Global Payroll Management & How Your Business Can Stay Compliant

When a company decides to go global, it needs to plan out appropriate salary payouts to all of its employees and freelancers along with benefits that may be required by local laws. In other words, it needs to figure out how their global payroll management is going to work. In this article EasyStaff discusses global payroll management and what you need to pay attention to when going global.

Global payroll management is the set of operations to streamline payroll data across international divisions within a single organization to deliver accurate salaries to its employees in full legal compliance with their local regulations. The process of unifying and accurately systematizing data is the same for hiring through an EOR (employer of record) or hiring independent contractors. The main challenge behind global payroll management is to set up a system that performs necessary payroll procedures simultaneously across countries. This challenge can be further broken down into smaller difficulties that international businesses are likely to face.

In every country, the role that employers pay in payroll tax payment is different. In Europe, it is often the employer’s responsibility, and so employees receive money and don’t engage with the tax authorities at all. But in other states, employees and employers are equally responsible for proper tax dedications and pay their shares separately. At the same time, laws and regulations are altered frequently, and meeting requirements is increasingly difficult as the company enters new countries.

To figure out how much tax is to be paid, businesses must establish systems to collect all the necessary information from attendance reports to expense reports and performance grades. Global payroll management must also take into account a large number of variables that affect salaries, such as public holidays, 13th salaries, etc. And it only gets more troublesome in case of sales representatives that get shares of how much they sell.

Once a company goes global, it is exposed to multiple organizations that control payroll in different countries. So companies are likely to even have one EOR per country they are in. Importantly, an international business needs to store data in appropriate language and format to both use it for its own needs and to be transparent for audits from local controlling bodies.

After all numbers and figures have been drawn, a company needs to actually send money to recipients. Apart from workers, funds must also be credited to tax authorities, benefit vendors (e.g. health insurance providers), local B2B partners, etc. Not all of these transfers are simple card to card payments. Global payroll management is also about finding and incorporating proper payment methods in accordance with local requirements.

Data associated with payroll is the primary target of cyber-criminals. Thus, it needs to be subject to the highest cyber security protection protocols — GDPR in Europe and CCPA in the US. It is critical that businesses are putting maximum effort into protecting the extremely sensitive personal information of their employees.

In-house. Many new businesses cannot afford an EOR partner. While they test waters in a new location, it is easier to rely on the existing staff to figure out how to pay their remote employees.

• Pros. It is relatively inexpensive. The method is the best for when a new market is only being tested out.
• Cons. Working with an overseas employee requires local know-hows and insights which are not accessible from across the world. The method is poorly scaleable, so the team may get overwhelmed with the amount of work caused by international expansion.

By location. Once your business gains traction and secures presence in several overseas locations, a logical solution may be to hire an agent or a contractor per location to manage your global payroll.

• Pros. Having a local who knows all there is to know about local tax regulations and labor laws keeps your business and your staff secure, protected and compliant.
• Cons. Separate entities don’t exchange information. Data is stored separately and may be difficult to retrieve and compile for an overview.

Unified services. To overcome differences in how data is collected and stored across countries where your business operates, you may turn to a single payroll management provider that runs the process for you.

• Pros. The process of global payroll is seamless and easily scalable. Data is standardized, so it’s always readily available.
• Cons. For some businesses, relying 100% on a third-party service provider may be seen as a risk as the entire mass of employee data is shared with an outsider.

What types of global payroll providers exist?

Global payroll providers run on different models that can roughly be classified as wholly owned and aggregate.

• An aggregate model means a network of partners to perform payroll management locally. Basically, a team in your home country has partners across the world to manage payrolls locally.
• A wholly owned model is when a provider has their very own branches across the world. Instead of aggregating partner organizations, it develops its own network of offices across the world.

How can SMEs stay compliant globally?

SMEs are always on a budget. It is startups and companies just starting out that are particularly careful with how money is spent. Where there is an opportunity to do things in house at a lowest possible price, they will go after it. That’s why delegating payroll management may not be an option as global payroll management solutions tend to be expensive.

Yet going global is a necessary measure if a business intends to increase revenue. For SMEs, global payroll management is as crucial as it is for large businesses and corporations. Staying compliant is a prerequisite for successful international growth. Thankfully, there are affordable pay-as-you-go alternatives to costly partnerships.

EasyStaff is a top option. It acts as a B2B partner on a B2B contract and it helps companies pay their employees and freelancers worldwide. Through a wide network of banks, EasyStaff is able to deliver payments from you to your teams anywhere in the world. EasyStaff is always on the lookout for changes in laws and regulations, so closing documents it provides for employers and their recipients are created in accordance with international requirements.