October 18th, 2020
Land and Expand part III – Global Mobility – GEO/PEO/EOR
Welcome to our 3rd Land and Expand article!
So far, we have touched upon planning and good governance as you expand. Today, let’s tackle the confusion that appears to exist when discussing:
PEO Professional Employer Organisation
GEO Global Employer Organisation
EOR Employer of Record
Despite Briars providing these services for many years, we only became aware of the above nomenclature in 2018, thanks to our American legal advisors. What follows is a snippet of our ‘journey’ as we came to understand the variances, disparities and risks when seeking to use the above in Europe.
The PEO contract operating in the US, where it has gained considerable traction over the last 30 years, involves the concept of co-employment.
Through this route the employee effectively has two employers:
THE PEO: responsible for payroll, benefits, human resources on a state and federal basis
THE US COMPANY: responsible for all other employment terms
There will be a separate commercial agreement in place between the PEO and the US Company. For further information please refer to napeo.org
Unlike PEO there is no professional body available to monitor for best practice. This terminology reflects a service similar to PEO. However, specific research should be undertaken on a country-by-country basis to ensure that any form is feasible. Failure to do so may potentially leave corporates with substantial compliance problems which may not surface until due diligence on fund-raising or M & A.
The concept of shared or co-employment does not work in Europe. However, there are other solutions available, enabling the overseas business to land and expand quickly and compliantly. However, before we take you through your options, let’s bust a few myths.
The following commonly used statements are not correct.
- PEO works in Europe
- GEO/EOR works throughout Europe
- Using PEO/GEO/EOR exempts the need for a local corporate entity
- PE (Permanent Establishment|) is triggered by headcount
Your Compliant Options
With our North American friends in mind, Europe comprises of around 50 countries. Some are members of the EU, the EEA and EFTA. Whilst there are certain common elements of law that apply across the majority of the countries, each jurisdiction retains its domestic regulations and so forth. Not dissimilar to US State and Federal laws. It is essential to remember this as ‘one hat doesn’t fit all’.
If we assume that you don’t trigger PE (which we will address in the October Newsletter) then your options are likely to be one or more of the following:
- Non-Residential Employer Registration
- A form of EOR – country specific
- Commercial B-2-B contract
- Contractors Agreements
Please refer to the July Land & Expand article for details.
By way of a working example, you may find reference to GEO/EOR being permitted in France. Unfortunately, this is not quite as it seems with penalties involved including the criminal offence for the supply of workers and civil employment claims.
Under French regulations, the options open deal with ‘Enterprise de portage salarial’ which are effectively umbrella companies or temporary worker agencies.
For the umbrella option to apply
- The employee identifies the Client Company
- The Umbrella Company contracts with the Client Company
- The Umbrella Company employs the employee
- The employee reports to the Client Company
- The Umbrella Company remains the employer
- The Umbrella Company must first be registered and approved by the Labour Authority
- Employees are capped at 36 months secondment
- Termination of agreement between the Umbrella Company and the Client Company does not permit termination of the employee contract where that is set at an indefinite time.
- Termination of contract of employment is governed by the prevailing French Labour Laws.
For Temporary Worker Agencies
- Agency must be formally registered
- Pre-trading authorisation required
- Solely able to supply workforce
- Placement of personnel for specific purposes only (such as, temporary increase in activity)
- Maximum placement of 18 months
- Criminal offence for non-compliance
This insight is not untypical. If you are considering an ‘EOR-type’ solution, then please do feel free to talk to the Briars team. It’s our job to keep you safe!