International payroll, or global payroll, involves compensating foreign employees located across various regions worldwide while staying compliant with local payroll laws. This process comes with unique challenges, such as juggling different currencies, languages, and time zones and complying with workforce legislation for different countries.
The good news is that there’s an easy way to navigate all the different aspects of global payroll. We’ll share everything you need to know — from the challenges of managing it in-house to how outsourcing to external vendors can simplify the process.
What Do External International Payroll Services Include?
Various global payroll providers offer multiple payroll processing services. The most common services include:
- Administering salary information through accurate timesheets
- Managing absences and holidays
- Organizing automatic payments or direct deposits to employees
- Distributing bonuses
- Distributing benefits
- Distributing pay slips
- Withholding employee taxes
- Making deductions such as pensions as per the legislation requirements
- Dispatching deductions and taxes to the local authorities at designated intervals
- Garnishing wages in accordance with alimony/maintenance debts, court orders related to child support, and more
- Managing change of employees
- Managing changes in salaries
- Updating employee records
- Reporting taxes at the end of the year according to the local procedures
- Adjusting settings for the new tax year
Working with a global payroll service provider can help you cover the entire payroll process, from the administration of salary information to dispatching deductions and year-end tax reporting.
In-House vs. External Global Payroll
Managing international payroll can be approached in two ways: in-house or through an external vendor.
If you decide to do the payroll processing on your own, you’ll have complete control over the process while creating a custom payroll experience for your staff. Not relying on third parties will also make you more flexible, allowing you to make last-minute changes, such as accommodating sick leave or vacation time. Additionally, you’ll have instant access to payroll data and history at all times, in-house.
Outsourcing your global payroll, on the other hand, offers the benefit of an existing streamlined process. This approach saves you time, allowing you to focus on other important tasks, while ensuring compliance with payroll laws across various regions.
Here’s a table for some visual explanation:
| In-House International Payroll | External International Payroll |
| Complete control | Less control |
| Custom payroll experience | Existing streamlined process |
| Flexibility | Less flexibility but more timesaving |
| Easy access to data | Data is stored in a third party but is more secure |
4 Ways To Manage International Payroll
From specialized payroll software to hiring an external service provider, here are your options when it comes to managing international payroll:
- Use specialized payroll software
- Use money transfer companies
- Work with an international payroll provider
- Hire an employer of record
1. Use Specialized Payroll Software
You can opt for a cloud-based payroll platform or application to manage your global payroll. These tools help you collect, organize, and monitor data from all locations where your employees are based, and they automate the timely distribution of payments when they’re due.
Typically, payroll software provides a single dashboard for a consolidated view of your data, ensuring transparency and flexibility. These platforms are also highly scalable, which means they can distribute payments to both small and large teams efficiently.
Advantages of payroll software:
- Saves time due to automated features that streamline repetitive tasks
- Reduces risk of manual error
Downsides of payroll software:
- Requires in-house payroll experts to operate the tool
- Involves a paid license or subscription fee to use the software
2. Use Money Transfer Companies
Money transfer companies like PayPal, Revolut, Western Union, and Payoneer, offer an efficient way to transfer your employees’ salaries internationally in various currencies while keeping transfer fees affordable.
However, it’s important to note that these services do not cover the broader payroll process, such as handling employee benefits and taxes and ensuring compliance with local regulations.
Advantages of money transfer companies:
- Extensive global coverage, making it suitable for employees in multiple locations
- Competitive exchange rates, which help reduce the costs of currency conversions
Disadvantages of money transfer companies:
- No payroll processing support
- No assistance with payroll taxes
- Lack of compliance features for local payroll regulations
3. Work With an International Payroll Provider
International payroll service providers are third-party organizations that manage payroll processes for businesses with a global workforce. These providers handle tasks such as keeping payroll records, distributing payments to employees, managing taxes, and ensuring compliance with local laws.
Partnering with an international payroll company with broad geographical coverage allows you to expand globally without the need to learn the payroll specifics of each country.
Advantages of hiring an international payroll provider:
- Complete payroll outsourcing without involving your in-house experts
- Access to specialized payroll expertise necessary for multi-country operations
- No need to purchase or maintain a software license
Disadvantages of hiring a global payroll provider:
- Typically higher fees compared to payroll software solutions
4. Hire an Employer of Record
An employer of record (EOR) is a third-party company responsible for hiring and paying your employees on your behalf. Unlike a professional employer organization (PEO), which requires your company to be registered in the country where it operates, an EOR allows you to hire top international talent without establishing a legal entity in the respective location.
In addition to this, PEO companies share legal responsibilities with you regarding your employees. An employer of record is responsible for all legal issues without gaining management or supervisory control over your employees’ performance.
Employers of record companies take care of the global payroll process, including timesheet collection, paying taxes, distributing benefits, and reporting to the local authorities. Some EOR companies also provide contractor management services.
Advantages of hiring an employer of record:
- Access to global talent
- Ability to outsource the hiring and payroll process entirely
- Reduced operational costs
- Risk mitigation regarding compliance with local payroll laws and employee classification
Disadvantages of hiring an employer of record:
- Typically requires a larger financial investment compared to using payroll software
The Challenges of In-House International Payroll
Having employees all over the globe and adhering to employment laws in each country can pose several challenges. The three main ones are:
1. Language Barriers
Language and cultural differences can cost you more than just nerves when it comes to payroll. Having expense invoices in different languages and failing to understand employees, partnering organizations, or local authorities can lead to severe issues. Some examples include missing deadlines or filing the wrong documentation.
2. Regulation Compliance
Each country has its own payroll laws and regulations that vary in terms of taxes, pension programs, bonuses, social security, and unemployment. Failing to comply due to insufficient knowledge or language limitations can result in fines and other serious penalties. This roughly translates to your company losing money.
3. Local Payroll Practices
Payroll practices differ from country to country, even among geographically close neighbors. Payment structures can change monthly, affecting tax rates, while benefits and bonuses may either be included in the payment package or calculated separately. There is also the issue of currency differences.
Distributing payment information often involves multiple parties, including employees, tax authorities, and benefit vendors. Moreover, everything has to be planned around different time zones. This can take time, which can delay payment processing.
Delays in payments can have serious consequences. In some countries, it may result in employee dissatisfaction and turnover, while in others, such delays could lead to penalties such as a suspended or revoked business license.
Best International Payroll Services
Below, we’ve gathered some of the best payroll software providers you can partner with to help streamline your administrative tasks:
1. Remote
Remote offers EOR services, including hiring local employees on your company’s behalf, meaning you don’t need a legal business entity in every country where you hire. Remote also manages compliance, taxes, and benefits, while providing country-specific HR support. Additionally, you also gain access to local legal experts for added guidance.
As an international payroll provider, Remote offers:
- Consolidated payroll processing across multiple countries
- Access to payroll reports by country
- Tax deductions
- Tax returns
- Benefit administration
- Expense management
- Pension collection
- Pay slip distribution
- Secure document storage
- Compliance with local payroll regulations
The currencies supported by Remote for billing include EUR, USD, AUD, CAD, DKK, GBP, JPY, NZD, NOK, SEK, and CHF.
In addition to payroll solutions, Remote offers employer-of-record services, contractor management, remote relocation, and consulting services.
Pricing:
- Starts at $599 per employee per month when billed annually.
- If you wish to use Remote’s global payroll solution only, use the Payroll or Contractor Management plan for $29/per employee/month.
2. Gusto
Gusto is a comprehensive payroll service offering payroll processing across the US and contractor payroll processing in 95 countries. It can also help manage health insurance, retirement savings, and compliance alerts across all fifty states.
Gust also offers:
- Payroll
- Tax filing
- Onboarding/Recruiting
- Benefits administration
- Compliance
- Employee self-service and resource centers
- Employee surveys
- Reporting and performance monitoring
The biggest possible drawback of Gusto would be the inability to process international payroll for full-time employees. However, it can still be viable for firms looking only to work with contractors across the US or in 95 other countries.
Pricing:
- Starts at $40/month with an additional $6/person/month and goes up to $80/month with $12/person.
- Plus plan for $60/month with an additional $9/person: Best for customers looking for more premium features
- Premium plan for $135/month and an additional $16.50/person: For those who want full access
3. QuickBooks
QuickBooks is a handy Intuit application that helps with employee payroll. It’s ideal for small businesses (50-150 employees), and it offers centralized subsidiary payroll management for a total of 240 countries. For those already using QuickBooks Online to handle accounting, the payroll features will seamlessly integrate, enabling centralized operations from a common platform.
QuickBooks also offers the following features:
- US Payroll
- Global Payroll
- Onboarding
- Expert Review and Expert Support
- Tax Filing
- Benefits Administration
- Time Tracking
- Expense Management
- Workflow Automation
- Reporting and Analytics
- Third-Party Integrations
- Tax Penalty Guarantee
Pricing
- For the first three months, the software costs $10.50 per month, with standard pricing after said three months from $35/month.
- The Essentials plan costs $19.50/per month for the intro and later builds up to $65/month.
- The Plus plan starts at $29.70/month for the intro and later builds up to $99/month.
- Finally, the Advanced plan initially bills you $70.50/month for the first three months, after which the monthly fee increases to $235.
International Payroll Takeaways
Managing international payroll employees makes global payroll processing a must. This can be a time-consuming and complex process accompanied by numerous challenges, such as local payroll practices, language barriers, and compliance with the regulations in the respective countries.
To manage your international payroll, you can:
- Use specialized payroll software
- Use money transfer companies
- Partner with an employer of record
- Hire a global payroll provider
Working with a reputable payroll company can help you process your payments accurately and securely while ensuring you adhere to local laws and regulations in each country.
Our team ranks agencies worldwide to help you find a qualified partner to implement the latest payroll solutions. Visit our Agency Directory for the Top Payroll Companies as well as:
International Payroll FAQs
1. How do you handle international payroll?
Managing global payroll will require you to understand and comply with different employment laws, tax regulations, and currency exchange rates for different regions/countries. Most businesses that employ foreign employees or contractors will team up with global payroll service providers or utilize purpose-specific software to streamline these processes to ensure that employees and contractors get paid across the globe.
2. Is there a global payroll system?
There are several systems designed to automate and centralize payroll processes across various counties. These systems integrate with local tax authorities, support multiple currencies, and provide comprehensive reporting capabilities to facilitate efficient payroll management on a global scale.
3. What are the benefits of outsourcing payroll processing?
Outsourcing these processes can have several benefits. It can save time, ensure legal compliance, and decrease costs while maintaining data security and enabling scalability. By entrusting payroll tasks to experts, businesses can streamline operations and focus on strategic initiatives rather than routine administrative tasks.
