PEO and Global PEO: Definitions, Misconceptions, and More

When HR and business leaders decide to expand to a new state, region, or country, they often discover that hiring workers in a new place can get complicated. Even when the company has gone through the hard work of establishing an entity, the challenges of remaining compliant with local, state, and federal laws becomes overwhelming. This is why many companies choose to partner with a PEO (to hire in the US) or a Global PEO (to hire abroad).

Deciding whether or not to partner with a PEO or a Global PEO is a big decision that shouldn’t be taken lightly. In addition to ensuring that your business has an entity established in the country, you will likely need to get buy-in from both HR and the C-Suite, as well as choose the best PEO for your business.

Here's a look at everything you need to know about PEO and Global PEO, including definitions, misconceptions, use cases, how to choose the right provider, features, and predictions for the future of PEO.

PEO: A brief history

When PEO started in the 1960s and 1970s, long before tech companies were disrupting every industry, it was known as employee outsourcing or leasing. 

However, the approach quickly became complicated. PEOs and employers weren’t sure how to share responsibility legally. This led to the creation of the National Association of Professional Employer Organizations in 1984. Around this time, the co-employment model was introduced, making the relationship between PEOs and their customers more black and white. 

Today, there are 480+ PEOs in the US alone, providing HR & payroll services to 173,000 SMBs and co-employing 4 million workers across the country. 

Across the world, global PEOs work in 180+ countries, though it’s important to note that PEO rules, practices, and regulations vary greatly from country to country. 

What is the definition of PEO?

PEO, short for professional employer organization, is a firm that provides HR & payroll services to small and medium-sized businesses with a legal entity, and brings the workers of the client under the PEO legal entity. The PEO shares legal responsibility with the client and is responsible for keeping clients’ policies & handbooks compliant, streamlining processes like benefits administration, and getting Fortune 500 buying however on health & workers’ compensation insurance.

What is the definition of Global PEO?

Technically speaking, a global PEO helps companies with an established entity manage payroll, benefits, onboarding, and other HR functions. The global PEO might not have its HQ in the country where they are offering services, but the global PEO must have an entity and some local presence.

Companies without a legal entity need to partner with an EOR to manage payroll, benefits, compliance, and other HR processes. To make matters more complicated, many HR leaders use the term Global PEO, when what they really mean is EOR.

Common PEO & Global PEO misconceptions

• Businesses do not need an entity if they partner with a PEO

• Global PEO is often used interchangeably with EOR/Global EOR, but the terms have different meanings

• A PEO/Global PEO is solely responsible for managing compliance and assumes all liability 

• A PEO is a waste of money

• We can hire out-of-state and international workers as contractors and still remain compliant

What types of companies partner with a PEO or a global PEO?

Companies of all sizes partner with PEOS, but especially small and medium-sized businesses. However, for employers who need to manage payroll & benefits for 100+ workers, working with a PEO can become more complex and not worth the investment. 

Why do companies partner with a PEO or global PEO? 

Expanding nationally and internationally can be exciting for businesses, but difficult for HR leaders. For instance, every time the company hires in a new jurisdiction, business leaders need to make sure that their handbook policies, health insurance plans, payroll processes, and other HR-related matters are compliant with all federal and state legislation, as well as local laws.

Top PEO use cases

• Have an established entity in the US, but don’t have an on-the-ground HR team 

• Want to hire workers in multiple states and need assistance remaining in compliance with laws in multiple states.

• Access to more affordable group healthcare & benefits plans, especially for smaller companies. With a PEO, SMBs can get Fortune 500 buying power on health & workers' compensations insurance (otherwise, clients' insurance options/pricing would be standardized & very limited in the open market)

• Need to expand into a new state without a local office or HR team quickly, often in as little as 1-2 business days

• Fear of being sued for non-compliance or a history of employee lawsuits, especially regarding the misclassification of contractors

• In-house HR team has limited resources for managing payroll, benefits, and other HR functions in a new region or state

• In-house HR team has not grown enough to keep up with company growth

PEO & Global PEO features

• Benefits (health, dental, life insurance)

• Payroll (bonuses, PTO, holiday pay, tax deductions, reimbursements, pay slips)

• Supplemental benefits, including retirement (401k) and equity/stock management

• Onboarding 

• Offboarding

• Payroll management & platform

• Customer support manager

How to choose a PEO provider

As you make your decision, you will want to ask your PEO’s sales team questions such as:

• What is the cost per employee, especially if we scale up?

• What are the costs or advantages of your health insurance plans?

• What other benefits do you offer besides health insurance? Can you add on retirement benefits, like 401k?

• What features does your platform have? Does your platform integrate with common HR tools?

• Can you customize pay schedules or pay frequencies, as well as offer reimbursements? 

• What kind of support will we receive from your team? 

• Do you offer EOR or Global PEO services for when we start hiring abroad?

Insperity, for instance, is known for its great service, which can come at a higher cost. You and your team will need to decide if the price point is worth the service being offered. 

List of PEO providers in the US

• TriNet

• Insperity

• ADP

• Justworks

• AlphaStaff

• INFINITI HR

• Paychex

• Engage PEO

List of global PEO providers

• Papaya Global

• Velocity Global 

• Global PEO Services

• GlobalPEO

• Horizons

The future of PEO

Established PEO players like Trinet, Insperity, and ADP TotalSource are now facing fierce competition from a new group of venture-backed companies, including startups like Rippling and Justworks. 

PEOs entering the EOR market. PEOs like Rippling are looking abroad and building out infrastructure to enable companies without entities in foreign countries to hire workers internationally. 

Investments in technology. As the world becomes more tech savvy, PEOs are upping their game and investing in their technology and product offerings.

Change in state and federal laws. Sudden changes in local, state, or federal laws can force PEOs to change their way of operations–sometimes overnight.

US PEOs partnering with Global PEOs/EORs. More US-focused PEOs will partner with Global PEOs/EORs to expand their coverage across the globe.

More VC money disrupting the space. Hiring and HR is ripe for disruption. VCs will pour more money into the PEO and Global PEO space, with the goal of innovating the industry with cutting-edge technology.

Global EORs/contractors entering the US PEO market. EORs and contractor management service providers with services outside of the US might try their hand at breaking into the US PEO market. 

Why companies partner with Via

If your business is looking to hire international talent in countries where you don’t have an entity, then you can partner with an EOR like Via to manage HR, payroll, benefits, and more, without the need of foreign legal entities, in-house global payroll & benefits specialists, or foreign HR & legal advisors. 

In fact, some of Via’s customers end up partnering with a PEO in the US (given they have an entity) and with Via as their EOR partner in Canada, Mexico, Colombia, or one of the other 12+ countries where we have our own established entities. 

With Via, you can start onboarding international talent without an entity in days–and remain compliant with all local, state/provincial, and federal requirements. Learn more about our EOR services today.