When crossing borders isn’t an option, Professional Employer Organizations can be a vital resource.
5 min read
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COVID-19 is having a devastating effect on global businesses, with experts saying this will be the most significant economic crash in decades. The travel industry, in particular, has been hit hard. More than 100 countries have restricted travel regulations in place, with more than a third closing their borders entirely. Countries with only partially closed borders are limiting entry to citizens and people with residency permits only and have stopped processing visas, including work visas, for anyone not already located in the country.
For international companies with operations in different countries, travel restrictions limit mobility and make it more difficult to manage staff and operations across borders. The situation is unlikely to change in the near future. Experts predict that there could be multiple waves of infection and that travel restrictions and the economic effects will be long-lasting to some degree. With this in mind, companies managing processes across borders, like hiring and growing the business, will need to rely on local partners.
For businesses growing their operations abroad, there are two options for hiring local workers. Some enterprises carry out the legal and hiring processes themselves, formally establishing the company in the country and complying with local employment regulations. Other companies choose instead to work with Professional Employer Organizations (PEOs) to help manage those processes.
What Is a PEO?
A PEO is a company that provides services to companies without an established presence in that location. PEOs function as a mediating entity between the company and the employees, managing the search and hiring process, complying with employment regulations, providing benefits and registering the employee under their own company. Effectively, the company outsources all of the HR tasks to the PEO but controls the day-to-day management of the employees and their work.
Even during the best of times, many companies choose to work with a PEO, but now, with travel restrictions limiting people to their own countries, partnering with local entities is an attractive solution for companies to continue their work internationally. Here are a few of the benefits of partnering with a PEO.
Avoid Bureaucratic Processes
By partnering with a PEO, companies can begin operating in countries without becoming a legally established entity in that country. The process of legally registering a company in any country is usually quite involved, requiring extensive paperwork, appointments and verifications, and is especially restricted now as a result of the COVID-19 situation. Avoiding this process and working with a PEO allows companies to dive straight into their operations in the country, whether obtaining new clients or beginning work with established connections.
Many countries also have minimum-income requirements for companies to legally register and hire foreign employees, which may be prohibitive for small or medium companies that don’t meet those requirements. Since it has become more difficult to gather all the required documents and complete the incorporation processes, more companies will turn to PEOs, allowing them to begin expanding their operations internationally and work around those restrictions. Often, companies will work with a PEO to get business going in a country before later becoming a legally established entity.
Improve the Hiring Process
The purpose of a PEO is to provide intimate knowledge of local employment markets to their client companies. Working with a PEO helps companies get the best results throughout the entire hiring and employment cycle. This can be especially valuable when looking for senior hires who will help manage the local branch. PEOs can help find and hire great candidates more quickly than the company on its own.
It can be difficult to hire employees in a new place, but with the knowledge of the hiring market and local network, PEOs can find more high-quality candidates for the best possible company fit. Once a decision has been made, the PEO helps the company ensure compliance with local hiring regulations.
Focus on the Core Business
Employees managed by PEOs are registered as employers under the PEO company name. Even after hiring, the PEO takes responsibility for administrative tasks like providing employee benefits and managing taxes. This leaves the company free to focus entirely on their core business, investing time in training and managing their employees rather than on administrative tasks and ensuring compliance. Each country has a different set of requirements, so for companies that work in multiple countries, working with a PEO can significantly increase operational efficiency by taking over the administrative tasks.
Using Local Partners to Maintain Operations
When companies are ready to begin working with a PEO, there are a few steps to follow. First, it’s important to evaluate company geographic needs and look for PEOs that operate in those locations. Research whether the PEO has the experience necessary to benefit the business in that location and the appropriate language skills to communicate clearly. When signing a contract with a local partner, it’s important to clarify the responsibilities and tasks expected from the PEO, to avoid redundant work and so the company maintains control of employee management.
The main benefit of partnering with a PEO is that it allows companies working internationally to maintain and grow their global operations quickly and with local guidance. The global situation resulting from COVID-19 has created an increased need for businesses to work with local partners, a trend that will continue for the foreseeable future.