International Professional Employer Organizations and Foreign Subsidiary as a Service companies are becoming a hot topic in the employment services space these days, with lots of companies exploring how this new model might support their international expansion plans.
International Professional Employer Organization (PEO) and Foreign Subsidiary as a Service (FSaaS) companies – which are similar but offer higher service levels for maintaining compliance - are revolutionising the international employment services market in the same way that those poster children of the sharing economy, Uber and AirBnB, are transforming theirs.
International PEO and FSaaS firms could be said to provide “employer of record” services. This means that a third party company hires employees in the target country on your behalf and assumes all responsibilities relating to that employment. Day-today management remains the responsibility of your company, however, as do employee liabilities.
As for defining the sharing economy, this has been described as:
“A socio-economic ecosystem built around the sharing of human, physical and intellectual resources. It includes the shared creation, production, distribution, trade and consumption of goods and services by different people and organisations.“
International PEO and FSaaS fall into this category because they eliminate the need to set up a company in a target country in order to hire employees in line with local regulations. To illustrate the point, the model has even been termed “employee leasing” depending on the situation in which it is applied.
While this approach will not enable you to acquire lots of physical assets in your target country, it does remove the cost and headaches involved in managing a foreign subsidiary. It also helps solve liability and employment-based risk problems as you are assured of being compliant with local labour laws – a major challenge for most companies.
Typical services offered by suppliers include creating locally-compliant employment contracts; handling employee on-boarding; staff registration with labour boards, and dealing with all pension, health and other related programs. Accurate and timely payroll services are also provided to local employees. They include dealing with withholdings and remittances to local authorities as well as handling HR-related tasks such as working out paid time off and 13th-month payrolls as well as dealing with employee exits.
But there are other reasons why companies are choosing to go down the International PEO and FSaaS route too:
• Swift international expansion Because it is possible to have workers up-andrunning within 24 to 48 hours rather than having to wait months to set up a subsidiary, it is estimated that the time required to enter foreign markets can be cut by as much as 90%.
• Cost-cutting
Establishing a legal entity in a new country can be expensive. Aside from the setup and ongoing fees related to establishing a permanent presence, it costs money if you can’t hire the right people quickly enough. As a result, we estimate that hiring in third party services can cut costs by up to 50%.
• Flexibility
As there is generally no fixed-term contractual commitment, this approach is a good option if you want to test market viability or run a short- to midterm project in a particular target country.
The steps involved in taking on a service provider
Step 1: Your chosen service provider will ask a few simple questions about what you are looking for in terms of employees so that they can work out total cost, start date, and the logistics involved in on-boarding workers in-country.
Step 2: You sign a contract with your provider and receive an initial invoice for on-boarding your staff. Step 3: A locally-compliant employment contract is drafted, signed and implemented with your approval.
Step 4: Employees are on-boarded locally on the first day of work and are paid each month in local currency by your provider, although they operate under your direction. Each month, you receive a single invoice to make it easy to understand your payroll obligations.
Step 5: Your services provider manages all HR activities so that you can focus on doing your job as effectively as possible.
Step 6: If you decide to terminate a worker on either a voluntary or involuntary basis, you and your service provider work hand-in-hand to make it happen in line with local regulations.
In today’s fast-moving world, the secret to success is being able to move with speed and flexibility, which is what International PEO and FSaaS is all about. This article is based on an excerpt from an eBook written by Velocity Global called “Global Expansion 2.0”.
Velocity Global is a global employment services company that is reinventing the way its clients do business internationally with its Foreign Subsidiary as a Service (FSaaS) solution. With capabilities across 170 countries, Velocity Global is a leader in agile global expansion
International Professional Employer Organizations and Foreign Subsidiary as a Service companies are becoming a hot topic in the employment services space these days, with lots of companies exploring how this new model might support their international expansion plans.
International Professional Employer Organization (PEO) and Foreign Subsidiary as a Service (FSaaS) companies – which are similar but offer higher service levels for maintaining compliance - are revolutionising the international employment services market in the same way that those poster children of the sharing economy, Uber and AirBnB, are transforming theirs.
International PEO and FSaaS firms could be said to provide “employer of record” services. This means that a third party company hires employees in the target country on your behalf and assumes all responsibilities relating to that employment. Day-today management remains the responsibility of your company, however, as do employee liabilities.
As for defining the sharing economy, this has been described as:
“A socio-economic ecosystem built around the sharing of human, physical and intellectual resources. It includes the shared creation, production, distribution, trade and consumption of goods and services by different people and organisations.“
International PEO and FSaaS fall into this category because they eliminate the need to set up a company in a target country in order to hire employees in line with local regulations. To illustrate the point, the model has even been termed “employee leasing” depending on the situation in which it is applied.
While this approach will not enable you to acquire lots of physical assets in your target country, it does remove the cost and headaches involved in managing a foreign subsidiary. It also helps solve liability and employment-based risk problems as you are assured of being compliant with local labour laws – a major challenge for most companies.
Typical services offered by suppliers include creating locally-compliant employment contracts; handling employee on-boarding; staff registration with labour boards, and dealing with all pension, health and other related programs. Accurate and timely payroll services are also provided to local employees. They include dealing with withholdings and remittances to local authorities as well as handling HR-related tasks such as working out paid time off and 13th-month payrolls as well as dealing with employee exits.
But there are other reasons why companies are choosing to go down the International PEO and FSaaS route too:
• Swift international expansion Because it is possible to have workers up-andrunning within 24 to 48 hours rather than having to wait months to set up a subsidiary, it is estimated that the time required to enter foreign markets can be cut by as much as 90%.
• Cost-cutting
Establishing a legal entity in a new country can be expensive. Aside from the setup and ongoing fees related to establishing a permanent presence, it costs money if you can’t hire the right people quickly enough. As a result, we estimate that hiring in third party services can cut costs by up to 50%.
• Flexibility
As there is generally no fixed-term contractual commitment, this approach is a good option if you want to test market viability or run a short- to midterm project in a particular target country.
The steps involved in taking on a service provider
Step 1: Your chosen service provider will ask a few simple questions about what you are looking for in terms of employees so that they can work out total cost, start date, and the logistics involved in on-boarding workers in-country.
Step 2: You sign a contract with your provider and receive an initial invoice for on-boarding your staff. Step 3: A locally-compliant employment contract is drafted, signed and implemented with your approval.
Step 4: Employees are on-boarded locally on the first day of work and are paid each month in local currency by your provider, although they operate under your direction. Each month, you receive a single invoice to make it easy to understand your payroll obligations.
Step 5: Your services provider manages all HR activities so that you can focus on doing your job as effectively as possible.
Step 6: If you decide to terminate a worker on either a voluntary or involuntary basis, you and your service provider work hand-in-hand to make it happen in line with local regulations.
In today’s fast-moving world, the secret to success is being able to move with speed and flexibility, which is what International PEO and FSaaS is all about. This article is based on an excerpt from an eBook written by Velocity Global called “Global Expansion 2.0”.
Velocity Global is a global employment services company that is reinventing the way its clients do business internationally with its Foreign Subsidiary as a Service (FSaaS) solution. With capabilities across 170 countries, Velocity Global is a leader in agile global expansion
