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Hiring staff via a professional employer organization (PEO) is an increasingly popular option among companies seeking to expand overseas. If you are wondering ‘why use a PEO?‘ four great reasons are highlighted below.
A PEO hires staff on behalf of a client, taking care of the payroll and adminsitration of those staff, so that the client doesn’t have to worry about dealing with unfamiliar regulations.
It is also a rapid proces, with only taking as long as it needed to find the right people to fill the roles — which will generally be a matter of weeks, if not days.
The many benefits of this type of arrangement have seen the PEO industry grow significantly in recent years, and the PEO market is expected to be valued at more than $106 billion by 2028 — more than double its value in 2020 (all figures in USD).
According to the US-based National Association of Professional Employer Organizations (NAPEO), today PEOs serve more than 170,000 small and medium-sized businesses, employing nearly four million people worldwide.
Note that providers of PEO services are often referred to as an employer of record (EOR) and may also advertise their services as employee leasing.
If you are considering hiring people overseas but are still wondering why use a PEO? The following four benefits are worth considering.
Contact us today to find out more about how we can support you with PEO services around the world.
Why use a PEO? 4 key benefits
1) Local knowledge
If you are wondering ‘why use a PEO?’, one of key benefits on offer is the expert local knowledge your provider has.
That means that your PEO will have a solid understanding of the best educational institutions and local companies to look out for on candidate profiles when seeking to fill roles for you.
Whether you are trying to hire people to executive roles, recruiting a team of IT professionals, or setting up a call center or other high volume operation, your PEO will have a clear understanding of what to look for among candidates.
The PEO will also have a well-established local recruitment network that you can tap into, promising to find ideal candidates in the shortest time possible.
Moreover, your PEO provider will also understand what sort of benefits you need to offer in order to attract the best local candidates, and will be able to advise you accordingly.
Beyond that, your PEO may also be able to provide you with valuable advice when it comes to choosing other partners and providers, or locations to consider basing operations in, if the people being hired will not be fully remote.
That expert knowledge and ability to quickly fill the positions you need feeds into another benefit when considering why use a PEO, namely the optimization of your time and resources.
2) Why use a PEO? Resource optimization
Expanding overseas by more conventional means, which will generally include setting up a legal entity and employing people to administer the staff you hire, requires significant time, funds, and planning.
So when asking yourself ‘why use a PEO?’, another key benefit is the time and cost efficiency it entails.
Because a PEO can have people in place in a matter of weeks, if not days, depending on their profile, taking care of their onboarding and ongoing administration.
Hiring through a PEO will generally come at considerably less cost than setting up your own entity, with the provider charging you on a monthly basis as part of its billing for the payroll it is managing on your behalf.
That cost will generally either be a fixed per-employee fee, or a comission based on a percentage of the salary each employee is earning.
Even in the case that the costs of hiring via a PEO are comparable or higher than setting up a local entity, it is still a much faster and more convenient option.
In fact, many companies choose PEO as a stop-gap solution while they go through the process of setting up a local entity and hiring people directly, or as an option that will allow them to get to know the local regulatory regime better, before incorporating an entity and having to navigate it themselves.
In doing so, they are able to better prepare themselves for the compliance issues that they are going to face while doing business in the new market.
3) Guaranteed compliance
As well as the local knowledge and efficiency that a PEO offers you, another crucial benefit is the guarantee of compliance with local regulations and norms.
That means you will be able to launch and operate in the market safe in the knowledge that you will not encounter any unexpected legal inconveniences or financial penalties for failure to comply with an unfamiliar law.
As part of the services agreement that is signed with a PEO will be the guarantee that all local regulations will be adhered to.
Not only does that mean that operations will be undertaken according to the law, but also that all documentation will be drawn up based on the legal regime, while staff benefits and other matters will always be handled appropriately.
So any contract provided by your PEO to an employee hired on your behalf will be in full compliance with local laws.
Meanwhile, the likes of annual vacation, paid overtime, parenthood leave, statutory bonuses, and legally stupulated provisions related to transport, food, or equipment will be properly implemented.
Not only will that be important in terms of avoiding fines and other penalties, but also in terms of maintaining your good standing in the eyes of local authorities.
4) Why use a PEO? Expansion opportunities
If you are questioning ‘why use a PEO?’, another major benefit to take into consideration is the future support they could offer should you be planning to expand further.
Because if you work with a PEO that is not just active in the market you are expanding into, but has a regional or international presence, that same provider can support you when you expand into another market.
That means you will be able to take the next step in your international expansion, knowing that you have the support of a provider you have already built up a relationship with.
It also means that if you are unsure about where to expand to next, or which market offers the best opportunities to find the talent you need, your PEO provider will also be able to help you.
That advice could be critical to guaranteeing that your ongoing expansion is as smooth and successful as possible.
If you would like to get a better impression of the costs involved with hiring people in different companies, try out the new Serviap Global payroll calculator.
Serviap Global assists clients around the world
At Serviap Global, we assist clients seeking PEO services around the world, providing the service directly in many markets, as well as having a network of trusted partners that extends our reach worldwide.
We are a family-run business that started life in Mexico before expanding throughout Latin America, and subsequently growing beyond the region.
While our vision is global, we are committed to the sort of service excellence and individualised treatment that comes with working with a local provider.
Contact us today to find out more about how we can support you hiring staff overseas.