise within your business. For example, suppose an employee is acting up or causing issues in the office. In that case, an outsourced HR provider may not be able to help you address these issues as effectively as an in-house human resources department would be able to do. The same goes for any other internal problems that arise within your business.

The lower value of the In-house HR department

The main disadvantage of using PEO is that you might lose the value of your in-house HR department. You still employ the employees, so all internal policies and procedures are still in effect. If you want to change any of these policies, you must involve the PEO.

Your employees won’t know who’s looking out for them. When an employee has an issue or concern, they might not always know who they should contact at their company or PEO — especially if their employer has multiple locations or works with various providers. This could lead to confusion and frustration among employees who don’t feel like they’re being heard.

Another potential downside is a lack of control and indirect communications. For example, if an employee has a question about their benefits or wants to file a claim for some compensation, they might call their HR representative at the PEO’s office instead of yours. This could mean losing contact with key employees and missing valuable information about your company’s performance.

Lack of process customization

A significant advantage of having an in-house HR department is that they can customize people-related processes to fit company culture and needs. With a PEO, these processes will change depending on which partner you select (and whether or not they’ve developed customized processes). If this is important to your company culture or strategy, it may be worth keeping your HR team rather than outsourcing payroll and other services to a PEO.

Limited flexibility

Many PEOs have strict rules about when and how you can terminate an employee’s contract with them. In most cases, you must give at least 30 days’ notice before terminating an employee’s agreement with you and pay any applicable taxes and unemployment insurance premiums during that period. This can be problematic if you need to make immediate changes to your staffing levels because it forces you into a situation where you have too few or too many employees at once.

How Much Does a PEO Cost?

The price of a PEO depends on the specific services it provides and the number of employees you have. When you sign up for a PEO, you’re required to pay a setup fee and an ongoing management fee. Some companies also offer discounts for large organizations that use multiple services.

Difference between an EOR and a PEO. Employment Risk Mitigation Strategy

Both PEOs and EORs work differently. However, an EOR is a company that takes on the legal risks of employing your workers, including finance, legal & compliance, and safety risks, saving you from any potential problems down the line. This means that all of the responsibilities that come with being an employer are shifted to them — from tax reporting to handling any injuries or issues that occur on the job. You’ll have none of these hassles but will take responsibility for managing your employees’ tasks and performance.

PEOEOR
Employment ModelCo-employer
Sole Employer
Key ServicesGlobal employment, payroll, benefits, immigration (visa, work permits), mobilityGlobal employment, payroll, benefits, immigration (visa, work permits), mobility
Local Entity EstablishmentRequiredOptional
LiabilityShares responsibilities and liabilitiesAssumes all responsibilities and liabilities
Legal AdviceOptionalRequired
Global Labour & HR ComplianceOptionalRequired

GEO (Global Employment Organisation): What, Why, How, and When?

Key GEO Drivers

The global economy has been increasingly shifting in recent years, with more businesses expanding their reach to international markets and taking control over risks. This has led to a rise in the demand for Global Employment Organizations (GEOs), which help businesses navigate the complexities of managing employees in multiple countries. 

Several key factors are driving this trend. First, there is a growing focus on corporate governance and transparency, as investors and regulators place greater emphasis on these issues. Second, the war for talent has intensified as companies compete for the best workers in an ever-shrinking pool. 

Finally, Permanent Establishment risk has become a significant concern for businesses, given the increased scrutiny of multinationals by local tax authorities worldwide. GEOs can provide a valuable service for companies looking to operate internationally, helping them overcome these challenges and maximize their growth potential.

What Is a GEO (Global Employment Organization)?

A Global Employment Organization is a cutting-edge solution that has completely changed the way companies can expand their business by enabling them to hire employees from anywhere in the world quickly, efficiently, and without having to establish a foreign legal entity. This innovative solution has enabled businesses to tap into a global talent pool, allowing them to grow and succeed in today’s competitive marketplace.

A Global Employment Organization helps streamline or centralize HR and operational processes globally. The GEO solution offers access to a global talent pool, making it easier to find and hire employees or providing specific employees to suit particular business and talent requirements.

Businesses expanding globally that don’t want to hire directly or establish foreign legal entities can use GEOs to comply with local laws quickly and affordably without having to go through the hassle of complying with multiple sets of laws and regulations and risk of misclassification. With GEO, employers can take on ambitious international projects with the best skills available.  

GEO Differentiator

A Global Employment Organization (GEO) is a subset of employers of record that perform their duties internationally in several countries worldwide.

When Do You Need GEO (Global Employment Organization)?

There are a variety of situations where GEOs may need to manage a globally distributed workforce. A GEO can facilitate quick employment and promote consecutive global moves.

5 most common HR challenges for going global

  1. An organization wants to hire the best talent from around the world, regardless of location. 
  2. An organization offers remote working options, and employees are allowed to work from anywhere they choose. 
  3. In the event of mergers, acquisitions, or sales activities, employees may be stranded in an area without a company presence. A GEO can help employ these one-time, third-country nationals in these cases. 
  4. When employees are part of a company’s global mobility program or when they work for a company that operates in multiple countries.
  5. An organization needs to establish tight cost control and management reporting with regard to its global mobility program.

What Services Does GEO Provide?

  1. A single point of contact for all your cross-border payroll administration. A specialized employer organization (GEO) administers a local payroll through the EOR, which gives employees the confidence they will receive statutory employment benefits and protections. Local payroll management is one of the most challenging aspects of running any business, so it’s crucial to work with an experienced GEO having expertise in global payroll.
  2. A Global Employment Organization (GEO) ensures that the employment contract meets local labor law requirements. A GEO also works with employers to help them understand and comply with employment laws in different countries. The GEO also provides resources and training to employees on their rights and responsibilities under the contract.
  3. A Global Employment Organization (GEO) provides work permits and visas for employees from other countries. This makes it possible for these workers to come to the employer’s country and work there for a set period.
  4. A Global Employment Organization(GEO) guides clients on employment law matters such as notice, severance, termination, and statutory benefits.
  5. Global Employment Organization(GEO) provides communication and coordination between the EOR, client company, and employees through regional account managers, allowing for a more efficient and effective working relationship between all parties involved.
  6. A Global Employment Organization (GEO) strives to create global pay strategies and structures that are fair and competitive. They consider many factors when setting pay levels, such as internal business needs and market rates. They also examine how local taxes and regulations can impact those rates to create a cohesive global model.
  7. A Global Employment Organization (GEO) can help align HR programs with global function and business needs

9 Benefits of Using GEO (Professional Employer Organisation) Solution

  1. Facilitated and unified global mobility administration 
  2. Centralized control over the global workforce 
  3. Enhanced international employee and employer compliance 
  4. Proactive global workforce cost management 
  5. Alignment of global talent with opportunities 
  6. Advice on favorable tax, benefit, and social security locations 
  7. Reduced permanent establishment exposure risk
  8. Simplified global reward structure and administration
  9. Multi-location compliance risk management.

Acumen International, Your Gateway to the Global Talent Market

Acumen International’s mission is to provide services that make the world a smaller place. It aims to help businesses of all sizes in any industry reach international growth and expansion through various services.

Looking to hire employees quickly and efficiently in any of 190 countries? Acumen International can help with our Express Global Employment solution. In just 72 hours, businesses can have their globally distributed employees working for them – perfect for when you need to get things up and running immediately. This solution also comes in handy during mergers and acquisitions, helping transfer and retain key personnel during the transition process.

The comprehensive service portfolio of Acumen International

  • Preparation of mandatory documents for in-country employment and payroll;
  • Compliant client and worker onboarding and offboarding in support of global expansion, remote workforce, or merger & acquisition requirements;
  • Audit-proof local labor law compliance;
  • Compliant statutory and voluntary employee benefits provision and management for local and expatriate talent, including health insurance, automotive leasing, office equipment, accommodation on-demand, and related technology requirements;
  • Coordination of monthly payroll, employee & employer tax payment processing, including year-end tax statements, and consolidated monthly invoicing;
  • Compensation management, severance, and employee termination services;
  • Immigration requirements processing, rendering work permit sponsorship, visa applications & extensions, and expatriate support;
  • Global mobility and relocation services;
  • Cloud-based Global Payroll Calculator provides total cost of employment estimates for local talent and expatriate personnel;
  • Local market benchmarking services for clients considering market expansion (e.g., salary, bonus, the total cost of hire, etc.);
  • Tailored on-demand international recruitment and staffing provided through in-country partners (ICPs).

Summing Up

Hiring needs vary in scope and duration, so the type of employee you choose should be based on your specific needs. PEOs are best for small-scale or short-term hiring, while GEOs are the best choice when you need a larger pool of workers.

Cross-border workers are a crucial part of many international companies. Globalization means organizations have expanded by reaching out to new markets and hiring workers from other countries. That complicates compliance because some organizations employ people in multiple countries and may have employment regulations. Managing these workers can be challenging, but there are ways to make it easier. The three innovative global employment models — GEO, PEO, and EOR can help minimize risk, centralize administration, and streamline operations.

Acumen International Global PEO and EOR solutions can help organizations develop effective global employment programs to ensure compliance with local legislation and provide a comprehensive and cost-effective solution across multiple locations. Acumen International is like a tailor-made suit that fits your business perfectly.

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