Companies have a range of options when looking to recruit employees overseas, and the choice will depend on each businesses’ individual circumstances.
What is a Professional Employer Organization (PEO)?
By using a PEO, a company outsources the employer-employee relationship to the PEO, who act as a third-party intermediary. The PEO can handle all HR and administrative tasks that arise in relation to hiring new employees in any given location. The PEO will ensure the legal and regulatory requirements of employment have been met, organise all visas and work permits, administer payroll, and will invoice the employer directly for these services. The employee will be directly employed by the PEO, but all decisions relating to management, duties, compensation etc. will remain with the company.
Is a PEO Right for My Company?
When assessing whether working with a PEO is right for you, one of your considerations may be the size of your company. There are obvious benefits to using a PEO for smaller companies who do not have the knowledge or staff to recruit overseas. But what about larger, more mature companies? Many big companies will already have in-house HR support, whether this is one or two individuals or a whole team. Maybe you are thinking about expanding your in-house HR team in order to adequately manage your international expansion, or maybe you are looking at other options. All these decisions will depend on the specific circumstances of your business and what markets you operate in, but it is worth considering the costs and risks associated with an in-house HR department and how these compare to the cost saving and risk minimising services offered by PEOs.
Using a PEO comes with a range of advantages, regardless of the size of your company. One of the most obvious benefits is the significant reduction in the administrative burden shouldered by the employer. Even if your company has a sophisticated in-house HR department, and you already employ HR staff who may be capable of developing their knowledge of another country’s customs and laws, and who could look for suitable candidates for a role, they simply may not have the resources required to do this in your desired timescales. There is also a risk that they may not fully understand the specific employment requirements of other countries. The services of a PEO would therefore enhance and complement your HR department’s capabilities, allowing you to work more efficiently and focus on your core business while benefiting from the PEO’s in-depth knowledge of local laws, regulations and customs. This invaluable expertise will ensure the hiring process is seamless and your new employee can quickly focus on the demands of their role, in the knowledge that all administrative issues in relation to their employment are in good hands.
Using a PEO vs Establishing a Local Entity
There is common misconception that a business must always establish a local business entity when looking to expand into a new region to allow you to hire your own employees directly. However, while this is a valid option, it can be expensive and time consuming. An alternative is using a PEO. For example, in China, if you establish a local entity you can invoice your own clients, and benefit from the added credibility of having your own business licence and operational autonomy. However, market entry is significantly slower than using a PEO, and it is much more expensive to establish your own Chinese entity, which requires substantial up-front investment. If you are entering a market for the first time and want to minimize your risk exposure, a PEO is an excellent idea. Once you have established yourself in the new market and your business has begun to grow, you can then consider incorporating a local entity to allow you to start hiring directly.
INS Global can assist you at every stage of this journey. We follow the full life cycle of our clients’ projects when they expand into a new country: from recruitment of individuals, employing them as a PEO, to incorporating your company a few years down the line.
As a serving PEO, INS Global can offer services in most of the Asia-Pacific region as well as countries such as India, UAE, Australia, etc. We have over 15 years’ experience in market entry consulting, and have worked with over 300 companies worldwide, from start-ups to multi-national corporations, using our sophisticated employment solutions to expand our client’s global reach. Contact us today to find out how we can support you.