PEOs, short for Professional Employer Organizations, have been around for over six decades, evolving from a domestic solution for small and medium-sized businesses into a widely embraced strategy for global business expansion, known as international PEO. In a nutshell, PEOs provide comprehensive HR outsourcing services to client businesses, such as payroll, benefits, regulatory compliance, and risk management.

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Read on to find out when and why PEOs emerged, what international PEOs are and how the rise of remote work impacted their operational model, why opting for a PEO may be a better idea than establishing a foreign entity, and how to tell if a business needs a PEO provider.

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How long have PEO services been around?

The history of PEOs dates back to the 1960s. They emerged in the USA in response to the need for small and medium-sized businesses to manage rising workers’ compensation insurance costs. PEOs did so by pooling multiple businesses together to negotiate better insurance rates. In the 1970s and 80s, with the industry’s growing popularity, the scope of PEO services expanded to payroll processing, benefits administration, and regulatory compliance.

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The co-employment model, where the PEO and the client company share employer responsibilities, was adopted in the 1990s, providing small and medium-sized businesses with access to even more extensive HR services, expertise, and benefits that were typically available only to larger companies​. It was during this time that popularity of the solution reached beyond the United States, and PEO services began to gain traction in countries such as Canada, Australia, and the United Kingdom.

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How do globalization and the rise of remote work affect PEOs?

With the rise of the global economy and the increasing need for companies to employ workers in multiple countries, PEOs were encouraged to broaden their service range even further to help client businesses navigate the complexities of international employment laws, payroll, and benefits. Moreover, PEOs faced competition from a more recent development known as Employer of Record (EOR), which offers similar services on a global scale but functions under a different model, employing and assuming various responsibilities on behalf of client companies. This is why international PEO became a segment of its own, catering to businesses that operate across multiple countries.

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With the ongoing demand for workplace mobility, borderless business collaboration, and flexible employment solutions, it is reasonable to predict that popularity of international PEO services will continue to increase.

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Are PEOs and international PEOs the same thing?

As it becomes clear from the previous paragraph, PEOs and international PEOs (also known as global PEOs) offer similar services on a different scale. While PEOs primarily cater to businesses within a single country and manage domestic HR tasks such as payroll, benefits, and regulatory compliance, international/global PEOs enable businesses to operate overseas and manage consequent tasks such as international payroll, benefits administration, and compliance with local labor laws. Both PEOs and international/global PEOs function as co-employers and share responsibilities with client companies.

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What do international PEO services include?

International/global PEO companies provide a broad range of services that fuel overseas operations for client businesses. Typically, international/global PEO services include:

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• global employment and mobility support (work permits, visa processing, and other immigration-related services)
• administrative support (contracts, employee records, and other HR-related documents)
• global workforce management (employee onboarding, wages payments and payslips, leave and PTO management, employee benefits management, and tax administration)
• compliance and risk management (compliance with local labor laws and regulations, mitigation of legal and other risks related to international employment)

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The best international PEO providers ensure consistent and streamlined communication with client companies, offer ongoing feedback on operations, and share expertise and best practices relevant to specific locations and contexts.

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Why choose international PEO services instead of setting up a foreign subsidiary?

Companies seeking to expand into overseas markets face the choice between the conventional procedure of setting up a foreign subsidiary and alternative solutions like international/global PEO services, EOR, or umbrella services. While each of these services has its own specifics and benefits, they are all known to be time- and cost-efficient compared to opening up a foreign branch. Common advantages offered by international PEOs include:

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• A swift entry into a foreign market through the co-employment model without costly registration procedures and associated fees. For instance, at Acvian we are able to onboard new hires for client companies within 24 hours, while it may take them up to 6 months to get started with a foreign entity.
• Cost optimization via access to international talent pools. PEO services enable clients to hire locals and expats alike, finding highly qualified specialists in/relocating them to countries with lower employer taxes and more attractive conditions.
• Advanced local expertise and comprehensive support for in-house HR teams. A PEO eliminates the need for 360-degree internal coordination and supervision of the company’s local presence, giving access to profound knowledge of labor legislation, administrative procedures, and tax administration in a designated country. It takes over international payroll and benefits administration and guarantees compliance.

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To instantly calculate payroll costs in the country of your interest, we recommend using the Payroll Estimator tool.

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When is an international PEO right for a business?

A company will benefit the most from international PEO services if:

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• it intends to enter a foreign market in a speedy and cost-efficient way
• it needs support with tasks related to international HR and compliance, such as payroll, benefits, and tax administration, and wants to avoid legal and administrative risks related to overseas operations
• It is a small or medium-sized business that wants to gain access to expertise and benefits typically available to bigger competitors

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As a PEO provider, Acvian allows your business to grow fast and risk-free. You can leave administrative steps and legal compliance related to overseas employment to us and focus on core activities without the red tape. To start your international expansion with PEO, contact us via submitting your request or scheduling an immediate meeting.