Expanding your business overseas is far from a walk in the park.
In fact, between figuring out how best to expand, researching and complying with the numerous local laws as well as handling local employment steps amongst many other things, expansion remains a considerable challenge for most businesses looking to enter a new market.
The good news is that it doesn’t need to be such a hassle! Indeed, when partnering with a local Professional Employer Organisation (PEO), you can expand quicker and more easily, whilst reducing costs and risk.
Sounds too good to be true? Let us explain…
Whether you’re a small business with limited HR resources or a multinational company looking to explore a new market more efficiently, partnering with a PEO gives you the opportunity to expand by outsourcing all of your employer responsibilities and liabilities to a third party. This means that you do not need to set up a local legal entity to hire staff.
Instead, a PEO partner legally acts as the employer of record (EOR) so that you can access a global workforce, without having to set up a complex global infrastructure. This gives you the chance to explore a new market whilst concentrating your efforts on your core competencies.
Whilst this option offers a lot more flexibility to businesses looking to cross borders, it does still require you to trust a 3rd party partner. And at the end of the day, like any other service provider, not all PEOs are created equal. Since this choice will have a huge impact on your business expansion’s success, choosing wisely is crucial. So how can one sort through the noise?
Not to worry! We have compiled a series of key questions to ask yourself when looking to engage a PEO partner so as to hone in on what is most important to your business. Ready to start? Let’s dive right in…
What are their domains of expertise?
When starting out, businesses tend to only think about their immediate needs, such as HR & payroll. But did you know that some PEOs also offer complimentary services such as recruitment and / or immigration assistance? That’s right, no need to go to a separate talent acquisition agency, law firm or immigration agent when you can outsource the entire employment & global mobility lifecycle to the same partner!
Not only is it easier and more efficient to have just 1 point of contact, it also tends to be more cost effective in the long-run. Win-win!
On another note, say business is going well and you wish to set up a legal entity in your host country down the line. Wouldn’t it be easier working with a partner you trust and who understands your business rather than spending more time and money finding someone new?
Whilst most PEOs don’t have company incorporation & ongoing compliance expertise, a select few do. This effectively means that should you decide to set up long-term, you could save yourself a lot of time, money and hassle by partnering with a more holistic PEO from the get-go!
All in all, when choosing a partner to explore a new market, think ahead. It’s not always easy to plan, but opting for a provider that has a proven track record and offers an array of services will make your life easier in the long-run.
Do they have a local presence or use partners?
If you’ve already done your research of top Global PEOs, you’ll most likely have noticed that many (if not all) flaunt their international presence as a means to convince you to sign with them.
This is of course incredibly appealing as it’s definitely preferable to work with one partner across different countries rather than having to deal with several service providers.
However, what most don’t tell you from the get-go is that they don’t in fact have a local presence themselves across all markets, but instead go through local partners to serve you. This effectively means that the Global PEO is acting as a bridge between you and the local employer of record.
Whilst this is in no way problematic, it is still important for you to know how the company works as it may impact your contract with them as well as the efficiency of their customer support.
If you are considering hiring the services of an EOR partner, it’s worth asking if they subcontract their services, and if so, where? They should be able to easily give you a breakdown of which countries they provide services in-house vs through a partner.
Should they confirm that they use a local partner, we would also recommend you ask them what their selection process is (effectively how do they choose their partners) and how long they’ve worked with them for. This should give you a lot more insight so as to make a more informed decision.
How will they onboard & support my local employee(s)?
Whether the PEO you choose has their own local entity or works with a partner, you’ll want to know how they handle their customer service.
Given that the provider you choose will be one of your employee’s main points of contact, you want to make sure you share the same values and are aware of the way situations will be handled.
Questions we recommend asking include but aren’t limited to:
– Who will our account manager be?
– Where will this person be based?
– What is their experience?
– Will this person be the same point of contact for our staff?
Since onboarding is such a crucial step in the hiring process, it’s also important to be aware of how that will be organised, what kind of information will be shared and how. For instance, it’s crucial to ensure your employee(s) understand the different roles you and your PEO have so as to avoid any miscommunication down the line.
How do they ensure data privacy & security?
In today’s day and age, data security is paramount. In fact, in an increasingly digitised world, businesses hold a phenomenal amount of sensitive personal data, both from clients / customers as well as employees.
As such, ensuring that the provider you choose has systems and processes in place to handle sensitive data is crucial, not only for your people but also for your business.
If you’re looking to expand to Europe, you’ll be glad to know that PEOs with a local presence there are bound by “the General Data Protection Regulation” (GDPR), which came into effect in 2016. But what about other countries?
As part of the selection process, we recommend inquiring about the ways your top PEO choices follow data security requirements for their clients, as well as for employees, in each country. Similarly to partnership agreements, PEOs should be able to answer these questions with complete transparency. If they don’t, you should consider this a red flag.
What pricing model do they use?
PEO providers either use a flat fee model (which is a fixed rate) or charge a percentage of the employee’s total employment cost. Depending on your business model and what you’re after, one may be more convenient than the other.
A flat fee model will enable you to plan and budget accordingly, whilst the 2nd option will be dependent on the number of staff you on-hire as well as their salaries.
Although it’s natural to assume a flat fee is cheaper, don’t be fooled as it could involve extra or additional costs (what we call “hidden costs.”) In order to prevent nasty surprises, we recommend asking the following when discussing pricing:
– What are we paying for exactly? What is included in the price?
– Are there any onboarding or set-up fees?
– Are there any transfer or exit fees?
Are they able to provide a referral?
Who better to testify to the quality of a company’s service than their actual clients? In fact, similarly to online reviews for products, asking for a referral is quickly becoming common practice when choosing a 3rd party service provider or outsourcing any business component.
Although most companies will have a “testimonial” or “success story” section on their website, we recommend digging deeper and asking your top PEO choices for a few client references that you could reach out to directly.
After all, what could be better than asking all of your burning questions to someone who has gone through it before?
All in all, when it comes to global expansion, you often find that you don’t know what you don’t know. Choosing to work with a local PEO to explore a new market is a smart decision because they have the local expertise to ensure your business remains compliant whilst also taking care of your best asset, your people.
Unfortunately though, due to the intricate nature of such a partnership, choosing a substandard PEO can be detrimental to your business’ expansion. Like most things in life, setting the right foundations from the beginning is often what will lead to sustainable growth and outstanding results in the long run. As such, it’s important to take the time to ask the appropriate questions so as to make an informed decision.
At the end of the day, the PEO you choose should warn you on the do’s and don’ts as well as guide you along the way. If they’re transparent in their communication, take the time to answer your questions, are knowledgeable in their responses as well as come recommended by past clients, you can trust that they’ll be a good choice.