Managing payroll across borders poses challenges for global firms. Timeliness and accuracy become increasingly complex when expanding internationally. Comprehending diverse tax and labor laws is another time-consuming undertaking. However, overcoming them is vital for the success of global expansion.

Companies expanding globally circumvent these challenges by offsetting tasks to a global PEO. Global PEOs manage their international workforce on their clients鈥� behalf. They do so through important HR functions, like payroll and workforce management. 

If you鈥檙e expanding operations internationally, knowing how a global PEO works will help you decide if you need their services, too.

Let鈥檚 cover what a global PEO is, what they do, and their pros and cons. 

Key Takeaways

• A Tool for Compliant Global Expansion Without a Legal Entity: A Global PEO (Professional Employer Organization), which is also known as an Employer of Record (EOR), is a service that acts as the sole legal employer for a company’s international workforce. This allows a business to hire talent in other countries without needing to establish its own foreign legal entity.
• It is Fundamentally Different from a Domestic PEO: It is crucial to understand the distinction between a Global PEO and a standard, domestic PEO. A Global PEO is the sole legal employer of the staff, assuming full legal risk. A domestic PEO, on the other hand, operates on a co-employment model, where it shares the employer status and legal responsibilities with the client company.
• Best Suited for Large-Scale, Multi-Country Expansion: Global PEOs are most effective and valuable for large enterprises that are planning to expand their workforce into multiple international markets at the same time. They provide a streamlined way to manage HR, payroll, and compliance across many different jurisdictions.
• May Not Be the Best Fit for Startups and SMEs: For startups and small to medium-sized businesses (SMEs), a Global PEO can be an expensive and overly complex solution. The article suggests that a standard offshoring partnership is often a more cost-efficient and practical strategy for companies that are expanding into just one new international market at a time.

What is a Global Professional Employer Organization (PEO)?

A global PEO is short for a global professional employer organization. Other names for a global PEO are:

• international PEOs,
• employer on record (EOR),
• and global employer organization (GEO).

A global PEO can help improve your global employment strategies. It enables companies to hire international employees while being legally compliant. With their assistance, you won鈥檛 need to establish a foreign legal entity to start hiring.

Global PEOs don鈥檛 only help with recruitment. They also oversee ongoing HR functions you need to manage your international team. 

Some of the global professional employer organization services include:

• Client and employee data protection
• Employee benefits packages
• Employee contracts, onboarding, and offboarding
• Employee engagement and management
• Global mobility services
• International payroll management
• Regulatory compliance
• Tax compliance
• Talent solutions

Sometimes, businesses interchange global PEOs with other employment mobility services. However, they are not all the same. So let鈥檚 discuss the differences between a global PEO and other employer organizations.

What is the difference between Global PEO vs. PEO?

While the two might sound similar, a global PEO differs from a professional employer organization or PEO (also known as a domestic PEO).

A PEO goes into a co-employer relationship with their clients. Co-employment means they share employer status, legal responsibilities, HR functions, and risks with their clients. PEOs can hire employees from countries where they have a legal entity.

On the other hand, a global PEO is the legal employer of the international team of their clients. A global PEO does all employer responsibilities for their staff. They also take legal risks away from their clients.

What is the difference between Global PEO vs. Global EOR?

Global EOR stands for global employer of record.

A global EOR and a standard EOR do the same thing. A global EOR is the legal employer of the employees in the countries where they have a legal entity. In this case, they鈥檙e the same as a global PEO.

In short: Global PEO = Global EOR/EOR.

But a standard PEO 鈮� Global EOR/EOR.

Is there a difference between an offshore company and a Global PEO?

Offshoring companies offer similar services to global PEOs.

They build an offshore staff for you. They also manage HR functions and payroll services on your behalf. Reputable offshore companies provide data security and protect you from legal complications and risks, too.

Their differences lie in the employer’s status.

Offshore companies are more similar to a standard PEO. Hiring an offshore company means you are both co-employers.

One difference it can have with offshore companies would be legal services. Some offshore companies can also offer robust legal protection for their clients.

Know more about how offshore companies work here.

What is the difference between a Global PEO vs. a Temp Agency?

A global PEO offers long-term relationships with its clients.

A temp agency is only responsible for recruiting and hiring temporary staff. Once recruitment is over, you鈥檒l no longer need the temp agency鈥檚 services.

Table 1: Differences Between Global PEO, PEO, Global EOR, Offshore Companies, and Temp Services

A global PEO provides HR services like many other employer services. However, its difference lies in its service depth, legal compliance, and legal employer status.

7 Advantages of Having a Global PEO

Working with a global PEO can be beneficial to your business鈥� growth. Here are eight benefits of an international professional employer organization to help you decide if their advantages can fill gaps in your growth strategies.

Faster Global Expansion

Tapping into a global PEO鈥檚 international network can speed up the establishment of a workforce in several countries.

An example of how they can speed up your expansion is through their pre-established human resources systems. You can skip the steps of establishing a legal entity, recruiting, and payroll processes. Your global PEO can handle that for you.

Legal Compliance for Multinational Regulations

Keeping track of overseas regulations is complicated. Managing multinational regulations and ensuring compliance for all countries is a step up in complexity. 

With a global PEO, you have a partner company that manages and follows the regulations of the countries where you operate. You reduce the risk of misinterpreting the local regulations. This avoids the risk of poor compliance and compromising your continued operations.

Connect With A Global Talent Pool

Korn Ferry predicts that by 2030, 85 million jobs will remain unfilled. Given the continued talent shortage, adopting flexible recruitment strategies鈥攍ike working with a global PEO in HR鈥攊s essential.

Global PEOs already have a pre-established network of global talent. You can reduce the time to hire for any unfilled roles. With a faster time to hire, you reduce recruitment costs, too.

Streamlined Cross-Border Payments

One of the most complicated HR functions with global expansion is cross-border payments.

Each country has its employee compensation regulations that you have to follow. 

You also want to ensure timely payments for your employees. That way, employees stay engaged, leading to better work performance.

You can avoid payment delays with a global PEO for payroll.

They have the expertise and payroll systems that expedite timely employee payments. They also ensure pay compliance with tax regulations based on the employee鈥檚 jurisdiction.

Improved Global Workforce Management

Both your offshore and internal teams benefit from your partnership with a global PEO.

Focusing on core competencies is key to maximizing employee productivity and efficiency.  By partnering with a global PEO, your internal HR team won鈥檛 have to execute both domestic and international HR functions. Instead, they can coordinate with the global PEO, reducing HR process complexity for both teams.

Strengthened Data Security

A trusted global PEO knows how to manage your business data and your employees鈥� data.

Most of their work involves building and working with remote teams. Since they鈥檙e a thoroughfare of data between you and your remote employees, ensuring they are GDPR compliant is crucial to your data security.

Related: Protect your remote teams with these cybersecurity protocols.

Availability of Legal Protection

One of the advantages of working with a global professional employer organization is legal protection. Many employer organizations don鈥檛 have robust legal risk protection for clients.

As the legal employer of your international team, a global PEO will shoulder legal responsibility for your employees.

Trusted global PEOs also keep you legally compliant overall. They have an in-house team responsible for legal compliance. They also track changes in labor and tax laws to ensure your continued conformity to them.

Table 2: 7 Advantages of Working With a Global PEO

The benefits of global PEOs range from faster expansion to better global workforce management. Thus, if you work with the right global PEO, you can gain these benefits for your company, too.

4 Disadvantages of Having a Global PEO

While global PEO has its benefits, it also has its drawbacks. Let鈥檚 discuss these cons, so you can accurately weigh if global PEOs fit your business needs.

Ineffective Use of the Global PEO

A global PEO doesn鈥檛 mean that everything is smooth sailing for your expansion efforts.

Some companies work with a global PEO without a formal expansion plan into emerging markets.

The better approach is to create a global expansion strategy with global PEOs being one phase in it. That way, you can plan the best timing to hire a global PEO. It鈥檒l also help you decide to what extent you want its involvement in your expansion.

Slower Conflict Resolution

Global PEOs work with multiple clients and manage multinational workforces simultaneously. Thus, if you encounter an issue with their approach to employee management and engagement, it can take a while before you get a response.

Given the scale of clients they work with, it鈥檚 harder to get a personalized approach from them. That鈥檚 unless you pay additional fees.

Less Flexibility in Employee Engagement

You won鈥檛 have as much control over the choice of benefit providers for your employees. That鈥檚 because global PEOs have a set of benefits providers they have pre-established connections with. Thus, you鈥檒l have less flexibility on employee engagement tactics for your overseas teams.

More Expensive For Startups

Global professional employer organizations work better for larger enterprises. That鈥檚 because a global PEO鈥檚 expertise is working with staff from multiple countries simultaneously.

When you鈥檙e a startup, you don鈥檛 need to scale that drastically yet. With most startup failures being caused by financial issues, wise resource management is essential. Thus, spending resources on a global PEO is not the most cost-efficient approach.

Standard PEOs and offshore companies are the better choice in this case.

They provide the same services for you. They achieve that at a lower scale and cost, too. Thus, they鈥檙e a more resourceful approach to global expansion.

Related: Are you a startup? Discover if offshoring is good for your small business here.

Table 3: 4 Disadvantages of Working With a Global PEO

When Should You Use a Global PEO?

Based on the pros and cons, you can determine when a global professional employer organization is more suitable for you.

For startups and medium-sized companies, a global PEO should be carefully considered. If your fiscal capacity for global expansion is sound, then global PEOs can be a less risky investment. However, they鈥檙e not your only avenue to international growth.

Standard PEOs or offshoring to countries like the Philippines are more cost-efficient. These savings matter more to the bottom line of businesses with lean teams and limited resources. However, businesses of all sizes can benefit from improved cost efficiency.

See how offshoring works for Servantex, a workforce management service in the US.

Its goal was to build its first customer service center in the Philippines. They started only with five employees. Eventually, offshoring led to a 6x growth in their team. Plus, it gained 79% of cost savings per role hired.

According to Jane Hamilton, Chief Administrative Officer of Servantex, they gained more than just cost savings: 鈥淲e were able to scale our internal services without putting a risk that we might have to lay people off again if it ended up being temporary.鈥�

Unlike startups and mid-sized companies, large enterprises can benefit from both global PEOs and offshore companies. They can use the entire roster of HR functions that global PEOs provide. They also can expand to multiple new markets simultaneously.

Global PEOs are best for an enterprise expanding to multiple global markets simultaneously. Offshoring is more efficient if they鈥檙e targeting one international market at a time.

How Much Does It Cost to Hire a Global PEO?

There is no standardized cost to a global PEO. It depends on which global PEO you work with.

Some charge a package deal with specific employee numbers and a limited set of services. Others charge per employee.

The factors that influence the cost of a global PEO include the following:

• Functionalities you need
• Types of employment contract (e.x, Contractual vs. Employee)
• Job roles
• Package pricing vs. bespoke solutions
• Length of engagement
• Staff compensation
• Management fees
• Other additional amenities

The simplest pricing strategy of global PEOs is a fixed monthly fee per employee, similar to that of EORs and offshoring companies. However, like offshore companies, the pricing changes based on the services you avail.

Recruiting a global team is one service. You can add other services like business enablement and payroll management. The monthly cost per head will then scale up or down based on the services you use.

Related: Compare the salaries of remote employees. Calculate the hiring costs of offshore talents transparently.

Building A Multinational Workforce With Expert Guidance: From Global PEOs to Offshoring

Global PEOs simplify global expansion for large companies. However, global professional employment organization companies are not the simplest or the most cost-efficient global expansion strategy for startups and mid-level businesses.

If you run a small to medium-sized business, offshoring companies make global expansion more attainable. They provide similar legal services to global PEOs. They also hire qualified offshore employees on your behalf, enabling you to scale your international operations. Offshore companies will source, onboard, and provide continuous HR support to your global team.
Once your company can scale operations internationally, working with a reputable offshore company will propel your global growth. Through offshoring, you too can reap benefits like 71% cost savings in salary costs while expanding globally. That way, you can cushion other global expansion aspects, like strategy and product development.

Frequently Asked Questions

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A 2020 Gallup study has shown that engaged employees lead to better overall business performance. This is easier said than done, though, as it may be challenging to boost morale, especially during an economic downturn.

Poorly motivated employees lead to a high attrition rate. Apart from the struggle to find the right talent, you鈥檒l have to spend three to four times the position鈥檚 salary to fill it. Many managers and leaders face difficulties finding, hiring, and building a reliable team, causing burnout. The global talent shortage worsens this reality that leaders have to resolve.

Are you ready to motivate your employees to achieve business goals faster? Here are practical and proven management tips based on the predominant work values of Filipino workers. These strategies aim to improve your leadership style and increase your team鈥檚 performance.

Key Takeaways

• Adapt Your Management Style to Filipino Culture: The key to successfully managing a remote Filipino team is to adapt your leadership approach to their cultural values. This includes avoiding micromanagement, providing clear instructions, and adjusting your communication style to be more empathetic and indirect.
• Communication Requires Nuance and Empathy: Direct, blunt Western feedback can be counterproductive. Filipino professionals respond better to an indirect and empathic approach. When giving constructive feedback, it is critical to deliver it privately to respect the cultural importance of “saving face.”
• Trust and Reliability are Foundational: Building a high-performing team requires establishing a foundation of trust. This is achieved through practical, consistent actions like paying salaries on time, as Filipino employees rely heavily on the semi-monthly schedule, and setting precise, mutually agreed-upon work schedules.
• Motivation is Driven by Recognition and Collaboration: Beyond basic management, keeping a Filipino team motivated is key to retention. They are highly motivated by sincere recognition for their hard work, being entrusted with challenging tasks in a collaborative environment, and feeling that their personal values align with the company’s mission.

Managing Your Filipino Remote Employees

Revisit your management style and align it with Filipino values that resonate with your employees. This entails immersing yourself in the Filipino culture along with its nuances. As a manager, it is also an opportunity for you to promote inclusivity in the workplace.

Avoid Micromanaging

Micromanagers deal with less confident and demotivated team members, according to a survey by Gartner. Know what, when, why, and how to delegate. Your energy and time are better channeled to growth strategies and your business鈥檚 core competencies.

Implementing a thorough onboarding process can increase employee confidence. This process requires constant feedback until the employee and the company have streamlined business operations together.

Have a Precise Work Schedule

A common misconception of Filipino workers is their tardiness. However, well-communicated work schedules can prove that Filipino workers aren鈥檛 habitually late.

Make sure that the work schedule is something you discussed and agreed on beforehand. Ideally, you must include it in the job description and the contract. Using an open-access collaborative work calendar is a great tool for coordination.

Adjust Your Communication Style

Western communication is direct. However, Filipinos often use indirect and empathic communication styles. This shouldn鈥檛 be confused with being soft or weak.

While direct communication may be quite an unfamiliar department, that doesn鈥檛 mean they aren鈥檛 open to feedback. 

Tip: The 鈥渟andwich method鈥� is a tried and tested communication approach for giving feedback. Start with something they鈥檙e doing right, then give your constructive feedback. End it with another compliment and ask for a timeline for the improvement you鈥檙e looking for.

This may take up your precious time, so consider collaborating with an offshore service provider. This partnership could focus on streamlining communication with your Filipino remote team. They can also manage other HR tasks on your behalf and keep you compliant.

See also: Find, Hire, and Build Your Remote Team in the Philippines

Provide Clear Instructions

Having clear directives for your remote Filipino employees improves output quality. By providing your employees with clear instructions, they鈥檒l know exactly what they need to deliver, leading to better performance and results.

Share your standard operating procedures (SOPs) with your new hires or establish new ones with them during onboarding. A poor onboarding process makes your remote workers feel undertrained, leading to dissatisfaction. 

Pay on Time

Filipino employees rely on timely pay to financially support their families and pay their bills. Billing due dates usually fall during payday as well.

If you鈥檙e working with an offshore company, there should be assurance that your employees are getting their payments on time. You might be making timely payments on your end, but the delays might come from the offshore company. Working with a reputable offshore company is crucial to top-notch payroll management.

Related: How Offshore Staffing Works in the Philippines

Provide Health and Wellness Programs

Companies with holistically healthy employees project 11% more annual profit growth than their counterparts, according to Metlife鈥檚 Employee Benefit Trends Study. This is why health and wellness programs benefit you and your employees.

Some examples of health and wellness programs are:

• Free gym memberships
• Access to online fitness classes
• Meditation app subscriptions
• Counseling programs

By providing health and wellness programs to your remote Filipino workers, they can live healthier and feel more cared for.

To recap, here are the action items you can apply in your workflow as a leader.

Keeping the Philippines鈥� Remote Workers Motivated

Having a management strategy for your Filipino workers is crucial to quality control. However, focusing only on management and forgoing engagement leads to motivation loss. To avoid that, here鈥檚 how to keep the motivations of Filipino employees high.

Create a Collaborative Environment

Companies hiring Filipino workers must know that Filipinos enjoy a collaborative environment in their workplace. They want to know that their company relies on them for more challenging tasks.

An example is the case of Claudine Hidalgo, a remote Events Manager for KE Creative Events. She felt accomplished after managing a major conference with over 300 delegates. 

鈥淚t was an honor for me to be entrusted with this project for a long-time client,鈥� she says. 鈥淢y boss and the delegates were very happy with what I produced. That in itself is very rewarding for me.鈥�

Connect Through Shared Core Values

Another way to engage your Filipino workers is by ensuring you have shared values. When an employee works for a business with aligned values, they can find fulfillment in their work.

This situation applies to the case of Ni帽a Azares who鈥檚 a project manager for The LOTE Agency, a multicultural agency from Australia. She enthusiastically shares that she鈥檚 鈥�…proud of the meaningful work we do for the multicultural community.鈥� She also mentions that being able to work with people from different cultures is the part of her work that she enjoys the most.

Related: What We Stand For At 麻豆原创

Recognize Their Hard Work

Hard work, resilience, and resourcefulness are highly valued Filipino cultural traits among Filipino workers. If they are recognized for the value they bring, it encourages them. Simple recognition amplifies their desire to engage with the work they do.

You can send congratulatory emails after finishing a tough project. Providing bonuses at the end of the year is always welcome. You can also highlight the efforts of an employee publicly during meetings. These are a few ways you can show recognition. 

Tip: Recognitions need not be fancy, as Filipinos usually read between the lines, too. Keep it short and simple!

Encourage Employees To Take Breaks

When your employees take a day off, it鈥檚 a chance to recalibrate with family and friends. They then come back to work more energized. If you see that an employee hasn鈥檛 taken their vacation or mandated leave for a long time, remind them to take it.

Encouraging breaks shouldn鈥檛 only apply to leaves. Tip: Encourage employees to take their lunch breaks on time, too. A study found that employees who take their lunch on time have more work-life balance.

Avoid Public Reprimands

Saving face is a Filipino cultural trait that you should remember when giving feedback.

If you need to reproach your Filipino worker, do so privately and calmly. Constructive criticism made privately avoids embarrassment. It鈥檚 a chance to improve their performance without causing distress. This nuance is rooted in how they value belongingness, too.

To recap, here are the action items you can integrate with your leadership approach:

Final Thoughts

Knowing the best approaches to managing and engaging your remote Filipino employees will optimize your business operations. While adjusting to the Philippine work culture takes time and effort, adapting these creates long-term partnerships.

Improve the management and engagement of your remote Filipino workers through a reliable local offshore service provider. The right offshoring company engages with employees on your behalf while encouraging growth for your business.

Frequently Asked Questions

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