When crossing borders is not an option, Professional Employer Organization can be a vital resource.
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COVID-19 has a devastating effect on global business, with experts saying this will be the most significant economic collapse in decades. The travel industry, in particular, was devastated. More than 100 countries have restricted travel regulations, with more than one third closing their borders completely. Countries with borders that are only partially closed limit the entry of citizens and people with a residence permit and have stopped processing visas, including work visas, for anyone who is not yet in the country.
For international companies operating in various countries, travel restrictions limit mobility and make it more difficult to manage staff and operations across borders. The situation is not likely to change anytime soon. Experts predict that there may be several waves of infection and that travel restrictions and economic impacts will last to some extent. With this in mind, companies that manage cross-border processes, such as recruiting and developing businesses, must rely on local partners.
For businesses that expand operations abroad, there are two options for recruiting local workers. Some companies carry out their own legal and recruitment processes, formally establish companies in the country and comply with local labor regulations. Other companies choose to work with Professional Employer Organizations (PEO) to help manage these processes.
What is PEO?
PEO is a company that provides services to companies without an established presence at that location. PEOs function as intermediaries between companies and employees, manage the search and recruitment process, comply with labor regulations, provide benefits, and register employees in their own companies. Effectively, the company outsourced all HR tasks to PEO but controlled the daily management of employees and their work.
Even during the best times, many companies choose to work with PEOs, but now, with travel restrictions that limit people to their own countries, partnering with local entities is an attractive solution for companies to continue their work internationally. Following are some of the benefits of partnering with PEO.
Avoid the Bureaucracy Process
By partnering with PEOs, companies can start operating in countries without becoming a legal entity established in that country. The process of registering companies legally in any country is usually quite involved, requires extensive documentation, appointment and verification, and is especially limited now as a result of the COVID-19 situation. Avoiding this process and working with PEOs allows companies to jump right into their operations in the country, whether to get new clients or start working with established connections.
Many countries also have minimum income requirements for companies to legally register and recruit foreign employees, which may be a barrier for small or medium-sized companies that do not meet these requirements. As it becomes increasingly difficult to gather all the necessary documents and complete the merger process, more companies will turn to PEOs, which allows them to start expanding their operations internationally and overcome those limitations. Often, companies will work with PEOs to conduct business in a country before becoming a legally established entity.
Improve the Recruitment Process
The purpose of PEOs is to provide their clients with in-depth knowledge of the local labor market. Working with PEOs helps companies get the best results throughout the recruitment and job cycle. This can be very valuable when looking for senior employees who will help manage the local branch. PEOs can help find and recruit great candidates faster than the company itself.
It may be difficult to recruit employees in new places, but with the knowledge of the recruitment market and local network, PEO can find more high-quality candidates for the best possible company. After the decision is made, the PEO helps the company ensure compliance with local recruitment regulations.
Focus on Core Business
Employees managed by PEO are registered as companies with the company name PEO. Even after recruitment, PEOs are responsible for administrative tasks such as providing employee benefits and managing taxes. This leaves companies free to focus entirely on their core business, investing time in training and managing their employees rather than on administrative tasks and ensuring compliance. Each country has a different set of requirements, so for companies that work in many countries, working with PEOs can significantly improve operational efficiency by taking over administrative tasks.
Use Local Partners to Maintain Operations
When the company is ready to start working with PEOs, there are a number of steps to follow. First, it is important to evaluate the geographical needs of the company and look for PEOs operating in these locations. Examine whether PEO has the experience needed to benefit businesses in that location and the right language skills to communicate clearly. When signing contracts with local partners, it is important to clarify the responsibilities and duties expected of PEOs, to avoid excessive work and therefore the company maintains control over employee management.
The main benefit of partnering with a PEO is that it allows companies to work internationally to maintain and grow their global operations quickly and with local guidance. The global situation resulting from COVID-19 has created an increasing need for businesses to work with local partners, a trend that will continue in the future.
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