What is an international PEO?

Hint: It's not what you think it is

If international expansion is on your radar, then you’ve likely come across something called international PEO. It's an effective avenue for adding employees in new locations to reach international markets. Let’s get right to the point: Much of the information circulating about international PEO is mistaken. 

Sometimes global expansion providers refer to the term "international PEO" incorrectly. When employed on the global scale, it doesn't actually fall within the realm of a professional employer organization (PEO).  

What’s the real story behind international PEOs?

Often, when people or providers use the terms “international PEO” or “global PEO,” they’re trying to tie a familiar concept in the U.S., the professional employer organization, to a type of outsourcing that helps companies hire internationally. But PEO refers to a co-employment situation, and in most cases, co-employment isn’t an option on a global scale.

Why co-employment doesn’t work internationally

In co-employment, a PEO and its client share legal accountability for employment responsibilities. The PEO is responsible for the HR services and payroll component, and the client organization takes care of the employee’s day-to-day management. Co-employment is common practice in the United States, but it’s not a model used in the rest of the world. It’s even considered illegal in some countries, such as France and Switzerland. 

Another important point regarding co-employment: Both the PEO and the client are legally required to be registered as a company, or entity, in the country where the employees are located. 

So, even if you were to find and enter into a (legal) PEO services situation outside the U.S., as the client organization, you’d be required to have—or set up—a legal entity in the country where the employees would be located. And that’s a complex and costly undertaking. 

This co-employment model, however, is not what others usually are talking about when they reference international PEO. More likely, they’re talking about an employer of record. 

What’s an employer of record?

An employer of record is a way for companies to outsource talent internationally without having to set up a legal entity in the country where employees are located. It’s similar to a PEO, in that it splits responsibility of HR and payroll administration from daily employee management. But unlike PEO, workers are fully employed by the employer of record. 

Because the employer of record already has a registered in-country company, the client organization can scale internationally, adding international employees in new markets without worrying about the expense and compliance risks associated with entity establishment. To distance this type of service from PEO and more accurately describe what’s being provided, we’ve coined the term EOR.

The Global Employment Outsourcing backstory

When we say we coined the term, what we really mean is we also came up with the concept and practice of Global Employment Outsourcing. Employer of Record (EOR) wasn’t well known as a service before we started offering it.

In 2010, while onboarding a multinational client to our Global Managed Payroll solution, we discovered that the company didn’t have employer registrations in several of its locations worldwide. This meant that because it didn’t have the required entities in place, it wasn’t paying its employees compliantly. 

To give this client a compliant way to pay all of its employees, we arranged legal employment for its workers through our in-country partnerships. The client’s employees would officially become employees of the in-country partners. As employers of record already registered in the countries in question, these partners would ensure that all statutory regulations were followed and benefits were provided. The client company would then be responsible for managing the workers’ day-to-day activities. 

Since that first EOR case in 2010, we’ve helped hundreds of organizations expand their presence in countries around the world. From multinational corporations to nonprofit NGOs, we've used our expertise to empower a wide range of industries. Today, we can provide EOR service in over 179 countries, either through our own established entities or via our in-country partners.

How to grow with EOR

EOR helps organizations meet their business growth goals because flexibility and scalability are inherent to the solution. Let’s explore some common expansion scenarios organizations may be encountering:

International PEO or global PEO isn’t the answer; EOR is

The scenarios above are just a few of the ways EOR can solve organizations’ diverse international employment needs.

With each of these challenges, the employer of record model (EOR) provides is the simplest, most direct way to help grow an international presence. An “international PEO” co-employment model wouldn’t be nearly as swift, nimble or cost-effective. And depending on the country, it may not even be legal. 

When evaluating modes of expansion and the providers that enable them, it’s important to have a clear understanding of the services being offered. If a PEO company is advocating for international PEO, it’s important to ensure that what they’re really talking about. Ask if it is an employer of record and not the co-employment model traditionally associated with a PEO. This is especially true if entity establishment isn’t something your organization is comfortable with or ready for. 

Want to learn more about EOR—and why we steer clear of the international PEO terminology? Contact us today.