Avoid These 7 Mistakes When Choosing International PEO Services

 

International growth can change the business trajectory, but it comes with some complicated HR, compliance, and legal issues. This is where international PEO services (Professional Employer Organization) come into play. An international PEO allows you to employ staff in other countries even if you do not have a local legal entity in place. They handle everything from payroll and tax to compliance and hiring.  
 
However, International PEOs are not all equal. 
 
Choosing a PEO that is unsuitable could involve compliance issues, unanticipated costs, and employee dissatisfaction. In this blog, we will identify 7 errors companies make when choosing an international PEO and how to avoid these errors as you expand globally.  
 
1. Do Not Assume Every PEO Can Provide Compliance Capabilities  
Error: Many companies just use the assumption that all PEOs have the same capability to manage international standards for labor law and compliance.  

Why is it a problem: Labor regulations can be vastly different from one country to another. If the PEO does not have extensive local insight, you are potentially subject to fines, lawsuits, or being shut down in that country.  

Solution: Work with an international PEO that has a sound compliance record and has local attorneys in every country you enter. Asking for specifics on how they have worked their way through challenges could reveal significant insight.  

 
2. Forgetting What Level of Service is Included 
Error: Companies often do not examine what is included in the service package closely enough.  

Why is it a problem: Some PEOs only provide payroll services, while other PEOs take everything from hiring to employee benefits. Partnering with a company that can deliver the benefits at a lower cost may require you to source multiple vendors from the expense you were trying to mitigate. 
 
Solution: Clearly define your global HR needs; do you need assistance with visas, benefits administration, onboarding, or offboarding? Choose a full-service global PEO that aligns with your long-term objectives.  

 
3. Failing to Consider Data Security and GDPR Compliance 
Mistake: Businesses fail to check how the PEO processes employee information. 
 
Why it's an issue: During international hiring, your employee information falls under various privacy laws, such as GDPR (Europe), PDPA (Singapore), and so on. A data leak can do irreparable damage to your reputation and legal liability.  
 
Solution: Ask about data safety practices, cloud infrastructure, encryption level, and how the PEO aligns with local privacy law. 

 
4. Failing to Understand the Fee Models 
Mistake: Thinking that either the low bid is a problem, or 
that you know and understand the fee structure.  
 
Why a problem: Some global PEOs have convoluted fee structures with hidden fees, termination fees, and minimums. A low buy-in could hide total costs over time. 
 
Solution: Request a detailed quote. Pursue pricing transparency regarding base service fees, taxes, benefits, setup, termination, and contract changes, and whether or not the pricing will be adjusted as your workforce increases. 

5. Choosing a PEO Without a Global Network 
Mistake: Engaging a PEO without a global network or depending on third parties to execute the delivery. 
 
Why it matters: There is no direct control of employment processes, which makes it difficult to manage timelines, there can be misinterpretations, and an increased risk. 
 
The fix: Choose a PEO that either owns its global PEO services or has a complete vetted partner network to ensure full accountability and a commitment to standardized service delivery across the world. 

 
6. Not Thinking About Employee Experience 
Mistake: Neglecting the employees' experience and only thinking about the employer's experience. 
 
Why it's a problem: Your employees may resent poor onboarding experience, delayed payments, or bad benefits packages that contribute to turnover. 
 
Solutions: Request references/testimonials from the employees of your existing client base. Know the PEO's experience with the employee life cycle, particularly onboarding, payroll processing, and when issues arise. 

7. Not Knowing the Disengagement and Transition with The Potential PEO  
Error: The failure to understand the disengagement/transition with a potential PEO, where there is an experience of outgrowing the PEO or wanting to build your legal entity. 

Why it is a problem: Some PEO agreements are heavily watered down and have different exit clauses, notice periods, termination fees, etc., that may affect your business. 

Solution: Understand what the PEO potential provider's process is for any orderly transition process of disengaging and moving your employees off their platform to your own legal entity. Read the final agreement very closely to understand and then ask for clarification on all exit terms and conditions before you sign. 
 

Conclusion 

The thrill of international growth, while exciting, can be complicated. Choosing the right international PEO service provider will make or break your opportunity to scale internationally. By avoiding these 7 common mistakes, you will be able to maintain compliance, financial efficiency, and employee satisfaction while developing a global workforce. 
 
You will need to take the time to assess providers, ask the important questions, and prioritize transparency and experience.