The ability to hire employees from any corner of the world leads to new challenges, including the need to juggle different currencies, languages and time zones, and comply with workforce legislation for different countries.
The good news is, there’s an easy way to navigate all of the different aspects of global payroll.
We’ll share everything you need to know about global payroll, from the challenges of managing it in-house to how external vendors can ease the process.
Plus, our experts at DesignRush will share their top pick for one of the best companies that offer global payroll services.
Get connected with the right payroll agency for your project.
International payroll or global payroll is the process of paying foreign employees working in different locations around the globe for the work they do for your organization.
Working with employees from other countries does not mean you can simply add them to your payroll processing.
Global payroll involves managing salaries and calculating the correct deductions in each respective country.
This can be a time- and effort-consuming task, requiring thorough knowledge of the tax and employment laws in the countries where your staff is located.
Using international payroll services allows you to:
Organize all of your payroll data in one place
Standardize the data
Calculate and deliver payments in local currencies
Remain in compliance with local hiring and tax laws
Typically, global payroll does not cover independent contractors who are responsible for submitting their own taxes and making mandatory contributions themselves.
Processing payments to contractors in the general payroll can involve operational and compliance risks, if contractors are perceived as employees by regulators and tax authorities. This misclassification can lead to penalties and back-taxes.
In-House vs. External Global Payroll
Managing international payroll can be done either in-house or through an external vendor.
If you decide to handle payroll on your own, you will have complete control over the process while creating a custom payroll experience for your staff.
Not relying on third parties will make you more flexible, allowing you to make last-minute changes, for example, due to sick leave or vacation time. You will be able to access payroll data and history at all times, in-house.
Outsourcing your global payroll, on the other hand, will allow you to reap the benefits of an existing streamlined process. This will save you time to focus on other important tasks and give you peace of mind knowing that all the legalities of payroll are being properly handled.
How 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:
1. Use Specialized Payroll Software
To manage your global payroll, you can opt for a cloud-based payroll platform or application. Using it will help you collect, organize and monitor data from all locations where you have employees. It will also automatically distribute payments when they’re due.
Typically, such an app uses a single dashboard to provide a unified view. This ensures data consolidation, transparency and flexibility.
Payroll software options are scalable, which means they can distribute payments to both small and large teams quickly and easily.
The advantages of payroll software include:
Saved time due to automated features
Reduced risk of manual error
The downside of payroll software extends to:
In-house payroll experts who need to operate the tool
Paid license to use the software
2. Use Money Transfer Companies
From PayPal and Revolut to Western Union and Payoneer, you can use money transfer companies to transfer your employees’ salaries internationally in different currencies, while paying affordable transfer fees.
However, these companies cannot cover the actual payroll process of handling employee benefits and taxes and ensuring compliance with local regulations.
The advantages of money transfer companies include:
Extensive global coverage
Competitive exchange rates
The disadvantages of money transfer companies include:
Lack of payroll processing
Lack of tax support
Lack of compliance with local payroll regulations
3. Work With An International Payroll Provider
International payroll providers are third-party organizations that handle international payroll for their customers. These providers keep payroll records, manage the payroll process, distribute payments to employees, handle taxes and more.
Using international payroll companies with broad geographical coverage allows you to expand globally without the need to learn about payroll specifics in each respective country.
The advantages of hiring an international payroll provider include:
Complete payroll outsourcing without involving your in-house experts
Access to payroll expertise necessary to process payroll in multiple countries
No need for a license
The disadvantages of hiring a global payroll provider include:
Higher fees compared to payroll software
4. Hire An Employer Of Record
An employer of record (EOR) is a third-party company that is responsible for hiring and paying your employees on your behalf.
Unlike a professional employer organization (PEO) that can also handle payroll and benefits but needs to be registered along with your own company in the respective location, an EOR allows you to access top international talent without the need to establish your own legal entity.
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.
Employer of record companies take care of the global payroll process, including timesheet collection, paying taxes, distributing benefits and reporting to the local authorities.
Having employees all over the globe and adhering to employment laws in each country can pose several challenges.
If you decide to handle international payroll in-house, you will need to:
Register your company as an employer in each jurisdiction where you have employees
Familiarize yourself with local employment law
Collect data about all of your employees
Handle the collected data in compliance with the local data protection regulations
Ensure your employees are eligible to work for your company
Process payments for each respective period
Verify if payments were processed and received
Report to local tax authorities to ensure the correct deductions were made
Challenges you may face while handling the entire operation on your own include:
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 serious issues such as missing document deadlines or filing the wrong documentation.
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.
Local Payroll Practices
Payroll practices differ from country to country, even if they are geographically close to each other. Payments can change on a monthly basis, which can result in different tax rates. Benefits and bonuses may be part of a payment package or calculated additionally.
Distributing payment information may involve employees, tax authorities and benefit vendors, and in some situations, the number of parties involved may be 10 or more.
Transferring money across international borders can include complex legal requirements or currency requirements.
In addition, international deposits and planning around time zones can take time, which can delay payment delivery. In some countries, this may result in a loss of employees, while in others such a delay can lead to a suspended or revoked business license.
Planning an accurate monthly or annual payroll budget around changing local regulations, multiple international banking practices and uncertain exchange rates can be a significant challenge.
The success of the process depends on careful monitoring, thorough knowledge of local practices and extensive experience.
Managing the international payroll on your own can require time, efforts and knowledge of local payroll regulations
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 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
DesignRush Recommends: Flexible International Payroll Solutions
Working with 10,000+ verified agencies in different categories, DesignRush helps facilitate professional partnerships across various spheres and industries. Our recommendations are based on thorough research into each service provider’s expertise.
If you plan to expand your operation abroad, working with a global payroll provider can bring numerous benefits, such as expert knowledge, specialized software solutions and in-house support to make sure all aspects of payroll are properly managed.
Our choice for international payroll management? Remote.
Remote can help you manage the payroll and taxes for your international staff, administer benefits and ensure compliance with the local payroll laws.
As an international payroll provider, Remote offers:
Consolidated payroll processing across multiple countries
Access to payroll reports by country
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.
Remote’s employer of record package, which includes international payroll, starts from $299 per employee, per month, when billed annually. Your first employee is free of charge when you sign an annual contract.
If you wish to make use of Remote’s global payroll solution only, send an individual inquiry based on the countries you want to cover, the number of people you plan to employ and other details.
In addition to payroll solutions, Remote offers employer of record services, contractor management, remote relocation and consulting services.
1"DesignRush Recommends: Payroll Management Tool"
Wrapping Up On International Payroll
Having international 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 company like Remote can help you process your payments accurately and securely while ensuring that you adhere to local laws and regulations in each respective country.
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