International PEO: a comparison between four spheres (Brazil, China, UK, Germany)

The PEO (professional employer organization) service is an outsourcing firm which provides services to small and medium-sized businesses. Basically, a PEO is a company itself, focused specifically on business tasks like health insurance, benefits, HR,  tax administration, compliance, payroll, and many other services. The partnership of a PEO and any business is called co-employment, and the business’s employees also become the PEO company employees allowing business to offset some of its liabilities.

The business owner retains essential management control over the work performed by the employees and the PEO assumes responsibility for works like the tasks described above.

International PEO is a way to employ people without having your own “company” in the country. There are a lot of reasons for people to use International PEO, the main one is having the freedom to operate locally without the burden of legal administration from having a subsidiary, branch, or the like. It is also a way of following the rules of local employment regulations without having to learn it all and easily stay on top of every regulatory change in the country.

Across the world, the PEO can be a little different from country to country. This varies because of the different laws, employment contracts, work-time regulations, holidays and leaves, and benefits of each country.

Below are summaries of the PEO service of 4 countries that are a reference. We took in consideration: employment contracts, work-time regulations, and benefits

Germany

Employment Contracts:

In most cases, employers prefer a written one as a proof of the agreement but a verbal employment contract is valid and binding on both parties. An employment contract needs to be in the German language and must include at least:
The employer's and the employee's names and addresses; The work commencement date; A job description; The place of work; The hours of work per week; The amount of compensation and method of payment; Leave entitlement; The notice period; Reference to relevant collective agreements, and duration of service in case the employment contract is finalized for a fixed term.

Work-time regulations:

• The Act permits extension of work hours up to a maximum of 10 hours a day if an employee does not exceed an average of 8 hours per working day over 6 calendar months or within 24 weeks.

• After completing their daily work, employees must get a minimum of 11 hours of continuous rest. If there is an interruption during this period, it must be allowed in full after such an interruption.

Benefits:

Employers and employees need to make equal contributions of approximately 20% of gross monthly salary to the statutory pension insurance funds. The employer transfers the entire amount of both contributions to the insurer. The pension benefit depends on many factors, such as the frequency and amount of contributions made, the period during which the payment of contributions occurred, the employee's income and social factors.

Foreign nationals are exempt from essential coverage as long as they have shown the necessary residence and work permits. The social security system includes:

• Health insurance

• Unemployment insurance

• Pension or old-age benefits, and

• Nursing care insurance

• Accident insurance

Brazil

Employment Contracts:

Under Brazilian law, employment contracts need to be in writing only for professional artists, professional athletes, and apprentices. An employment relationship through written contract, tacit agreement or oral promise is also legally valid. A tacit employment agreement is based on the parties' behavior when there is no formal employment agreement. When there is no specific termination date, an employment agreement is expected to be valid for an indefinite period. Employers may hire employees with probationary terms that are treated as fixed-term contracts with a maximum period of 90 days.

Work-time regulations:

• The federal constitution establishes “normal working hours” of 8 daily and 44 for every week unless stated otherwise as part of a collective bargaining agreement. It may be mandatory for employees to work a maximum of 2 overtime hours every day. In an emergency, there may be a need for additional overtime if a specific agreement registered with the Ministry of Labor and Employment.

• Workers get the right to 11 hours off in between 2 working days. For every uninterrupted work period lasting 6 hours in a workday, employers need to provide a 1-hour break for rest or a meal. Employers that fail to allow this rest break must compensate workers with a premium of 50% additional wages for the hour that should have been a break

• Employees get 1 day paid off each week, usually Sunday unless the Ministry of Labor and Employment has given special approval on an employer's request for work on Sunday.

• Underage employees cannot work during night shifts.

Benefits:

• A comprehensive Social Security system manages contributions to provide for workers' compensation, pensions, education funds, unemployment insurance, and other welfare provisions. Both employees and employers need to make social security contributions, which vary based on industry type and workplace risk.

• Social security also grants benefits in the following areas: survivor pensions, aid for dependents of people who are incarcerated, savings funds, benefits for the elderly and those with disabilities, professional rehabilitation assistance, work accident payments, maternity leave payments, family salary support, and accident insurance and sick leave benefits. The legal age of retirement is 65 for men and 60 for women. To qualify for benefits, male employees need to have completed contributions for at least 35 years, women for a minimum of 30 years.

United Kingdom

Employment Contracts:

Under the Employment Rights Act 1996, employers must provide employees a written statement with terms and conditions governing employment within 2 months of the beginning of work. Although employers and employees are free to agree to the terms governing offer of employment, British law imposes a number of obligations, protections, and rights that may override the terms of the contract. No change to employees’ contract may apply without their consent.

Under British law, certain terms are implied in contracts of employment. Including:

• Fidelity (serving the employer in good faith and not acting against its interests)

• Obedience

• Due diligence and care, and

• Protecting trade secrets and confidential information.

Work-time regulations:

The maximum workweek in the U.K. is 48 hours averaged over a duration of 17 weeks. Sectors, such as transport, are exempt from this limitation of working hours, as the employees in these industries qualify as “autonomous decision makers” who can manage their time. Employees may agree to “opt out” of the 48-hour maximum limit by giving written consent. Employers are required to maintain certain records of the working time. Employees receive:

• a rest break for 20 minutes after every 6 hours of continuous work

• 11 hours of rest per 24 hour period, and

• 24 hours of continuous rest every week (or 48 consecutive hours every 2 weeks)

Benefits:

All employers, except some employers that in recent years were required to remit withheld income tax to the U.K. government for the first time, need to enroll their employees into a pension plan. Employers can use the independently run, government-backed defined contribution plan, National Employment Savings Trust (NEST), or their plan, which could be either a defined contribution plan or a defined benefit plan.
 

China

Employment Contracts:

A written labor contract is essential in China to protect both the employee and employer.
The law has specific regulations that determine what happens if a written contract is not provided within a month after starting work. These include:

• Employers may have to pay double the salary for every month the employee worked without a contract.

• If the employee works for 1 year or more without any written contract, the contract is deemed open-ended.

• Contracts can be of 2 types -- fixed term, and open term or a term that expires once a specific task is completed.

Work-time Regulations:

The standard work schedule in China is 40 hours per week, based on 5 days and 8-hour each day. The law makes it mandatory that employees receive at least 1 full day rest during the week, although most employers provide an additional day off, resulting in employees usually being off on Saturdays and Sundays. According to the provision of the Labor Law, employers can extend working hours for production or operational needs as long as the labor union (if any), and the employees give their consent. Employees who don’t have a standard work schedule can work more than 160 hours a month excluding the maximum overtime of 3 hours-a-day.

Benefits:

Employers are liable to provide social insurance benefits to their employees including foreign workers holding work permits. There are typically 5 types of social insurance benefits:

• Old-age pension insurance

• Medical insurance

• Occupational injury insurance

• Maternity insurance

• Unemployment Insurance, and

• Housing funds