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Using a PEO to Manage Risk When Hiring Internationally

Companies moving into new markets – especially new foreign markets – face a number of risks. Nowhere are those risks felt more strongly than in establishing a new team. Executives are aware, of course, that those risks must be mitigated or managed as far as possible to ensure smooth transition into that new business environment, and to give the company the best chance of long-term sustainable success. One means of achieving just that is to partner with a professional employer organization (PEO), which can relieve the executive team of the time, stress, and administrative burdens associated with risk management in the hiring context. 

What hiring risks are faced when expanding internationally?

Hiring in and of itself presents a number of risks. Despite the persistent efforts of recruiters (in-house or agency), even the most sophisticated of search processes can ultimately result in those risks being realized. In recruitment, the main risk is usually that a hire is placed only to later find that the person was not the right fit for the role or the company. This could be for a number and variety of reasons, from a lack of core competency to an ability to integrate well with the existing team members. 

Whatever the ultimate form of the realized risk, it is no surprise that hiring entails such risk in the first place. Indeed, the entire hiring process is rife with risk. Risk exists in almost all stages of the hiring process, including: choosing the right place to search for a candidate, designing tests and assessments to benchmark applicants, conducting background checks to verify qualifications and references, negotiating salary and benefits, onboarding the hire in their new role, and eventually integrating them into life at the company.

In addition to these risks – which would arise in relation to hiring in any context – hiring internationally presents its own set of risks. Entering a new country means having to deal with a whole new set of expectations in relation to how the business will operate, from the day-to-day novelties of a new culture, society, and language to the complex rules around new legal, tax, and social security regulations. 

Each of these areas in and of themselves presents company executives with a new risk to manage, and the consequences of getting it wrong can be considerable. Indeed, fines, court cases, administrative complexities, and significant operational delays are just a few of the consequences that can not only burden a new company’s presence, but derail it completely.

How can a PEO help to mitigate and manage hiring risk?

PEOs offer foreign investors a number of benefits, but one of the most significant of those benefits has to be risk management. In few other types of organization are foreign companies able to find a partner that not only knows how to avoid common issues in entering a new market, but that knows how to actually deal with those issues swiftly and effectively if and when they arise. 

As just a few examples, PEOs can:

  • Consult with company executives on market entry strategy 
  • Ensure the company is – and stays – compliant with local laws and regulations
  • Deal with local government offices and bureaus on the foreign company’s behalf
  • Negotiate salary and benefits packages that comply with local statutory requirements
  • Manage internal staff conflicts and formal disputes locally, often without burdening foreign teams
  • Update all employment procedures and policies when applicable laws and regulations change
  • Navigate complex economic or political tensions that may affect company operations  

Summary

The exact risk mitigation and management strategies employed by a PEO will vary depending on the specifics of the foreign company, their particulation strategy or situation, and the country in which they want to operate, but in any case the benefits offered in this regard are comprehensive. 

Companies will find that in relieving their executive teams of the administrative burdens of risk mitigation and management in hiring, they allow those executives to focus their efforts on higher value activities that more directly contribute to the company’s strategic goals and objectives. In this regard, a PEO can be the perfect partner not only because material risks are lowered or avoided, but because it allows the best talent in the company to focus on what they do best.

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Camilla

Camilla is an international lawyer with a keen interest in global business trends and emerging high growth industries.

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