What is a PEO and How Can They Benefit Small and Medium-Sized Enterprises?

What is a PEO and How Can They Benefit Small and Medium-Sized Enterprises?

What is a PEO? A PEO, or professional employer organization, works with a wide range of business clients in order to manage HR responsibilities such as payroll, benefits, and more. Most PEOs will come with a workforce that has extensive legal, tax, accounting, HR, and client services experience. There are many beneficial reasons to consider partnering with a PEO – it can reduce the cost of administering employee benefits, streamline your payroll, and even help you successfully expand your business overseas without having to set up your own entity.

If you want to expand into a global market, a PEO is a cost-effective choice for helping your company get through the inevitable challenges of hiring international employees, ensuring compliance with local laws and regulations, administering benefits, and managing the payroll of international employees, and terminating international employees compliantly when necessary.

A PEO can also arrange health insurance and other benefits costs for companies both at home and overseas, making it an ideal way for small-to-medium businesses to be able to offer their employees an excellent benefits package even on a tight budget and attract more top talent. So, how exactly can a global PEO help you successfully expand your operations overseas?


Hiring International Employees

When you expand your business overseas, it’s a given that you are going to need people working for you in those global locations. However, no business owner can be in two places at once, and hiring international staff becomes trickier if you have to make an overseas business trip to do it every time. For example, the New Horizons Global Partner program can take over these day-to-day, necessary operations for getting the international branch of your business up and running when you expand overseas, by sourcing, interviewing, and hiring the best employees for the job on your behalf. This site has more information on what they do.


Payroll

Both regular and global PEOs can manage payroll on behalf of your company. This is an extremely beneficial service when you run a company that is expanding abroad. Making payments to international employees from your home country is not impossible, but thanks to time differences and differences in currency, it may not always be easy. Trying to ensure that international employees are paid correctly and on time each month from halfway across the world can be tricky. A good global PEO will ensure that payments are made correctly and on-time to employees in different time zones, and they should have extensive knowledge of international banking practices to ensure that payments go as smoothly as possible. They will also understand how to comply with local tax laws to ensure that the necessary tax withholdings are made.


Compliance with Local Regulations

Hiring employees in one country can be very different from the next, and this is something that any business owner who is looking to expand into a global market should understand. But there’s just one problem – you are busy enough looking after your business and your employees in your home country, and taking the time to learn about local employment laws and regulations in another might not fit so easily into your schedule. And, if you are based in your home country the majority of the time, you may easily overlook any regulation changes in the international location. This is where a global PEO comes in. They will have extensive knowledge of the employment laws and regulations in the country that you are looking to expand into and will be able to ensure that your practices are fully compliant, helping your business avoid potentially damaging fines and penalties. In addition, they will be able to keep up-to-date with law and regulation changes in order to make adjustments to how things are done whenever needed.


Employee Benefits

Offering employee benefits that are attractive to the top talent can be difficult enough at home, but even more tricky to navigate when you are expanding into another country and may not have extensive knowledge of what’s expected and what the cultural norms are when it comes to benefit packages. A global PEO will be clued up on the kind of benefits that employees expect in the country that you are expanding into, and will be able to put together an employee benefits package for your international employees that are in line with what they are used to and includes benefits that will attract the best.


Accurate Financial Forecasting

Financial forecasting can be an extremely complex process where international business is concerned. Businesses that are new to global expansion will often struggle to project monthly human resources expenses, due to factors such as international banking practices and currency exchange rates. A good global PEO will be highly experienced with these factors and more, making it easier for you as the partner company to develop accurate projected budgets to work with. They can take all the international factors into account and streamline your payroll, making it easier for your business to make effective budgets and plans based on them.


Streamlined Expansion

New markets across the world present a wide range of new opportunities for growth for any kind of business. Today, companies in every market are constantly weighing up the costs and benefits of expanding internationally, taking into account both the challenges and opportunities. As your company tries to navigate a new international venture, working with a global PEO can help by providing you with further confidence about a range of key areas. For example, having a global PEO manage and administer payroll and benefits, your company has the peace of mind that it is paying employees in accordance with local laws. As a result, your business is more likely to build a strong relationship with its international employees, who are more likely to be satisfied and productive at work as a result.


Data Security

Data laws can vary around the world, and some countries have passed data regulations that have had a huge effect on international business. One example of this is the General Data Protection Regulation (GDPR), which was passed by the European Union in 2016. The regulation applies to all countries in the EU and establishes key privacy and security rights for any individual in terms of their digital data. Businesses that operate in the EU must ensure that any data that they keep on clients is secure, safety transferable, and can be accessed by the client. Failure to do so may mean that the company faces a penalty or a fine. In this instance, a global PEO who is well-versed in GDPR can help your company navigate the requirements and complexities of this regulation and ensure that your business is compliant, even if it does not apply to your home country.


Cost Efficiency

Finally, working with a global PEO can make your international expansion a much more cost-effective venture. An in-house human resources team can quickly become a bigger and bigger expense as your company expands into more global markets, so it’s no surprise that a global PEO is a very cost-effective answer to the problem for many companies who have plans to expand their operations abroad.

From hiring individual employees to navigating the complexities of different laws and regulations in another country, there are several reasons why working with a global PEO is the way forward for any business expanding internationally.

Susannah Griffin
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