Global payroll can be a challenge for businesses that have remote teams. In this post-pandemic age, remote jobs have become the new normal, and people are increasingly shifting toward working from the comfort of their houses. This trend has been surprisingly beneficial for companies as well. Now, companies are more interested in hiring employees on a remote basis since it can save up many costs. Remote jobs are not free from flaws. However, this new trend will not slow down any time soon.
International expansion is also a major reason for companies to hire international talent. However, this brings in payroll issues that the companies might face. To counter this problem, businesses are increasingly shifting toward global payroll services instead of managing the payroll in-house. It is difficult to deal with international payroll, especially with all the rules and regulations you are expected to follow.
Payroll international services can really help large organizations keep the payroll in check for all employees. If a company decides to keep payroll in-house, it will require a dedicated team of well-trained employees to deal with international payment intricacies. However, difficulties start piling up once you hire more international employees for your payroll.
In this article, we’ll talk about the benefits of global payroll solutions and how they can help organizations fulfill the difficult task of managing international payroll data.
Before diving into it, let’s first understand what global payroll entails.
What is Global Payroll?
Global payroll is a process that helps companies manage employees’ wages. Not only wages but a payroll service can also help you calculate bonuses, benefits, and withholding taxes. The biggest advantage of global payroll is the ability to pay international employees without any hassle. A global payroll service provider will organize and protect your international payroll data. You don't have to worry about local laws and their compliance since the service provider takes care of everything.
This is also helpful if you need to pay foreign contractors. Since contractors are not part of your payroll, you don’t need to worry about employee benefits or taxes; however, dealing with international contractors can get complicated really fast. A global payroll provider can also help you make regular payments to international contractors without any hassle. Payroll processing is not as complicated as many think. Once you have the right payroll information, you can easily manage your international payroll. This is perfect for international businesses that are looking to streamline their payroll process. The good thing is that it is perfect for large and small businesses.
Difference Between Global & Local Payroll
Your regular staff can easily cater to the local payroll because they know the local laws and rules that must be followed. On the contrary, hiring employees from different countries will entail complexities such as:
- Employee benefits
- Employee classification
- Payment methods
- Exchange rates
- Minimum wage laws
- Tax rates and compliance issues
Dedicating your resources to deal with these issues can be detrimental to your business. Instead, it is easier to outsource the global payments and make your employees work on more important tasks. The penalties in case of non-compliance can be very huge so it makes sense to hire a global payroll provider to save manpower, money, time, and efforts.
Moving on, it is important to consider the major global payroll challenges (out of many).
Let’s begin.
Global Payroll Challenges
Handling payroll is a sensitive job, you need to ensure accurate salary disbursements, and it’s certainly not just that. Here we’ll focus on three main global payroll challenges i.e., local compliance, local compliance, data management and security, and international money transfers.
1 Local Compliance
Employers need to ensure local compliance for every international employee they hire. Employees can be from multiple countries which means the employer has to follow multiple laws of each country. Some of the local compliances are:
- Employment laws
Hiring foreign workers remotely means you have to ensure the country’s labor laws are met. In this case, the company’s laws are not superseding the country’s law; it's the opposite.
According to the country’s labor laws, the minimum wage, weekly hours, and employee benefits all differ. Even what constitutes an employee benefit is considered different depending on the country. It can be paid leaves, maternity leave, social security, health insurance, or any other benefit. Further, the level of education required for a particular benefit or a job might also be different.
Let’s take a look at an example to understand this challenge better. In the US, if a company hires an employee from Serbia, following local laws, the employee should be given 52 weeks of maternity even though there is no such law in the US. Since it is the country's local law, the employer must comply.
- Tax regulations
Tax regulations differ from country to country. Even figuring out your home country’s taxes is not easy, let alone a foreign country’s. A few tax-related pieces of information that you might need are tax deadlines, tax withholding regulations, income taxes (federal and regional), and payroll taxes, among many others.
Employment taxes are complex since they contain many conditions and/or clauses. For example, in the US, the stipend is considered taxable unless employees reimburse the expenses for buying equipment.
Automation can be a lifesaver in this situation; however, to better use automation, you need first to learn a lot of minor tax details before you move towards the automation process. Hiring a global payroll provider will allow you to work freely, knowing that professionals are handling all the legal complications.
- Employee classification
Employee classification is important to consider because countries have different criteria. For example, whether a worker is considered to be a contractor or an employee depends on the employee classification. Failure to properly classify employees can result in multiple lawsuits or heavy fines; however, you need to familiarize yourself with this.
The meaning of being a contractor and an employee is different and there is no general employee classification rule, meaning that every country follows its classification standards. To get better clarification, consider the following example. Compared to the US, Germany has set simple employee classification. In Germany, you are considered to be a contractor if you set your work schedule and work independently without directives. However, the same requirements in the U.S would mean that the person is a senior full-time employee.
2 Data Management and Security
Employees’ sensitive data is part of the payroll, including account information and social security. Data management and security have become crucial since data leakage, ransomware attacks, and phishing spam have become more common. If you hire international employees, you will need to pass around data online, which can lead to severe data management and security issues.
A dedicated payroll international service can provide the type of security you’re looking for, including protection of data, scan systems, strengthening cybersecurity, timely responses to data breach incidents, and heavily encrypted data & passwords.
Employers are expected to follow international data regulations. For instance, if you hire EU employees on your payroll, you must follow GDPR standards. That’s just one example; imagine you hire employees from 10 different companies - meaning the burden to comply with 10 different data regulations. A global payroll solution can transfer the legal liability from you to the service provider; you just need to sign a DPA or Data Processing Agreement.
3 Foreign Money Transfers
Sending money internationally is not a simple process. Although many service providers have simplified the process to make it quicker, it can still be a time-consuming process and at times, expensive. When it comes to international money transfers, you can get tied up with multiple costs that are associated with the process. Since many third parties are involved, the transfer fee adds up from multiple sides, and in the end, the employer has to bear the costs.
The challenge here is that different countries have different payment methods available. You have to ensure that the proper payment method is chosen to pay your employees' salaries - further increasing the time and expense. Some countries use payment options like IntaSend, PayPal, Payoneer, SWIFT, cryptocurrency, and many more.
When choosing the payment methods, you also need to ensure that the employees can effectively receive salaries in their local currency. This means you can select the payment methods that support the local currency. Further, you have to bear the transfer and intermediary bank fees. Lastly, you need to show proof of the legitimacy of your transactions, usually in the form of transaction statements or invoices.
Benefits of Using a Global Payroll Provider
Quick Implementation
First, let’s focus on the basics. The implementation process is the time it takes for a service provider to start handling global payroll payments. Ideally, your chosen payroll service provider will have a smooth and quick implementation process that can help in saving time.
You need to ask your potential service provider the following questions:
- How long is the implementation process?
- What are the steps involved?
Another way to better judge service providers is to look at their past case studies. That way, you can ensure that your global payroll will be taken care of without any hassle.
User Experience
The ability to access and use the global payroll solution easily can determine whether it’s worth the investment or not. Even if a global payroll solution provides multiple cutting-edge features, no one will be happy using it if it’s not good in terms of user experience.
Good payroll software should be highly intuitive and adjustable based on your company's needs. Here, it is better to determine what kind of payroll software you’re looking for.
Ask yourself the following questions:
- Do I need 24/7 accessibility?
- What are the important data insights that you need?
- Which functionalities can help you?
- Does it leverage new technology?
- Is it a cloud-based platform that is easily accessed from anywhere?
Once you’re able to answer these questions, you will find exactly what you’re looking for.
Ability to Scale
Since global expansions require you to improve your payroll process, you also need the type of global payroll solution that can scale well as your business grows. Companies often start entering new markets and continue to go exponentially. You need to ensure that your chosen solution is the one that supports high scalability.
In terms of scalability, you should find a global payroll provider that can support more countries and allow you to further grow. At IntaSend, we are introducing a mass payout system to 11 countries including India, Pakistan, and 9 African countries. We are working hard to further expand supported countries so your business can keep growing with us.
Automation and Standardization
The core feature of any global payroll service provider is the automation and standardization it offers. The idea behind this is the ability to improve process speed and accuracy. You can save countless hours through error-free global payroll automation and standardization will help with keeping data formats and processes in a standard way.
This can consolidate the whole payroll data from a single point. This can further provide much-needed data reliability and transparency which seems to be a big concern recently. You will leave the tedious task of manually extracting global payroll data and harmonizing it for accuracy.
Moreover, these features are extremely useful especially when you’re preparing audit reports that require high accuracy and the margin of error is unacceptable.
Advanced Reporting
Reporting is an obvious consideration when we’re looking for a payroll service provider. When you’re dealing with a global workforce, you need advanced reporting features that can provide you with various reporting options. For example, if you’re looking to see a report based on a particular country, you should be able to easily get and analyze it. This feature can help you compare reports for several countries and draw useful conclusions.
Compliance
Without a doubt, compliance is the most important for any employer. Having a global payroll solution allows you to let the professionals take care of the legal complications. The compliance burden only gets worse when companies start expanding globally therefore, you need a solution for your business that has a proven record of providing exceptional compliance services in the past. In case you need advice on payroll regulations, benefits, or taxation, you should receive the best advice that can help you with your international expansion goals.
Workforce Management Tools Integration
Integration with workforce management tools can help business success since it can make the process highly efficient. Businesses have many useless management tools at their disposal that they can use to make global workforce management easier. Your ideal global payroll solution should support integration in order to work well with these management tools. Without the integration option, all the tools are useless and your global payroll solution will not be working in an effective manner.
Data transfers between the HR system and global payroll should be smooth and flawless which can help improve process time as well. Similarly, bookkeeping and accounting tools should work well with each other in order to be effective. Therefore, an open API should be provided by the global payroll platform to allow seamless integration between the tools that improve the overall global payroll process.
International Payments Solution
Managing payroll is more than just calculating accurate salaries and deducting them. Another important aspect of this task is to actually ensure that your global team is getting paid on time without any hassle. SWIFT payments are one way to send employees salaries; however, they are really expensive and slow. Global payroll providers need to find a better alternative than using SWIFT payments since they are unreliable and often restricted in a few countries. Having a digital wallet can help you make quicker international payments.
Freelancers and Contractors Support
Post-pandemic, most companies have shifted towards hiring freelancers, remote employees, and contractors to fill the workforce. This is especially true for start-ups that are just entering the market. Since hiring full-time employees requires employers to pay a lot of benefits, it is more convenient for new businesses to hire contractors and freelancers to save excessive costs. For such businesses, having a global payroll solution can be a blessing since it can help save and manage payroll data and make monthly or bi-monthly payments to freelancers and contractors without worrying about benefits. Ideally, you should choose a payroll provider that provides contractor management tools for you to work with.
If you’re looking for a user-friendly, affordable, and effective global payroll solution, IntaSend can help you. Our platform supports global mass payout which can help send payments to multiple employees in just a few steps. Drop us a line and we’ll be in touch to help you.
