Global Expansion

How to Select the Right Global PEO Vendor

February 15, 2021
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10
Brett Ungashick
Founder

The International PEO industry is one of the fastest growing segments of the HR tech industry. Many buyers are learning about these solutions for the first time. This is a guide to selecting the right vendor

If this is your first time buying an international PEO solution, then you'll likely encounter quite a few unknowns.

OutSail provides a free service that helps companies compare, evaluate and select the best global PEO for their needs.

Learn More: Request a free vendor report comparing all Global PEOs with pricing and pros/cons

When working with clients on a global PEO selection process, these are a few considerations that we take:

1.) Determine how you want to classify employees

There are three main options that you'll have when classifying your global workforce:

  1. Contractors - This is the least costly approach and requires the least amount of administrative support, but also can be the riskiest when it comes to compliance. Additionally, most top notch employees won't want to be a contractor for long. If you want to go the contractor route, there are solutions that can help create compliant contracts and automate payments across multiple currencies.
  2. Full-time employees hired by a PEO - If you want to reduce your compliance risk and offer your employees better benefits and tax breaks, then making them a full-time employee is the way to go. Keep in mind, however, that keeping employees on a Global PEO indefinitely can be costly. If you want to go the Global PEO route, there are solutions that can allow you to make compliant full-time hires anywhere in the world within days.
  3. Full-time employees hired by your company - If you plan on having a large presence in a country for a long time, then it is likely a good idea to set-up an entity in that country. By setting up an entity, you no longer have to hire your international employees through a middleman and can save significant money. However, setting up entities is a costly and bureaucratic process. If you want to go the entity set-up route, there are solutions that will help you register in countries, complete the proper tax set-up and provide accounting and legal resources.

Many vendors in the Global PEO space can help support one or two of these classifications, but as a buyer you will want to first decide on your long-term vision for how you will classify your global workforce, then you will want to identify solutions that are strongest in those areas.

2.) Decide what else you want from a vendor

Each vendor in the global PEO space has a different calling card. Here are some of the key selling points we see from our partners:

  1. Easy-to-use technology - For some buyers, a very important consideration is the technology platform that they'll use to onboard new hires, manage their global workforce and process payments across the globe. The more recently-founded companies in this space tend to have the stronger user experience in their technology
  2. Robust global expertise and services - For many buyers, the most important factor is the quality of the global expertise they receive from their Global PEO partner. The most established companies in this industry offer a deep roster of global employment experts available to their clients. These experts can provide benefit recommendations, compliance guidance and tax support.
  3. Flat rate costs - One downside of the international PEO space is that the services can be very expensive and can include a number of fees, including minimum monthly costs, reserve deposits and a % of employee salary. Some of the newer vendors in this space now operate on a flat fee per employee, which is not only more predictable for businesses but also less expensive.
  4. Support for multiple types of employee classifications - If businesses need a mix of both contractors and full-time employees, there are a few solutions that can manage both classifications well. This can provide greater flexibility and allow businesses to have a single tool to manage and pay their entire global workforce.
  5. Fully owned entities - If you're new to the space, this factor may seem confusing, but there are two models in the Global PEO space. Some Global PEO companies have physically set-up entities across the globe, while other Global PEO companies partner with entities and don't actually own them. The lack of ownership can make costs less predictable, increases the risk of compliance errors and can cause delays in payments.

3.) Evaluate a concentrated shortlist

At this point, you've determined your key criteria: (a) how you want to classify employees and (b) what other perks you want from a vendor.

Now it's time to identify a shortlist of global PEO vendors. We recommend contacting the OutSail team and getting a free vendor report with detailed pros/cons and pricing.

However, if you need a quick primer on the marketplace, you'll find this guide helpful:

Comparing the 8 Best International PEO Vendors

Once you've found a shortlist of 2-3 highly aligned vendors, then it becomes time to evaluate those systems.

OutSail has built a robust guide of questions to ask when evaluating Global PEO vendors. Here are a few key questions to keep in mind:

  1. Do you provide global advisory services to help with local laws, taxes and compliance?
  2. Can your technology support both contractors and full-time employees?
  3. What is your standard pricing model (% of salary, flat fee, etc.)?
  4. Are there additional set-up, platform or maintenance fees that aren’t included in that total?
  5. Do you fully own your entities or are they owned by partners?

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By identifying your key criteria, selecting a highly aligned shortlist and evaluating effectively, you will be well on your way to finding a long-term global employment partner!

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Brett Ungashick
Founder
Brett is the founder of OutSail. He spent the early part of his career selling HR software before switching sides and going to work for the people buying the software.

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