Australia has caught international attention for its highly competitive, stable commercial environment. The Pacific Island nation has experienced 26 years of uninterrupted positive economic growth, and its powerful agricultural and mining sectors make significant contributions to the global economy. With a GDP of around US$1.3 trillion (2017), the country offers prime prospects for newcomers moving into the Asia-Pacific region.
For any company looking to expand into Australia, there are two main options available when considering your market entry strategy. Entrepreneurs can choose to form a legal entity (proprietary company) or engage with a Professional Employer Organization.
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Australia: What is a Professional Employer Organization (PEO)?
In general terms, people are probably more familiarized with the concept of a proprietary company than a Professional Employer Organization.
According to the US leader for Professional Employment Organisation industry news, NAPEO, “A professional employer organization (PEO) provides comprehensive HR solutions for small and mid-size businesses. Payroll, benefits, HR, tax administration, and regulatory compliance assistance are some of the many services PEO companies provide to growing businesses across the country.”
In other words, a PEO provides companies with human resource services. For those expanding into Australia, a PEO enables you to hire staff locally without having to formally incorporate a company in the country.
PEO services for expanding in Australia
By partnering with a PEO, you are giving the power to outsource many of your human resource functions such as employment liability, visa management, payroll and compliance. The PEO firm will become your overseas staff members’ ‘Employer of Record’. These organizations engaging with your management team to address complicated human resource-related matters as part of the team.
A PEO will hire the staff members you need to get your business off the ground in Australia. Typically, these are senior sales executives. They will manage all compliance paperwork and requirements for these staff in Australia, so your company doesn’t need to be physically present and registered in the country.
Key benefits of a PEO
A PEO service company can support business expansion into Australia by hiring and managing staff for your company without needing your physical presence in the country. This saves you the hassle of having to register your company in Australia, which is a more cost-effective approach in the short term.
By hiring employees through a PEO, you bypass strict compliance requirements in place for incorporating an entity in the country, which for Australia includes:
- establishing a locally registered address (for fiscal purposes)
- appointing a resident director and
- appointing a public officer.
The Professional Employer Organization will ensure all employment compliance measures are met, freeing up your time to focus on other core elements of business. Your locally-based employees can then work to develop business and client relationships, and build brand awareness in advance of a full-scale market entry investment.
By electing a PEO to be your Employer of Record in Australia, you’re taking advantage of valuable economies of scale when it comes to group fee structures for insurance and compliance. Employees hired through PEO may also enjoy certain organizational benefits that smaller businesses can’t offer, such as health plans and insurance.
Downsides to using a Professional Employer Organization
The main disadvantage for businesses using a PEO as their market entry technique is that while cost-effective, it limits the company’s ability to make quick progress in raising brand awareness in Australia. Having an established office gives companies extra exposure, so relying on one or sales executives may mean a slower progression towards full expansion and company incorporation.
Additionally, employees isolated from your main headquarters and other colleagues may impact turnover. Though a PEO can offer greater benefits to staff in some cases, companies may find they need to replace their international contingent more often than those based at home.
Company incorporation in Australia
Forming a company in Australia is a more complex process, but depending on what you need it could be the right option for you.
It’s helpful to operate in a country with an open economy for international business. Australia’s commercial environment offers a wide range of preferential trade tariffs with key partners, and government support for new business. Having a presence in this market means giving yourself the opportunity to position your company in one of the most reliably prosperous countries in the world.
Benefits of company incorporation
The steps for company incorporation in new markets can be challenging for foreign entrepreneurs. However, the Worldbank Group assesses that in Australia, company incorporation time can take as little as 2 days.
With a proprietary company, you’ll avoid the need to pay a PEO service provider to manage and organise staff payment. This could therefore save you considerable expenses in the long term, freeing up your budget. By being directly responsible for all aspects of staff management, including payroll and benefits, there will also be less opportunity for misunderstandings between the employees and the employer.
Company incorporation could therefore be considered a better option for larger companies that have clear intentions to enter the Australian market for the longer term. Though upfront costs are higher, the company can enjoy the accessibility of in-house human resources staff and other professionals.
Downsides to company incorporation
The disadvantages of forming a company in Australia are higher initial investment, and relative difficulty of market exit, should operations not go to plan. A PEO partner can offer greater flexibility to enter Australia, whereas those who register their company with local authorities have a greater entry and withdrawal process.
Summary of options
Australian labor regulations for businesses that are expanding can be quite complex and difficult to navigate. Regulations do change from time to time and as a business owner, you might be finding it hard to keep up with. Partnering with a local PEO will give you the freedom to focus on other important areas for your business, as they manage employment requirements for your overseas staff.
However, having an established company in the country offers greater and more immediate brand exposure and access to in-house staff, which may be more desirable for larger multinational companies.
Work with a trustworthy PEO or Company Incorporation Provider
Whether you decide to incorporate a new company or start your international expansion first through a PEO, Biz Latin Hub can help. Our local legal experts can assist with the incorporation of a local company and can manage every step in the process, from the incorporation of the company, registration with local tax authorities to the opening of a corporate bank account.
Our experienced Australia team also offers top-quality PEO services. With local understanding of Australia’s talented workforce, we ensure your business finds the key staff it needs to further your expansion into the country.
Contact us now and we’ll help you design a strategy to capitalize on your commercial opportunities.
Learn more about our team and expert authors.