A global EOR is an outsourced back-office administrator for companies with international employees. In short, Employers of Record place their clients’ international staff on their own global EOR payroll. In doing so, the business no longer needs to undertake the long, complex, and financially onerous task of setting up a subsidiary within their international employees’ countries, instead using the infrastructure and established payroll resources of their Employer of Record partner.
The expanding company is still the functioning employer and the one all international staff report to. The EOR executes back-office payroll, benefits, and regulatory technicalities associated with international staffing. They can also provide other auxiliary HR duties the original organization doesn’t have the resources, bandwidth, or technical expertise to tackle themselves.
By definition, PEO stands for “professional employer organization.” A PEO, specifically as it pertains to the U.S. market, is also known as a co-employer. PEOs manage payroll, benefits, and other HR responsibilities for the employees of a client company.
Typically, a PEO has a staff with extensive experience in HR, legal, tax, client services, and accounting. Businesses partner with PEOs to reduce the costs of administering benefits, streamline payroll operations, and successfully expand to an international market without having to set up their own entity. A PEO can cost-effectively guide companies through the challenges of compliantly hiring international employees, compensating according to local laws and regulations, and should it become necessary, compliantly terminating employees to reduce risk.
In addition, PEOs are helpful in that they mitigate health insurance and benefits costs for companies. Working with a PEO is a great way for small- and medium-sized businesses to offer employees great benefits without having to burden their HR administration and in-house HR resources.
International expansion brings many challenges, though. One of them is payroll. Managing international payroll is no easy task. In fact, it can be incredibly challenging. The bigger the scale of an organization, the more challenging payroll can be. And when organizations have overseas employees, the difficulties can really pile up.
Payroll always requires dedicated staff, established processes, and clear expectations from companies and their employees, but these requirements get more complicated as companies expand internationally. There are time zone differences and exchange rates to consider. Each country has its own tax laws and may have additional legal requirements for compensation, benefits, and pensions. When managing international payroll, a global HR team must make sure a variety of legal and logistical benchmarks are met, while ensuring payroll to global employees is delivered on time. In certain countries, if international payroll is missed or late, the consequences can be severe, including a suspension or permanent loss of a business license.
Cultural differences can’t be overstated, either. Beyond the fact that different cultures have different holidays, international employees often have different values, expectations for compensation, and communication styles.
International payroll services, then, include the typical processes necessary for paying employees, but also a set of strategies for monitoring and responding to changing international business requirements. They include an ongoing process of understanding other cultures as well as systematic, data-driven processes that make international payroll expenses predictable, timely, and error-free.
Typically, a company would have to rely on a variety of payroll companies to fulfill the unique in-country needs of each international employee. Working with these vendors — and entrusting them to execute global payroll within regulations on a monthly, semi-monthly, or possibly weekly basis — is in-and-of-itself a huge mountain to climb for any HR administration, no matter the size. In addition, administering payroll across time zones, while also dealing with language barriers, adds another element of complexity.
Given these challenges, it’s no surprise that companies often outsource part or all of their international payroll services. A global professional employer organization (PEO) can help companies meet their international payroll obligations while maintaining compliance with foreign legal and cultura
We’re in-country for you and your candidate.
Rich global HR service provider partners resource.
Advanced crawler and intelligent identification technology, a global team of expert consultants.