Outsourcing, PEO & Single Point of Management (SPM)
Outsourcing is the business practice of hiring a party outside a company to perform services and create goods that traditionally were performed in-house by the company's own employees and staff. Usually done as a cost-cutting measure, it can affect jobs ranging from customer support to manufacturing to the back office.
Businesses can reduce labor costs significantly by outsourcing certain tasks. They can also avoid expenses associated with overhead, equipment and technology. A manufacturer of personal computers might buy internal components for the machines from other makers, for example, to save on production costs. A law firm might store and back up its files using a cloud-computing service provider, thus giving it access to digital technically without investing large amounts of money to actually own the technology. When used properly, outsourcing is an effective strategy to reduce expenses, and can even provide a business with a competitive advantage over rivals.
Like domestic outsourcing, international outsourcing saves businesses money by allowing work to be completed on a contractual basis by non-employees, and in a location with cheaper labor or supplies. But it may also eliminate the barriers encountered by a business entering a new country to establish local market share. These businesses may need native speakers of a particular language or those familiar the indigenous culture or those with some sort of specialized expertise, in the local laws or safety regulations, for example. Hiring directly may not be justified, budget-wise, so outsourcing becomes an effective cost-control solution.
Outsourcing of Human Resources (PEO)
What is a PEO?
The acronym PEO stands for Professional Employer Organization.
PEOs work with small businesses to help them manage payroll-related taxes, certain human resources functions, access to benefits, and other employer-related administrative functions necessary to running a business.
As your dedicated Employer of Record (EOR), we will hire employees in-country directly on your behalf. We handle risk mitigation and compliance to take care of the big picture—while you maintain day-to-day control of your employees.
Fast market entry to get you up and running in a new country in as little as 48 hours
Cost savings of 60% when compared to establishing a foreign entity and ongoing maintenance costs in-country
Risk mitigation by ensuring your company, intellectual property, and employees are protected
Streamlined process with a provider that manages compliance, payroll, and benefits, simplifying your international invoicing
FAQ's on Outsourcing HR
How much is the VAT tax?
The Amount Payable for the Vat tax is 16.33% above the Total Outsourced Cost.
Does the Brazilian Labor law recognizes a Fixed Employment agreement?
What are the cost savings in using a PEO?
The cost savings in using a PEO service arise at every stage including:
Are they employed on local employment contracts?
Yes. The local employment contract is required to comply with Brazilian labor and employment laws.
Is there a minimum or maximum period we can engage "Setup Global" as a PEO service provider?
We have different situations where clients engaged us for 3 to 6 months whilst their local entities were being established. Concurrently we do have clients who have been with us form many years.
How do we manage leave requests and tracking leave consumption?
Leave requests are controlled by you, the client. The employee will request leave directly to their line manager or HR as normal and you will review/approve it. But we need you to report any leave consumed (annual leave, sick leave and unpaid leave) each month before the day 27. This allows us to track against the overall accruals. If you are in any doubt whether a leave request is in line with the statutory allowance please talk to your account manager
How are taxes and social security contributions paid?
Employer and employee taxes are handled according to the requirements of the Brazilian regulations. These will be clearly outlined in your initial proclaim along with an explanation of how they are calculated. Each month we’ll invoice you, in advance of the payroll date, for what we call the Total Cost of Employment.
Who pays the taxes?
"Setup Global" handles payment of income taxes and employer taxes to the host country tax authorities as part of the payroll process.
Who pays the employee? Who calculates payroll?
Setup Global, as the Employer of Record, will pay the employee their net salary through the local payroll.
Why use a PEO service?
Can we set the local salary in a foreign currency?
Not possible. The client and employee must agree what the salary should be in local currency and this becomes their fixed salary. However, the salary can be adjusted, but typically it can only be increased as lowering the salary requires agreement from the employee and may also raise red flags with tax and labor authorities. Nonetheless, the client can pay Setup Global in USD without any additional tax and even so we will grant the employees payment in BRL currency.
What are the advantages of using Setup Global as an Employer of Record?
The leading asset is that it makes international employment easier and cheaper.
Can we still reimburse employee expenses directly when using an employer of record service?
We recommend expenses be paid through us. Just to be clear if expenses are reimbursed by the client directly to the employee, Setup Global will not be responsible for ensuring it is done compliantly. There are three risks.
Who manages the employees?
The client maintains primary responsibility for the employee’s activity and conduct in Brazil, however as the Employer of Record, Setup Global is directly responsible to the authorities for the employment.