In an increasingly global world, international businesses are always on the hunt for ways to operate more efficiently, and to coordinate certain processes across all the territories they’re in.
Payroll is no exception to this, and despite huge disparities in laws, currencies and cultural norms between different countries around the globe, it’s entirely possible to run a more harmonized international payroll strategy.
This blog takes a look at the basics of international payroll, the key challenges to navigate in getting it up and running, and the solutions that can help along the way.
What is international payroll?
International payroll challenges
International payroll solutions
In a nutshell, international payroll means the payment of employees who work in a country other than the one in which the company is based overall. Pay for any employees that are employed through agencies, or are signed up as contractors, sometimes also fall under the international payroll umbrella.
As part of international payroll, companies should consider what the actual processing entails, and the model they put in place to run it:
The act of running international payroll includes several actions as well as paying staff their wages. Employers should also issue timesheets, make tax or insurance deductions, send those deductions to the relevant authorities as required, and garnish wages to comply with any legal restrictions in place.
It is entirely possible for larger organizations to run an international payroll model in-house - but it may not be practical to do so. Such a strategy would take up vast amounts of time and resources within the payroll team, and leave them very little scope for undertaking their other essential duties.
The alternative is to use a global payroll solution, which may not necessarily cover every single function of international payroll, but will lighten the load considerably. What’s more, it can automate many of the tasks like co-ordinating data and checking laws in different jurisdictions that can be especially time-consuming when done manually.
Whether run in-house or by using a global payroll solution, international payroll is a major undertaking. With so much variation in what’s required from country to country, the model that’s in place must ensure everything is adhered to, but still serves the needs of every employee in every territory. Four challenges stand out in particular:
Every single country has its own set of rules and requirements around when and how employees should be paid, minimum wage legislation, and even the payment of statutory bonuses at certain times of the year.
Not only will every country have their own tax laws, but some of them will overlap through tax treaties and similar arrangements. International payroll needs to account for this, as well as all compliance demands such as information for auditing
All data involved in international payroll processing has to be protected from unauthorized access or disclosure, in accordance with the likes of GDPR in Europe, LGPD in Brazil, or the recently introduced China Civil Code
Working across several different territories means many different currencies to deal with, and therefore many different exchange rates between them. Keeping track of these constantly moving targets and making sure everyone is always paid correctly can be especially complicated.
If you choose to adopt global payroll solutions instead of an in-house approach for your international payroll, then you will have access to a wealth of expertise and technology. This help can make your international payroll processing quicker, more efficient, better coordinated and can better ensure constant compliance. Areas to explore include:
Teaming up with an expert partner, one who can provide a mixture of assistance and international payroll software, can help lighten the load of running payroll worldwide. These partners can take care of all of the most complex tasks - and use automation for jobs like rationalizing data from different sources - so that payroll always runs smoothly, however many countries you operate in.
These payment or treasury services take care of accurately paying employees the correct amount at the right time, regardless of the currency they’re paid in. They can also ensure the appropriate paper trail is established, so that information of who has been paid and how much is always available for compliance needs.
This innovation puts employees in control of when and how much they’re paid. Through an online platform or even a mobile app, they can check their wage balance, which accrues day-by-day or shift-by-shift, and instantly withdraw however much they want to their own bank account. Earned Wage Access, also known as on-demand pay aids flexible working, helps keep employees out of debt and encourages positive employee experiences.
There’s much to consider when adopting international payroll, but outsourcing to a partner and making use of their software and innovation can remove much of the stress. These international payroll solutions show the way forward in operating a global business where payroll and associated functions are almost as simple to run in dozens of countries as they would be in one.
CloudPay’s global payroll solution is ideal for businesses exploring the brave new world of international payroll, and how it can integrate with their wider business operations. Learn more about what we do and how we do it here.