If you are planning on expanding your business abroad, you may have heard the term PEO payroll. Professional Employer Organization is what the acronym PEO stands for, and this is an indication of how your company is licensed to do business in another country. Another designation in international payroll solutions is EOR, which stands for Employer of Record, and the two have very different meanings in terms of business classification. Here is a basic rundown for your information.
Professional Employer Organization
When you work as a professional employer organization within another country, you establish a licensed business presence in that country. In other words, you register your business entity with that country’s government and go through the steps necessary to apply for and receive a separate tax identification number applicable to that nation. You are still required to have a bank account with US dollars as the currency, but you will operate as a licensed business in that country.
A PEO payroll service is an excellent resource to have when opening offices in locations throughout the world under the professional employer organization classification. Their personnel are dedicated to your payroll operations in each country, and this includes managing your global employees time and benefits and reporting your payroll operations to the proper regulatory authorities in each nation. You’ve established your business as an entity within each country, so you will be required to comply with tax and regulatory bodies.
Employer of Record
If you are an employer of record in a foreign land, you work more as an employee sponsor than an actual employer. In this case, you may partner with firms overseas and sponsor the salary and benefits of their employees rather than license your entity within that nation. In this case, you won’t necessarily be required to have a bank account loaded with US dollars. Rather, you will pay your sponsored employees in their currency, or your partner organization will and you will reimburse them.
Your tax and regulatory requirements will be different under this business classification, so it remains in your best interest to outsource this function to a global payroll expert. You will still have this financial portion of your business to manage and report, and you will also have tax reporting requirements with which to comply in the U.S. and abroad. Leave this to the experts to keep your EOR functionality streamlined and within compliance.
An experienced PEO payroll service can help you in either case. They have the personnel locally and abroad to keep your international business running smoothly.