Why businesses should rethink their Global Employment Organizations

13 minute read 10 Dec 2021
By Rachel D’Argenio

EY Global and EY Americas Mobility Market Leader

Helping clients deliver strategic insights, incremental value, and life-changing experiences. Loves being creative and enjoys baking with her son, going on long walks, and traveling.

13 minute read 10 Dec 2021
Related topics Workforce

In this video, we explore the structure of the Global Employment Organization and how it benefits firms that operate globally.

A Global Employment Organization (GEO) is an internal legal entity that functions as an in-house service provider for an organization. Its mission is to manage a cross-border workforce in a tax-efficient and administratively efficient manner, while also offering benefits and a rewarding work environment for employees. Because of the increase in cross-border employees in the market, as well as the risks that come with it, GEOs have become a popular topic among global organizations recently.

GEOs are designed to facilitate a specific type of global employment. They have been used by the Fortune 500 for more than 50 years and are well-known among assignees or expats.

There are four scenarios where GEOs traditionally manage employee or worker populations:

  1. Talent strategy – when an organization typically hires the best talent worldwide regardless of location
  2. Remote working – when an organization leverages remote working, considering both the company's work location flexibility and the employees' demand to work anywhere they choose
  3. M&A – workers who arise as a result of mergers and acquisitions or sales activities (When a cross-border transaction leaves employees stranded in an area where the company does not have a presence, a GEO can be used to employ these one-time, third-country nationals.)
  4. Cross-border employees – workers who are part of a company's global mobility program, as well as employees who work for a company that operates abroad

Some organizations adopt an alternative approach to managing a cross-border workforce. If they want to engage remote workers but don’t have an internal solution, they'll either hire independent contractors or use a Professional Employer Organization (PEO). A PEO is a third-party company that hires identified employees, provides local benefits, delivers pay, and oversees employer compliance. It is seen as a viable option for a company’s specified, short-term needs.

In exchange for its services, the GEO will charge the operating entity an arm’s-length service fee – maybe a commission or general service charge – based on the activities. This fee represents the GEO’s profit.
Andrea Filippelli
EY Americas Global Employment Organizations Leader.

Differences between GEO and PEO:

  • On the administrative side, the PEO can be effective at meeting local employer reporting and withholding requirements, providing local benefits, and handling specific HR operations, especially when many countries and employees are involved.
  • Because GEO is internal and is responsible for execution, the requirements would be managed directly by company employees and their vendors. Although the cost is frequently less than that of a PEO, the potential "headache" produced by these commitments may be considered more "costly" than PEO rates.
  • The risks associated with a PEO structure include failing to accurately meet compliance duties, going out of business unexpectedly and leaving the company to deal with the fallout and drawing more attention and scrutiny from tax authorities.
  • Depending on companies’ talent strategy and employee experience, some provide PEO employees with company-specific advantages that should only be available to company employees.

PEOs are ideal for small-scale, short-term hiring needs while GEOs are the best solution when a critical mass is reached.

Summary

Internationally operating companies that manage cross-border workers should consider implementing GEO to help them manage risk, centralize administration, streamline operations, and provide rewards and a better employee experience.

About this article

By Rachel D’Argenio

EY Global and EY Americas Mobility Market Leader

Helping clients deliver strategic insights, incremental value, and life-changing experiences. Loves being creative and enjoys baking with her son, going on long walks, and traveling.

Related topics Workforce