
How to Switch to a New Employer of Record
Companies that are currently employing staff abroad, either expats or residents, may have chosen to use a third-party Employer of Record (EOR) for hiring and payroll. Due to the ease
Read MoreThe use of a PEO (Professional Employment Organization) is becoming a popular employment option for companies with operations in countries such as the US, where there is wide difference between state laws on corporate registration, employment and payroll. The PEO is useful where a company (foreign or domestic) wants to assign or employ staff in multiple states, but wants to avoid the expense and administrative tasks of complying with diverse state laws and regulations.
This service can also be used in some foreign countries for basic employment and payroll support, and act as a ‘co-employer’ for the client-company. Sometimes the term, international PEO, is used interchangeably with GEO (Global Employment Organization), but there are a few key distinctions between these two employment outsourcing services which are outlined in this guide. Basically, the GEO is a sole and legal employer of record, whereas the international PEO simply shares some of the employment and payroll tasks with the client.
A PEO is a HR outsourcing service, that can assist a company with the management of employment related tasks, including employee benefits, compliance with state and federal regulations, servicing payroll and risk management. It is essentially a ‘co-employment’ relationship between the PEO and the client-company, where the employees are employed by both, so that the PEO can assume some of the employer responsibilities for the client.
Subscribe to get more insights like this.The question does come up of why a company would use this service for their employment needs and administration. The primary reason is that the PEO has a built in HR support structure that includes:
The PEO may take on any or all of these functions for the client, saving the HR department time and money as an efficient solution to complex payroll and employment regulations.
The international PEO contracts in a business-to-business arrangement with the client to handle defined aspects of the employment duties to the employees. This can be a comprehensive service, or in some cases may be scaled down to suit the client’s specific needs.
The client-company still has the employment contract with the employee, and will both negotiate compensation and manage the work activity. The employee will probably not even notice the PEOs role, except if they have concerns about any administrative issues that come up.
There are pros and cons to using an international PEO as with any professional service, and each company will need to assess their own needs and weigh any disadvantages in their decision.
There are a few myths and misconceptions about PEOs, and if you are considering using this type of service you need to know the facts:
Fact: An international PEO is not an ‘employer of record’, only a GEO has an EOR service
In truth, international PEOs are not functioning as the sole, local legal employer, and there are limits to the reach of their authority. If a PEO service claims to offer an ‘employer of record’(EOR), then they are actually a GEO. The exception is the FESCO service used in China which is a blend of the two, designed to meet that country’s exacting employment laws.
Fact: A PEO will not manage your employees or control your business
It has a purely administrative role and will not interfere with the daily work or management of employees. However, they may interact with employees to gather personal data or submit insurance claims.
Fact: An international PEO cannot insulate your company from non-compliance or liability
Unlike a GEO, the international PEO will not assume any risks of legal liability or regulatory violations. Their role is purely advisory in this area, although they can guide you in minimizing compliance risk.
Fact: PEO vs. GEO: There are major differences
As mentioned, there is a difference between an international PEO and GEO employment solution. The basic distinction is that the GEO offers the client a sole and legal employer of record (EOR) in the location where business is being done. The employment contract is between the EOR and employee based on local laws.
The PEO service is a bit more arms-length as a ‘co-employer’, and is essentially in place to support the employment relationship with the end client though various HR related administrative tasks and services. The following points illustrate the differences between both approaches.
Employer Relationship
Insurance
Employment Contracts
Company Registration
Statutory Requirements
The question of what types of companies will use a PEO depends on several factors such as:
If these points describe your HR department, then a PEO can offer one reasonable solution to your employment needs, but a GEO could also do the same thing with an EOR to act as full legal employer.
While these two types of employment services seem interchangeable, you can now see that there are major differences that could affect your company. The key point to keep in mind is that the GEO offers a far higher level of protection and insulation from liability in a new or unknown business location. The PEO simply handles payroll or employment administration and does not have a legal employer of record in the locale.
If you require a more comprehensive employment solution, then a GEO service is probably more suitable. The PEO would be sufficient if you just want third party support for a few HR functions. Please contact us if you have questions about either of these unique HR outsourcing services. We make international employment simple.
Companies that are currently employing staff abroad, either expats or residents, may have chosen to use a third-party Employer of Record (EOR) for hiring and payroll. Due to the ease
Read MoreUS employers that are either expanding abroad or hiring remote employees will be entering an entirely new context of foreign employment regulations. Even the most experienced HR department will be
Read MoreA Global Employment Organization (GEO) is an international solution for hiring employees abroad, without having a branch or subsidiary in the foreign location. The GEO structure utilizes ‘employers of record’
Read More