Today’s business world is one in which there is greater mobility (both real and virtual) than ever before, so that both start-ups and established enterprises have far greater capacity to operate in global markets beyond their national borders.
This has produced no end of significant outcomes for new and emerging businesses, not least the fact that world class R&D is increasingly accessible regardless of where you might be based, and that start-ups in their initial phase are not excluded from being able to engage in exciting and innovative staff, such as sales managers, from a global talent pool.
However, while in some ways it is an increasingly straightforward proposition to expand operations into new markets, hiring managers from outside your home country to be a part of your expansion and growth does nevertheless present some challenges.
And while it is undoubtedly easier than it was, even in the relatively recent past, no matter how quickly global business is evolving, ensuring compliance regarding hiring and managing staff can require significant time and resources, and can in some circumstances be a barrier to entry.
Overseas hiring for start-ups
One of the biggest challenges facing start-ups when it comes to hiring overseas talent revolves around HR. Many enterprises in the start-up, growth, or expansion phase don’t have the resources to take on an HR team in a foreign country, and this can therefore mean difficulties in meeting and maintaining compliance with regard to worker classification, pay and conditions, taxation, entitlements, and so on.
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Without local knowledge and expertise, understanding the labour laws of jurisdictions in which you don’t have experience can be challenging. Under these circumstances, it can be easy to make mistakes and unwittingly incur penalties for infractions, which can be severe.
So, the question is, how does a start-up that wants to operate and engage talent in another country do so in a way that ensures compliance with local legislation, but is nevertheless cost-effective and can be achieved without having to set up a local legal entity or a foreign subsidiary?
Why working with a global PEO can be the solution for your start-up
Working with a professional employer organization (PEO) can be a highly efficient and cost-effective solution for start-ups and other enterprises looking to hire managers and team members in foreign countries. It removes the need to set up a legal entity, and/or to engage a HR team in the new location to manage the staff there.
The role of an international PEO is essentially to provide support and services for businesses of all sizes that better enable them to manage risk and ensure compliance when hiring foreign workers.
It allows a start-up to outsource the functions normally undertaken by an in-house HR department, such as finding and hiring staff, ensuring that they are properly classified with regard to taxation and other deductions, and managing compliance with local labor laws in terms of leave, entitlements, termination, etc. Further significant functions include the ongoing management of payroll and employee records.
Essentially, an international PEO becomes an employer of record on your behalf, enabling you to access and hire global talent, while saving you the time and expense of establishing a legal entity in that location.
At the same time, however, while the PEO assumes responsibility for the administration of your overseas workforce, you nevertheless retain complete control over how they operate, and continue to oversee teams and their workload in the same way you would if they were based in your home country.
A further advantage is that it is a quick and straightforward process to engage the services of a PEO (far simpler than setting up a legal entity), and likewise relatively easy to end the relationship should changing circumstances require it.
When should you engage the services of a PEO?
An international PEO is also the ideal solution in the initial stages of an expansion when you might be testing the waters in a new market.
In a worst-case scenario where an expansion (or an individual employee) doesn’t work out, the termination process is handled entirely by the PEO, who has the responsibility to ensure that all financial and legal requirements are met.
This eliminates one of the key risks and expenses that often prevents start-ups from taking on workers from abroad, in that you are not left with excessive financial or legal obligations should you not be able to continue employing them.
Working with a PEO is also especially advantageous if you operate in multiple jurisdictions simultaneously. No two countries have precisely the same labour laws in place, so trying to stay on top of these, while at the same time managing global operations, can be difficult.
However, as ensuring compliance is one of the key functions of a PEO, this aspect remains its responsibility, thus relieving you of this burden so that you can get on with running and growing your business.