International Payroll: How to Create a Better Process

Businesses are always diversifying their operations into foreign countries as the world becomes increasingly globalized. Expanding their operations globally helps them gain access to a larger pool of talent. However, it comes with its set of challenges, one of them being the payroll process. 

This aspect can be difficult to manage. However, there are many paths you can follow to make the process easier, while you enjoy all the benefits that come with globalizing your company.

Below, we elaborate on what an international payroll is and how you can make it an easier process for yourself!

What to Keep in Mind When Paying Your International Employees? 

In human resources, international payroll processing refers to the process of adhering to foreign pay and taxation regulations in order to pay employees abroad. International payroll processing also includes the act of keeping records for all payable employees, their pay, and the applicable social costs in a given jurisdiction. 

The main difference between domestic and international payroll processes is that when dealing with an employee who is not in the same country as you, there are additional factors to consider. 

Here are some of the considerations to keep in mind:

• Local employment laws
• Local tax & compliance responsibilities
• Local data protection laws
• Employees’ work eligibility status
• Currency exchange rates

A global international payroll requires more coordination than domestic payroll. However, it also means that you have access to a much larger talent pool, which is a huge benefit if you want to expand your business.

How to Create a Better Process When Dealing with an International Payroll?

Try In-house Payroll

Global corporations with sufficient internal resources may decide to handle payroll in each foreign branch. To ensure understanding and adherence to international payroll rules, this strategy requires in-house expertise in all countries where they have employees. 

In countries where the company has few employees, in-house payroll can be an inefficient option to implement. If keeping payroll in-house becomes more difficult as your company expands into new key markets, a pros and cons discussion should take place among decision-makers.

Outsourcing with an international payroll service company in some or all foreign markets may make more economic sense.

Outsource the Payroll Process

Whenever you have to pay your international employees, you can outsource your payroll process. Outsourcing your international payroll process is the best way to ensure that everything runs smoothly and that you don’t have to worry about compliance or data security. 

It allows your company to concentrate on its core competencies while lowering the costs and risks associated with international expansion. By working with a company that offers international global payroll services, you can benefit from the expertise and resources of a specialist team that understands international tax laws and regulations. 

Other benefits when you outsource your payroll process include:

• Lower cost
• Improved efficiency 
• Reduced risk
• Increased accuracy and reliability, etc.

Work with a Local Payroll Administrator

Companies with a more established local presence but who are struggling to manage errors, inefficient processing, and compliance on their own should consult with a local payroll administrator.

Multinationals benefit from having a local payroll processing team on the ground in countries with complicated payroll compliance laws when they hire an experienced and efficient local payroll administrator. 

A local administrator can ensure that payroll is done correctly in a specific country while also improving data security and visibility in foreign markets, lowering the risk of fraud and mismanagement of company assets abroad. 

Furthermore, by using a local payroll administrator, businesses can save money by not having to hire additional personnel or invest in costly infrastructure to manage international payroll processing.

Hire an Employer of Record 

An employer of record hires talent on your behalf without requiring you to establish a local entity. An EOR can manage your company’s payroll and taxes, as well as onboarding, employment contracts, benefits, and other responsibilities. 

Because EORs remove two significant barriers to global employment, they are very appealing to businesses looking to hire global talent or expand internationally.

Final Thoughts 

There are many factors to consider when expanding your business internationally. Each country has its own set of laws and rules that must be followed when processing payroll, so it’s critical to know exactly what you’ll need to process international payroll before you decide to go global.