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Global Expansion: Considerations for accessing a Global Talent Pool with a PEO strategy.

A client recently contacted me with a pressing need. They are a US-based company looking to place employees in two European countries—one through local hiring and the other by sending a US-based employee on assignment. Their question was simple: “How can they do this quickly, efficiently, and cost-effectively?” There was a time in recent memory (at least my recent memory) when this question might have generated condescending laughter and headshaking, starting with the word “immediate” and ending with “cost-effective.”   But the rise of Professional Employment Organizations (PEOs) has changed the game. PEOs offer significant opportunities for businesses to employ, attract, and retain foreign talent while navigating complex employee benefits and immigration processes.

The prevalence of Professional Employment Organizations (PEO), has shifted this equation and generated huge opportunities for companies looking to employ, attract and retain foreign talent while navigating complex employee benefits and immigration processes.  Today’s world represents a startling dichotomy.  Complexities related to employment laws, cross-border requirements, taxes, rules, and processes have become exponentially more complex, while the expectation that we will be able to travel, move and operate globally and seamlessly is taken completely for granted.  PEOs represent an important resolution to this dichotomy. 

What is a PEO?

A Professional Employer Organization (PEO) is a third-party entity that partners with businesses to manage various aspects of human resources (HR) and employment administration. In a co-employment relationship, the PEO becomes the employer of record for certain employment-related purposes, such as payroll processing, benefits administration, compliance, and risk management. While the client company maintains control over day-to-day operations and retains responsibility for the direction and supervision of its employees, the PEO takes on key HR functions, providing expertise, resources, and support to streamline HR processes and ensure compliance with employment laws and regulations. The primary goal of a PEO is to help businesses save time, reduce administrative burdens, and access comprehensive HR services, allowing them to focus on their core operations and strategic objectives.

Importantly, for global expansion, PEOs also take on the work associated with immigration for employees who are being employed outside of their country of citizenship or residence.  In some cases, PEOs can offer sponsorship of the employee.  For small companies without international entities and infrastructure or experience with immigration and international HR process, this is a game changer. 

PEOs, not a Panacea

Professional Employer Organizations are the solution in every case.  There are a few issues with PEOs, I’ll discuss the three “Cs” below:

  • Cost: While using a PEO can provide the best and most cost-efficient answer to business needs, there are substantial costs associated with engaging their services. PEO fees may be a percentage of payroll or a flat fee structure. But like any decision, understanding the cost is critical.  Just like with international assignments, the “idea” and the “reality” may not align. It may sound like a good idea to have that employee in London or Shanghai, but is it worth the investment? 
  • Control: When partnering with a PEO, the client company shares certain employer responsibilities with the PEO, potentially leading to a perceived loss of control over HR functions. It’s important to understand what areas of control in employment-related decisions, you are losing. Likewise, there are co-employment risks.  Because the PEO becomes the employer of record for certain purposes, which may introduce additional legal and contractual complexities. Additionally, while the PEO shares some employment-related risks, the client company still retains liability for certain aspects, such as employee performance, workplace safety, and hiring decisions, so make sure you understand those levers of control. 
  • Culture: PEOs typically serve a wide range of client companies and industries. Their standardized processes and procedures may not align with the culture and values of every organization. Additionally, PEOs usually operate on standardized HR systems and processes. This can limit the flexibility to tailor HR policies, procedures, and benefits programs to the specific needs of your organization.

Selecting the Proper PEO

When selecting a PEO, there are several important criteria to consider. These criteria will help you find the right PEO that aligns with your business needs and supports your talent acquisition and management goals.

First, there are certain baseline qualities that must be met by any PEO, and most of the reputable players in the space bring these to the table: 

  • Compliance: Any PEO must offer compliance and legal expertise.  After all, this is why they are there.  They must ensure that the PEO has a strong understanding of labor laws, regulations, and compliance requirements.  If they are helping you employ non-national employees, then immigration should not just be an afterthought but a core competence. 
  • Reputation: The PEO should have a solid reputation and track record.  Check references, evaluate testimonials, and review any case studies related to your objectives to ensure performance, customer satisfaction, and reliability.
  • Financial stability and compatibility: Make sure they have a solid financial standing. They must be able to meet their commitments.  Can they scale with you if necessary?  Also, review carefully the terms and conditions of the PEO’s contract, including the duration, termination clauses, and the ability to modify the agreement as your needs change.   Inflexible or unreasonable terms are a red flag for financial compatibility and often an indicator of financial weakness. 

In addition to these and other baseline qualities, the selection of a PEO often comes down to three broad factors:

  • Service Alignment: Do they offer the services you require, and is their service model going to meet your expectations?  Assess the level of customer support and responsiveness provided by the PEO. You should have access to dedicated representatives or account managers who can address your concerns and provide timely assistance. Do they have the technology to integrate into your organization? 
  • Cultural Fit: Does the PEO have experience working within your industry and for companies with your culture?  For from being a nebulous question, remember they are an extension of your People or HR organization and will have an outsize impact on how they employee feels about the company.   
  • Pricing structure: Understand the PEO’s pricing structure and the specific costs associated with their services. Compare pricing models, including whether they charge a flat fee, a percentage of payroll, or a per-employee basis. Consider the overall value you will receive in relation to the cost.

While the scale of this decision for small businesses with only a few employees is often too small to justify a full RFP, it is entirely reasonable to conduct a basic RFI with a few standardized questions for those PEOs you are actively considering.  Sometimes interviews are the best way to determine the PEO with the right capabilities and best fit.  By considering these criteria and conducting thorough due diligence, you can make an informed decision when selecting a PEO that best aligns with your organization’s needs and goals to partner with.   

After all, the right PEO can unlock access to a global talent pool and global markets, ensuring the success and growth of your business and the fulfillment of a global strategy. 

Michael Ray has advised many of the world’s leading organizations on Global Talent Mobility, helping organizations build a globally mobile workforce with solutions, strategies, expertise, and advice.  To learn more about global mobility and navigate the complexities of international talent management, visit www.globalmobilityadviser.com.

 

 

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The following article concerns Professional Employer Organizations (PEO) and considerations for their selection and use for global expansion and global talent management. 

#Globalization, #InternationalHR, #ExpatriateManagement, #GlobalMobility, #InternationalRelocation, #TalentManagement, #GlobalHR, #GlobalWorkforce, #EmploymentLaw, #HRCompliance, #InternationalBusiness, #GlobalHRStrategy, #HRConsulting, #GlobalHRInsights

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