Tag: professional employment organization

What Are the Pros and Cons of PEOs?

Should you use a PEO for your business? Right now, there are 487 private employment organizations in the United States alone, serving millions of employees.

When it comes time to decide if using a PEO is right for your business, it’s wise to consider both the pros and cons of such a service.

Below we explain some of the top pros and cons of using PEOs to help you with your decision.

What is a PEO?

A PEO, or a professional employer organization, is a type of HR outsourcing that is known as co-employment.

Businesses work together with a PEO so that each is responsible for different tasks. The PEO will take care of administrative tasks like payroll and benefits, leaving the business to focus on more important decisions.

Some PEOs also offer strategic services but no PEO organization operates entirely alike. Each one will have its mix of offerings, benefits, and drawbacks, which we will touch on in the following sections.

Pros

PEOs are a quickly growing industry. PEO employment growth is 16 times higher than the rest of the US economy since 2013.

One reason for this is the numerous benefits that a PEO brings to a business. Below are just a few of the top benefits you can expect to experience when using a PEO.

Affordable Benefits

PEOs are known for giving employees the best benefits possible without costing the business significant cost increases.

A PEO will work with insurance companies and benefits providers to negotiate benefits and insurance policies for the group.

Since PEOs often work with upwards of thousands of employees, they can leverage their massive buying power to obtain better deals from service providers.

Employees at the small- to mid-sized companies partnered with the PEO will have access to a greater range of benefits, from health care to retirement plans.

Shared Liability

Businesses that enter into a partnership with a PEO are entering a co-employment relationship. The PEO will split the legal responsibilities of the employee.

Should a lawsuit occur or a problem arise with an employee, both the PEO and the company would have to take steps to mitigate the situation.

Frees up Resources

Using a PEO will save you both time and reduce your bottom line. You’ll be able to use these newfound resources to focus on growing and developing your company.

Costs saved from a PEO could allow you to hire employees or give better training to new employees. You can focus on giving more value to existing team members while focusing your efforts on larger goals.

Better Recruiting Position

With all of your additional benefits, you will have positioned your business as a more competitive option for candidates.

Those looking for a closer work environment with fewer employees won’t have to sacrifice the benefits that they may have only been able to get from working at a larger company – they will truly be able to get the best of both worlds.

Cons

PEOs are great opportunities to outsource some of their more mundane tasks and focus on building employee relationships and growing their business.

However, PEO services are not perfect. You should be aware of potential drawbacks or obstacles you may have to overcome when using a PEO service.

Custom Plans

PEOs are known for providing employees with greater benefits that come at a lower bottom line for companies. Unfortunately, in some cases, this may come at the cost of allowing employees to have individualized plans.

PEOs work with insurance companies and benefits providers to find group solutions. While the overall cost may be lower, some people may not receive the individual choices that they’d like.

The best solution to combat this is to work with a PEO company that has ample resources and connections and can leverage its expertise to create a dynamic set of benefits that works for as many employees as possible.

Relinquished Control

Company leaders will certainly enjoy that the PEO shares risks and takes some off the burden of the company. However this comes at a cost – the employees are co-employed by the PEO.

This means that you will be relinquishing some of your control as a business owner. 55% of entrepreneurs say their largest motivation for starting a business was so that they could be their boss, so many top executives may have to adjust to the fact that they will no longer be making 100% of the decisions.

Less Access to Information

PEO services take responsibility for tasks like payroll services and employee benefits. When they do this, they gain access to important company data and use it to make decisions.

Once the PEO services have access to the data used for benefits and payroll, the company will have little insight into this information.

In some situations, all communications and transactions will have to go through the PEO, even if it’s a small request that would be easily taken care of if it stayed within the organization.

It’s important to understand that you’ll have to accept some elements of a “hands-off” approach when using a PEO service. The small communications that you could handle before will now be under the purview of the PEO.

Compliance Not Guaranteed

PEOs are responsible for handling your taxes and payroll filing. But if they fail to do this properly, it’s you who is vulnerable to fines or penalties for noncompliance.

When looking for a PEO, make sure to select an organization that does guarantee tax compliance with payroll processing. A compliance guarantee means that the provider will take care of your taxes as the reporting agent on your behalf, as well as be responsible for any fees or fines that occur from their errors.

Using PEOs for Business Growth

PEOs are a great option to consider for your business whether you’re looking to streamline operations or expand your company.

Start your search for PEO services with Bradford Jacobs. Our team of consultants would be happy to discuss how we can meet your business’s needs. Do not hesitate to contact us, and we will be in touch shortly!

7 Major Benefits of Using a PEO Service

Businesses continue to try to answer the age-old question: how is it possible to achieve growth using proven methods?

Enter PEO. Economic analysis shows that PEO employment growth is 16 times higher than the rest of the US economy since 2013.

And this growth translates to businesses: companies in PEO arrangements grow 7-9 percent faster and have lower employee turnover.

What is PEO, and why is it so effective?

Below we’ve created the following guide explaining the benefits of using a PEO service and how it can grow your business.

What Is a PEO?

A professional employer organization (PEO) works with small to mid-sized businesses to give them access to better resources and provide them with more efficient HR functions.

Traditionally, companies would either need to rely on in-house HR or outsource HR completely. With PEO, businesses can automate certain processes while keeping their private information in-house. Meanwhile, they’ll benefit from all of the PEO’s professional services.

A PEO typically specializes in payroll, benefits, HR, and labor compliance services. It will streamline company operations and may even help your company grow faster.

How Does a PEO Work?

PEO’s work by co-employing your employees. The PEO will use your workforce for administrative purposes like paying employees and filing taxes, but you will still have full control over who you hire and the benefits offered to employees.

The PEO will act as the administrative employer, while you act as the worksite employer. This means that they employ your workers on record for the purpose of taxes as you maintain fulfillment authority over your team members.

Each party will have certain responsibilities, but you never lose control of your company’s overall strategy, business operations, or marketing and sales.

7 Benefits of Using PEO Services

Using PEO services will benefit your operations in more ways than one. Below are 7 of the top benefits of using a PEO company.

1. Smoother Payroll

Maintaining smooth payroll operations is necessary for a high-functioning business, but it can be difficult to master. Executing the process seamlessly, from handling withholdings to recording accurate employee hours, is a time-consuming and imperfect process.

A PEO will make your payroll run much more smoothly and reduce accounting costs. PEOs can automate numerous parts of your payroll process, handling important documents like your W-2s, and take care of your withholdings.

2. Better Employee Benefits

PEOs often have thousands, if not, hundreds of thousands, of employees in their system. This gives them leverage with insurance companies and other benefits providers.

Ultimately, they’ll be able to secure the same benefits for your small or mid-sized business that only a large company typically has access to.

Most PEOs are able to offer some combination of these services:

  • Healthcare plans
  • Worksite benefits
  • Mental health support
  • Commuter benefits
  • Life insurance and disability insurance

Companies that may not have been able to offer anything more than basic benefits will be able to provide employees with an array of options thanks to a PEO. This is especially relevant following the Covid-19 pandemic, as a recent survey revealed that 4 out of 5 employees would prefer more benefits over a pay raise.

3. Lawsuits

While every business hopes never to face a lawsuit, sometimes they do happen. A single lawsuit can devastate your business, but working with a PEO will help to minimize damage.

PEOs share some of the liability associated with certain employment-related claims. The PEO will also have numerous experts who can help you mitigate a tense situation.

4. Payroll Compliance

Both federal and state employment laws are constantly changing. If you don’t follow them vigilantly, you’re subject to pay high penalties. More than 40% of small businesses are fined each year for missing payroll taxes, according to data from the IRS.

Staying compliant with taxes and laws is necessary for the healthy operation of your business, but this process takes long hours from your week.

A PEO will help maintain compliance and monitor employee liability, giving you the assurance that your business is meeting law requirements.

Many PEOs assist with areas including payroll compliance, benefits compliance, and out-of-state compliance. Their expertise will allow them to stay on track with regulations in a more timely manner than individual HR employees within your business.

5. Saves Time

Many PEOs assist with areas including payroll compliance, benefits compliance, and out-of-state compliance.

Your HR team is likely spending a significant amount of their time working on mundane tasks from filing paperwork to reading through changing employer-related laws.

Using a PEO will free up the time of your HR team so it can focus on helping you grow your company.

PEOs will work to automate routine tasks like tracking hours for payroll, paying employees, and general employee management.

6. Saves Money

Research from NAPEO shows that the ROI from using a PEO was over 27% in cost savings alone. Each PEO essentially “employs” workers from numerous individual workers, which gives them an advantage when negotiating with insurance companies.

This advantage allows them to obtain cheaper and high-quality benefits for small business employees while simultaneously lowering the cost (a PEO will usually use a fixed monthly fee per employee or percentage of payroll.)

7. Recruiting Benefits

As a result of all of the benefits that a PEO will provide, your business will have a more competitive position when it comes time to recruit new candidates.

You’ll be able to offer similar benefits as a larger company while providing the tight-knit feel of a small business. Candidates will not feel like they have to compromise between a personal working environment and the great benefits traditionally only associated with working at a larger firm.

Leveraging a PEO Service

Using a PEO service does more than just streamline your business operations it can be a catalyst for growth. By saving time and money with numerous business processes, you can free up resources and leverage them to gain more opportunities.

Bradford Jacobs offers global PEO services so that you can achieve your business expansion goals. Contact our consultants to explore your growth options.

What Is a PEO? Everything You Need to Know

You may have heard the word “PEO”—PEO employment is growing at a rate 16 times faster than the rest of the economy.

But what is a PEO service? And how does it work?

PEO is one of the secrets to giving your business a competitive advantage, especially if you’re small to mid-sized.

Curious to learn more?

Below, we’ve created the following guide explaining what PEO services are and how they can benefit your company.

What Is a PEO?

A PEO, or professional employer organization, is a company that provides employee and management solutions.

It acts as the legal employer of a workforce employed within a company. Essentially, it works on behalf of the client company.

Services will vary between PEO service providers. For the most part, though, services will include payroll processing, onboarding, and securing benefits. PEO services will also manage HR.

The PEO model was first developed in the US, but it has also become popular as a global employment solution. Many companies looking to expand team up with a PEO to have additional resources for a growing network of employees.

PEO can be referred to as a national PEO when it operates across state or local ones. Global PEO is a solution for businesses operating overseas.

A global PEO provides even more services than a national PEO would. Additional solutions include international recruitment and strategy. They also assist with visas, immigration support, and foreign legal entity setup.

How Does a Standard PEO Work?

When your organization teams up with the PEO, the PEO will share many employee-related responsibilities with you.

PEOs hire employees directly and handle the administrative tasks for these employees. This includes processing payroll, taking care of benefits, and being responsible for taxes.

Meanwhile, your company will still have day-to-day control over the employees and how they serve the company. Employees will receive all assignments and instructions from the business.

With this arrangement, the PEO will act as the “Employer of Record” for insurance and tax purposes. This position will be coupled with their other administrative and compliance duties.

PEOs are experts in performing these duties. When taking over these responsibilities for a company, the company will save costs. This is because a specialist PEO will deliver more services more efficiently than their client company.

The company and the PEO will work together to write out a contract outlining what the PEO is responsible for. A standard agreement will likely include

  • Payroll administration
  • Essential taxes
  • Employee benefits regulation and administration
  • HR duties

PEO agreements can also include recruitment, onboarding, and training. Global PEOs typically have international services.

How Does Global PEO Work?

Global PEOs handle many of the same tasks as standard PEO services. For example, they hire employees, manage HR tasks, and keep your business compliant. But they do all of this on an international level.

Furthermore, global PEO acts as the company’s employer of talents internationally, relying on its global network and relationships to build a solid international reputation for your business.

Conventional PEOs in the US primarily work to manage the HR operations of a company. Global PEOs take it a step further: they mitigate risk, create and execute an international hiring process, and ensure that payment is compliant with different countries’ rules.

You won’t be surprised to hear that global PEO can get much more complicated than a national PEO service. Global PEO services act as the employer of record for people living throughout the world.

A global PEO service can also work with a company to expand globally in the shortest possible time. They’ll assist your business with finding the right people for each location and establishing your presence in different areas.

Who Benefits From a PEO?

PEO services can be effective for any company that looks to streamline operations and expand into new markets. But PEO services are particularly beneficial in three situations:

  • Companies that need HR professionals
  • Small businesses that want to be more competitive
  • Organizations looking to expand globally

Companies may be looking to add an HR department to their team or be unsatisfied with their current outsourced HR services. In these scenarios, you should consider working with PEO services.

Many companies will make the mistake of assigning HR tasks to employees who do not specialize in HR or who are not equipped to handle such tasks. This will only result in more errors, delayed task completion, and frustration among the team.

When your company reaches the point of needing its own HR department, a PEO service should be a top consideration. You’ll be able to save on time and money instead of committing to building an entirely new department.

Small and mid-sized businesses looking to be more competitive may also benefit from a PEO service. Many small businesses have difficulty attracting high-quality candidates because they cannot compete with the benefits that larger companies offer.

A PEO partnership gives these small businesses access to top-tier retirement plans, insurance, healthcare, and even pension options that put them on the same playing field as more prominent corporations.

Businesses looking to expand globally will also benefit from a PEO.

One of the most challenging parts of global expansion is familiarizing your business with the foreign market. With a PEO service, you will significantly lower your responsibility.

Global PEO services have access to resources around the globe that will help you hire the right team members, stay compliant with international laws, and ultimately reach customers within your target location.

How Does PEO Relate to Co-Employment?

Co-employment is often used to mean PEO, but the words have different meanings. Co-employment is a specific subset of PEO that is offered in certain countries.

Co-employment means that two distinct companies take on the rights of an employer. One is the operating employer, responsible for the day-to-day management of employees.

The other company is the administrative employer, taking on payroll tasks, benefits administration, and potentially onboarding processes. The PEO will act as the administrative partner within the two companies.

PEOs using the co-employment method have more than just the two companies involved. There is a third party: the employees. A co-employment partnership should involve a Tri-partite agreement that outlines the obligations for all three parties.

Benefits of Using a PEO

Through a PEO, employees working at small businesses gain access to benefits that they typically only receive from larger firms. But PEOs offer more benefits to both employees and the company itself.

Reduces Liability

Working with a PEO means that you won’t be fully responsible for the actions of your employees because they will act as the co-employer. This also goes for lawsuits and other potential problems.

A PEO will share some of the liability associated with specific employment-related issues. Its resources will help reduce damage and keep your business running in crisis.

Lowers Costs

Using the services of PEO has the potential to save on overhead costs when running your business. You’ll be able to provide more benefits while lowering your bottom line.

Research from NAPEO shows that using a PEO generates an ROI of 27% in cost savings alone.

Using a PEO has the power to decrease costs significantly because you are shifting many of the HR responsibilities to the PEO. You won’t have to hire an HR department or pay for completing tasks like payroll and assigning benefits.

Refocuses Business

HR tasks can be time-consuming for businesses. When they have to focus on filling an HR position or correcting a payroll error, it can take precious hours from the week and cost the company numerous resources.

PEO services will help companies become re-focused on their goals. Businesses won’t have to spend as much time on mundane tasks or employee-related issues. All of these areas will be taken care of by the PEO.

This additional time and money can be leveraged into growing and developing the company. Executives can focus their energies on their core responsibilities while PEO services handle the rest.

Increases Benefits

PEOs give businesses access to numerous benefits that they would otherwise not be able to use.

How does this work?

PEO services often have thousands—some may even have hundreds of thousands—of employees. They negotiate with insurance companies and benefits providers on behalf of these employees.

With the potential to gain business from all of these employees, insurance companies and benefits providers will often work out details with the PEOs that provide more benefits at lower rates.

Most PEOs can offer many, if not all, of these services:

  • Comprehensive healthcare plans
  • Worksite benefits
  • Mental health support resources
  • Computer benefits
  • Retirement plans
  • Life insurance
  • Disability insurance

Small and mid-sized companies may not be able to offer many of these benefits using their own funding. But PEO packing gives them access to more comprehensive services for the entire staff.

Regulation Compliance

There are often many rules and regulations involved with HR duties and the employment process. These rules may change frequently.

Because PEOs operate as professional employment searches, they will stay updated with this information. They’ll be aware of the critical regulations that you may not understand.

Using a PEO will make it easy for your company to comply with significant HR rules and regulations. You’ll be able to grow and manage your staff more efficiently with a clearer understanding of your obligations.

Competitive Recruiting

Covid-19 led to a mass resignation called the Great Resignation. Employees are quitting en masse (23% are expected to quit in 2022) as they continue to look for more flexible jobs and better benefits.

Using a PEO service will make your business more competitive when recruiting. Often, candidates may choose larger companies because of better benefits and perceived opportunities.

With PEO services, candidates won’t have to compromise. Your company will be a serious contender because your benefits will match those of a larger corporation. In addition, you’ll be able to provide those benefits within a close-knit work environment.

Build Employee Performance

PEO services can also extend beyond just the hiring of employees. A PEO can also help companies evaluate employees and help them become more successful.

A PEO can observe employees and evaluate them. They can coach managers and supervisors on how to form better relationships with employees and offer better feedback. They can also give employees more resources to develop personal goals and grow within the company.

The PEO’s knowledge working with dozens of organizations will give them insight into creating effective training programs and methodology that will lead to employee success.

PEO Potential Drawbacks

The numerous benefits of using a PEO service have the power to transform your organization. But like any other business service, a PEO has its drawbacks that you should consider.

Compliance Not Guaranteed

One of the responsibilities of a PEO involves handling your payroll filing and taking care of your taxes. If the PEO does this correctly, you will have saved yourself time and effort. But if they fail to do these tasks properly, it’s you who is vulnerable to penalties for noncompliance.

When choosing your PEO, make sure to select an organization that guarantees compliance. Some PEO services offer to do these tasks but do not guarantee results.

Most PEO providers will offer tax compliance with payroll processing. They’ll calculate, file, and pay your taxes as the reporting agent on your behalf. The guarantee also means that they will cover any fees or fines if they make an error.

Limited Access to HR

When you are in complete control of your employees, you have full access to their information. Having this visibility allows you to make personnel decisions. But with PEO services, you have minimal access to this information.

Your existing HR managers and top company executives will have little insight into employee company data. Communication between personnel managers and employees also can become more complicated with PEO services.

With the PEO relationship, you have to contact the PEO with the message. Then you wait as they fulfill the request.

This can be helpful if it is a difficult situation to handle. But with simple requests that could be quickly taken care of by the organization, it will feel like unnecessary additional steps.

May Impact Morale

Many employees choose to work with a company because of the company culture. Unfortunately, many employees are not engaged or motivated in their workplace. F worldwide are not engaged or are actively disengaged.

It’s important to consider employee morale before teaming up with a PEO. How will you explain to employees that they are no longer directly working for your company?

Many employees will feel as if they are caught in the middle of your business and the PEO. Some may not feel valued and may leave their positions as a result.

Think about how your employees would feel if they learned that they have been “leased” to a PEO. How could you demonstrate to them that the partnership is the best choice for the entire company? You will have to integrate other employee appreciation methods within your organization to keep morale high.

Giving Up Control

Many business owners start their own companies because they want freedom. In fact, 55% of business owners say their motivation for starting their own business was to be their own boss.

When you join forces with a PEO, you will lose access to some of your control as a business owner. You won’t have full access to your employees’ information anymore, and much of the hiring process and payroll process will be out of your hands.

If issues arise with your employees, you’ll have to go through your PEO. In some cases, you may feel like this is unnecessary and inefficient. Keep in mind that using a PEO means that you have to sacrifice some of your freedom if you want to share the responsibilities.

Potential Benefit Changes

For the most part, PEOs are a great way to access benefits traditionally associated with larger companies. Their relationships with insurance and benefits providers make them significant assets for employers.

But keep in mind that PEOs can switch providers at any time. While it’s normal to occasionally switch providers, be wary of PEO services that frequently change the plans they offer. The last thing employees want is fluctuating prices or unpredictable options.

Also, be aware that some plans may be better than others. Lower benefits for your company are enticing, but certain companies may provide options that don’t fit employees’ needs. In some cases, you may need to compromise your expectations for plan options.

Guidelines for Choosing a PEO

Not all PEO services are the same. Here are a few guidelines for choosing the best PEO service for your business.

Assess Your Workplace

Spend some time assessing your company’s operations. Do you have an HR department? What does it look like?

Analyze how long it takes employees to complete specific HR tasks. Maybe payroll is taking up a large number of workers’ hours. There may be tense relationships among employees that are causing problems.

Also, consider expansion plans for your company. Are you looking to grow in the near future, or are you in a stage where you’re focusing on internal operations?

Understanding the current state of your company will give you a starting point for your PEO services. You may be looking for PEO services on a more local level, or you may realize that global PEO will be the best choice for your business.

Investigate Company Expertise

Once you have narrowed down your choices to a few companies, investigate the expertise of those companies. One of the best ways to do so is by exploring the company’s website. The best PEO companies will have professional-looking websites with numerous resources.

Consider your needs and see if the company addresses them on their website. Are you looking to expand into Serbia? Maybe you want PEO services in Hungary.

Take advantage of the free resources that PEO companies offer on their websites, from blog posts to downloadable guides. The quality of these resources will indicate how knowledgeable their PEO services are.

Understand How Benefits Are Tailored

Talk with the PEO company to learn about how benefits are offered and tailored. Some companies may provide universal plans to all employees, while others may take a more individual approach.

Also, look for information on how the PEO is funded. Is the PEO fully insured or partially self-funded? Who is the carrier for the benefits?

Understanding how the PEO provides its services will help you better understand what to expect. A PEO that has been using the same insurance provider for years will likely offer you stable benefits. Consider that other services may be more flexible with benefits, but that prices may change accordingly.

The bottom line is to look for PEOs transparent about how they’re funded and the services they provide.

Review the PEO’s Client Service Agreement

Most importantly, review the service agreement carefully. Your relationship should be carefully laid out in the agreement. Each party’s responsibilities and liabilities should be clear.

What are the PEO’s guarantees? Ensure there are no grey areas and you understand your role in the partnership.

Look to see if there is a way out of the contact. Make sure you’re not locked in unknowingly. What provisions allow you or the PEO to cancel the contract?

Leveraging PEO Services

Now that you can answer the question “What is a PEO service?” you can start to research the best PEO fit for your company.

Ultimately, PEO services have the power to transform your business. If you are willing to relinquish some control over your business and trust the process, you could benefit greatly.

Bradford Jacobs offers global PEO services in countries ranging from Belgium and Greece to China and Israel. Contact us to learn more about our services.

International Subsidiary vs. Branch – What to Set Up

If you are looking to expand your company into foreign markets, one of the most important questions you have to ask yourself is whether you want to establish into the new territory as a subsidiary, or a branch? This is a crucial part of the planning process in business expansion.

Your answer to this question depends on a few factors, such as the opportunities you perceive in the new market, as well as any regulatory or cultural challenges you may want to tackle in your new territory or country. Other questions you may want to ask yourself during this decision time include:

  • What is the establishment process like – do you need a legal entity in the country first before setting up other processes, like payroll?
  • What is the process for acquiring work permits and residency permits for employees?
  • How long will it take for the company to be able to legally do business?

If your questions are more specific to the country you want to expand, check out our Country Guides. If you want to know more about the main differences of these entity types, you can read more about it below.

What are the main differences between a subsidiary and branch?

When deciding on whether you want to open a branch office versus opening a subsidiary company in a new territory, you will need to consider three points:

  1. What your primary business interest(s) will be
  2. What your goals are for the entity you choose
  3. How you will handle taxation and liability

The requirements for the incorporation of a branch and subsidiary will vary according to the country, but the main requirements include: a local address, incorporation documentation, and representatives of the parent company. The requirement for a local bank account also varies according to the payroll laws of the country you are expanding to. Share capital is only required for subsidiaries, but not for branches.

The characteristics of both entities are in the table below:

Understanding what makes both the branch and subsidiary distinct from the other makes a huge difference in making the decision for your business’ expansion.

However, one also needs to know the benefits and drawbacks of each entity type, before deciding which one is the best choice for you.

What are the pros and cons of a branch?

Pros:

  1. Parent organization maintains a greater level of control: A branch office receives all instructions from the parent company, as well as reports to it in all its decision-making processes, providing the parent company with greater control.

  2. Easier to integrate due to the same the laws and policies of the parent company/head office: Since a branch must be incorporated under the documentation of the parent company, the policies and culture of the parent company are easier to implement into the branch’s operations.

  3. It costs less to establish: Branches to not require any share capital to be provided beforehand, and the set-up costs to set up are considerably less than those of a subsidiary company.

  4. Offers the parent company greater tax benefits: In a majority of cases, any revenue that is earned by a branch office are handled by tax treaties signed between the country of the parent organization, and the country of the branch (eliminating double taxation). So, any taxes that the branch office has to pay are handled by the parent company, who can benefit from the taxation laws and benefits of the branch office’s location.

  5. It is the simplest form that a business may take for business expansion: A branch is often the simplest and safest way for a company to expand its brand into a foreign country and explore new markets. Other company types require more regulation, documentation, and compliance measures.

Cons:

  1. More difficult to explore new business opportunities for parent organizations: A branch is restricted in its business activities, so the lack of independence creates more difficulty in market exploration.

  2. If branch has legal problems or debts, a parent organization is liable: Parent companies are completely liable for any of the branch’s debts, fines, or legal settlements, which also increases the risk of the expansion.

  3. Finding employees for the branch: This depends on the country’s labor and migration laws, but finding employees is a lengthy and demanding process, especially if you are transferring employees to the new branch.

What are the pros and cons of a subsidiary?

Pros:

  1. Subsidiaries are independent of their parent company: A subsidiary is a separate legal entity, so it may conduct business more flexibly and easily, form partnerships, and explore new markets with little to no restrictions from the parent company.

  2. A subsidiary adds more accessibility and greater credibility to the parent organization: In most cases, foreign clients, service providers, and banks prefer doing business with a subsidiary for both legal and financial reasons, creating better accessibility to your business and sector.

  3. A subsidiary is more flexible than a branch: Subsidiaries enjoy a greater degree of flexibility in the issuing of transferring of shares to third parties (such as investors, partners, employees etc.), as well as the public stock exchange.

  4. Can explore more economic opportunities in a foreign country: A subsidiary can explore new markets in a foreign and need not necessarily stick to the same market as the parent company.

  5. May take advantage of cost efficiencies in a foreign country: Parent companies that open foreign subsidiaries can often take advantage of the country’s manufacturing and labor costs.

  6. A subsidiary offers greater liability protection for the parent organization: Since a subsidiary’s legal identity is separate from the parent company, that offer the shareholders of the parent company greater legal protection. They have no liability in the case of legal problems or debt of the subsidiary.

Cons:

  1. Subsidiaries cost more to establish and open: Subsidiary incorporation procedures are significantly higher than those of branches. Subsidiaries must have their own documents (including translations and legal advice), business or trade licenses, bank account, office space, payroll system, and more – which accumulate in costs.

  2. Face regulatory and cultural challenges: If you want to open a subsidiary in a new territory, you must carefully study the cultural, political, and regulatory environments of that country – as they will all have a significant effect on how the subsidiary will work. Shareholders or directors who live in the country can help the parent organization better understand how things work.

  3. Costs can be high in case of regulatory and legal problems: If a subsidiary falls into certain issues in terms of profit or revenue, there are more intricate legal and financial questions involved, especially when the legal system or language is not one you or your company are familiar with.

Contact us today to learn more!

Choosing between a branch and a subsidiary office in a foreign territory can be a difficult and complex issue – particularly if you are invested in expanding into new markets as quickly as possible.

It not only takes time to decide on the course of establishment and type of operation, but it also takes time to do the research and understand the different laws, rules, and customs of the country and how they do business.

However, there is a faster and simpler way to sort this out. Through Bradford Jacobs’ Global PEO and EOR models, we combine legal expertise and high-quality international HR.

We use our global infrastructure to help companies onboard teams in over 100 countries, without the need to set up a subsidiary or a branch office.

For more information about what we can do for your company’s expansion, contact one of our consultants today.

What is a Global PEO?

When a company is looking to begin their global expansion, the process can be exciting, but it can also be overwhelming. Expansion involves a number of procedures, such as payroll, recruitment, and incorporation. But, international law and red tape can intervene in these plans.

A PEO, or a Professional Employer Organization, is also known as a co-employer. They take care of all areas of employment in a new territory, so you don’t have to. Payroll, benefits, and other HR responsibilities for the employees of a client’s company are all handled by the PEO. They make sure that the work you do for your business is easy and hassle-free.

A PEO offers cost-effective and tailor-made solutions for your international expansion and be up-and-running in a new market within hours – with your goals in mind. Find out below how a PEO works, how it can work for you, as well as the benefits that you can get out of using a Professional Employer Organization.

How does a Global PEO work?

PEOs are experts in all areas of international employment and global expansion – which include, but are not limited to:

  • Human Resources & Compliance: A PEO’s staff must decipher and implement a variety of labor laws, to ensure that the companies stay compliant in all types of the country’s regulation that apply – including local, state, and national laws. When regulations change, the team must research the possible impacts, as well as make the necessary adjustments.
  • Benefits: PEOs must also coordinate location-specific benefits with health insurance companies – which can include medical, dental and vision. Benefits being given can also include commuter benefits, flexi-spending, and sick leave. PEOs offer flexibility when it comes to employee compensation.
  • Payroll & Tax: PEOs must calculate tax contributions, make direct deposits to the employees’ accounts delivered on-time, and other issues that are related to Payroll.

The staff must keep well-informed in all these areas, and stay updated about changes in local laws and regulations in countries where PEO services are offered/where the employees are located.

The starting blocks for global expansion

PEO works to make the starting blocks for a client’s expansion goals. An important part of the PEO’s work include handling the legwork and risks of their client’s expansion, whilst you focus on your company’s success.

A global PEO not only performs the required tasks, but they also work as your strategic partner. They form part of your expansion team and will guide you in your next steps for acquiring the best results, as well as the best people on your team.

International employees may also be able to use a global PEO as their Employer of Record (EOR). If you have an international employee, they would be legally employed under the global PEO. They will take care of almost all administration and compliance, but you would be responsible for their day-to-day activities.

If you have any more queries about how a PEO works, check out our most Frequently Asked Questions on our Global PEO or What is PEO pages.

Who should use a Global PEO?

A global PEO can be utilized by any company – no matter their size or industry. All you need as a business owner are global expansion goals and dreams, and we can handle the rest.

Business owners of small and medium-sized companies can use PEO services by outsourcing their Payroll, HR, and administrative tasks whilst they focus on what they do best. Large companies may also benefit from the services of a Global PEO. They can continue their expansion and global reach without worrying about the costs, time and resources on administrative and recruitment needed to reach their goals.

If you are a business owner and you are looking for:

  • Opportunities in global expansion
  • To test potential markets in new territories
  • To find international talent without the hassle of handling immigration procedures and payroll administration
  • Have ambitions goals for expansion, but lack the finances and resources to get there at present

Then a PEO is the best service for you!

What are the advantages of a Global PEO?

A Global PEO is a service that supports many employees and businesses worldwide – over 4 million employees in the world have been hired through a PEO – and includes the following benefits:

  1. Saves time, money, and resources
  2. Cuts risks and reduces lawsuits
  3. Takes charge of employee benefits to ensure the happiest employees
  4. Streamlines expansion as well as hassle-free withdrawal
  5. Tests new markets at no great risk to you
  6. 24/7 support
  7. Happier Employees

What does Bradford Jacobs provide?

At Bradford Jacobs, we know business expansion can be complicated. It is our goal to provide the best solutions that are tailored for you and your company’s expansion goals.

We are a Global Professional Employer Organization service provider, benefitting from a network of PEOs all over the world. We believe in a world of globalization, and want to see it happen for you, too!

By using our global network, you can turn international freelancers, contractors, or consultants into a dream team – with employees from anywhere around the world.

We provide a number of services, including:

  • Employer of Record Services (EOR) – if you want an employee in a specific territory, or the employee you chose cannot be moved to where you want them to go, you can benefit from our EOR services. They are registered under Bradford Jacob’s payroll, but you are responsible for their tasks and day-to-day activities.
  • Outsourcing Payroll – Our teams ensure that employees’ taxes, social security contributions and benefits are paid compliantly and on time. No issues for you or your employees, wherever they are.
  • Recruitment – We assist in building your company’s global workforce, without the hassle of complex international onboarding processes. We make sure that your employees are happy with their conditions and benefits.
  • Global Mobility – Whether you need visas or to relocate your current workforce, we are experts in immigration laws and requirements. We can help you build up, reduce, or move your workforce from any country, and to any country you prefer.
  • International Knowledge of Compliance – When you use our PEO services, you have access to our team of experts. They have extensive knowledge of international laws, regulations, and cultural practices of a number of countries.
  • Continuous Support – our team will work tirelessly to ensure that your plans are going well. We also anticipate any new developments within your company, industry, and market to keep your business keeps thriving in its expansion.

If you would like to see more of how our PEO services work according to the country, then check out our Countries We Serve page.

Contact us

Using the services of a Professional Employment Organization is a great asset in globalization and global expansion. At Bradford Jacobs, we want to hear your story, ideas, and goals – and make them a reality.

Contact us today to see how we can help you achieve international expansion.