Q&A EOR: Employer of Record, PEO and Umbrella.
What is an international PEO?
An international Professional Employer Organization (PEO) is a service provider that allows businesses to outsource specific tasks and processes related to employee management. This is accomplished by the PEO hiring the client company’s employees and becoming the employer of record for compliance and tax purposes. While the International PEO manages and maintains a global payroll service and record-keeping for the client employees, the client is able to direct the daily tasks of the employees, focusing on the key priorities that impact the business.
PEO vs EOR vs GEO, what’s the difference?
Who benefits from using an international PEO
International benefits organizations of various sizes and sectors. However, it is particularly valuable to companies that:
- Cannot delay their hiring timelines and need to be operational in new markets quickly.
- Are unsure if they will be in the market for five or more years.
- Have international headcounts between one and 20 employees.
- Do not have the extensive financial and internal resources required for global expansion.
- Require a bridged solution between an acquisition close date and entity readiness.
Why should a business use an International PEO?
International PEO’s enable companies to establish a presence in foreign markets without the complexities and restrictions of setting up an entity. Zapeo becomes your Employer of Record (EOR) and hires members of your global team on your behalf through local, compliant employment contracts.
Businesses could start operating in a new market in as little as 72 hours and dramatically cut expansion costs by utilizing an international PEO compared to establishing a permanent in-country entity. Zapeo handles all payroll, benefits, compliance and risk mitigation in over 113 countries while providing you with one global point-of-contact.
Why use an international PEO service instead of setting up a legal entity?
Generally, it is not advised to set up a local entity when first setting up in a new country due to the time-consuming complexity of local labor law, tax, and termination obligations such as end of year financial reporting, nominating local directors, and ensuring that the entity meets all local legal requirements.
Another reason is to retain your employees by avoiding payroll mistakes. Zapeo is powered by Praxima, a global payroll solution that is fully automated and comprehensive. This is why an international PEO service is the best solution to set up an operation in a new country.
Can a company hire remote workers as contractors?
This route is not advised due to common financial, and even criminal liabilities due to contractor misclassifications. If an individual works exclusively for and/or takes direction from a company, then this “Remote Contractor” would be misclassified. This worker will be able to legally claim full payment for social benefits, PTO’s, severance payments, monthly compensation, and sometimes backpay which defeats the purpose of hiring this worker as a Contractor in the first place.
Another thing to take into consideration is the fact that it’s hard to enforce non-competitor, NDA, and IP protection clauses on contractor agreements.
Why use an International PEO instead of paying an employee as a Contractor?
Who will manage the employees?
Zapeo serves as a transparent layer between the company and the employee. When employees are operating in a foreign territory, all day-to-day directions are from their direct reporting manager. After onboarding, the communication between the employee and Zapeo is minimal unless there is an HR activity that needs attention like benefits enrollment or termination.
