In our modern world, it's not unusual for companies to operate in many different countries. This brings its own set of challenges, of course, but there are also myriad benefits.
Your customer base expands exponentially, especially if you operate physically as well as online.
You enter new markets and enjoy the different commercial opportunities each one brings.
But most of all, your business gains access to human capital and cultural insight from around the world rather than being restricted to talent located closer to home.
This article gives you a few vital tips to reducing the potential headache of global payroll, allowing your organisation to capitalise on the benefits.
International Payroll Explained
First, let's recap what international payroll - also referred to as global payroll - means.
Put simply, international payroll is the process by which a company’s employees are paid for their labour when the company operates in two or more regions.
We specify regions rather than countries because of the presence of international blocs. It’s possible to employ people from multiple countries in the EU, for example, while only making payments in one currency.
Because global payroll deals with payments between different regions rather than within one region, there are many inherent complexities. Varying tax laws, employment laws, cultural expectations, and languages interact to make a refined and unified payroll system harder to implement.
Payroll Tips For Your International Payroll Employees
When it comes to international expansion, however, the benefits often far outweigh the potential challenges. The tips in this section are designed to make the global payroll process that little bit easier.
Hopefully they’ll help your organisation to position itself to tap into the benefits without falling into common pitfalls.
1. Be clear on the nature of their employment
International employees all fit into one of these three buckets -
- Individuals from the organisation’s home country who are sent abroad temporarily for a project or role.
- Individuals from the new country who are employed by a location in that same country.
- Individuals who work remotely and are not fixed to one location.
The precise method of payment will vary depending into which category an employee fits.
2. Be aware of all required deductions
It’s not just a case of making sure your employees pay the required tax on their income. Your organisation also needs to factor in other deductions like social security (National Insurance in the UK, with similar schemes operated in various other countries), pensions, and payroll tax.
Depending on the region and the nature of employment, responsibility will fall differently. Ensuring your organisation and its employees clearly understand - and carry out - their responsibilities is key to ensuring smooth payment.
3. Keep data up to date
Global payroll systems rely on the accuracy and reliability of data. If information becomes out of date or incorrect, processing payment is liable to suffer. Building a mutual channel of communication where changes to data, or requests for confirmation that existing data is still correct, can be made by either side with the confidence that such requests will be met.
4. Keep a paper trail
Keeping a paper trail around your employment, payment, and tax affairs is always recommended, but especially so within the context of an international relationship. Things can get tricky quickly when calculating tax obligations across borders, and state revenue services are famously demanding when it comes to auditing suspicious tax arrangements, and clawing back any owed money. Regardless of whether the avoidance was intentional or deliberate.
To avoid being caught out by any unexpected audits or requests for information, both sides should be diligent in keeping records and documentation about everything pertaining to payroll.
5. Observe each other’s customs
For organisations hiring international employees, and for workers entering the employment of an organisation headquartered abroad, there will be a culture shock.
Organisations risk inadvertently violating cultural norms or expectations, such as bonus structures or observation of local holidays.
Employees, on the other hand, must adjust to a work style which, as a hybrid between foreign and national, can potentially be quite different from what they’re used to.
On both sides, it pays to do research, be patient, and give the benefit of the doubt. In the context of payroll, this means looking to resolve disputes or other issues calmly and internally in the first instance. However this extension of patience and acceptance of a new culture’s interaction with your own is valuable at every step of an organisation.
6. Track time accurately
The biggest tip for an international employee is to track your time carefully and accurately. Your payment depends on accurate submissions of time completed. Processing of payroll relies on these figures to calculate what’s owed, and this forms the basis of calculations of all manner of deductions.
So, submitting accurate time reports, whether as physical timesheets or through software, is the crux of everything.
Tying back to tip number 4, accurate reporting also strengthens your recourse by providing a more detailed paper trail.
7. Be punctual
Tacking onto the above, be punctual in recording and reporting your work. As the information on which the whole process relies, ensuring punctual delivery lets everything run smoothly.
As with tip 5, this is valuable advice at every step of an organisation, too.
As employees of an international organisation, your staff may have a slightly different experience with their payroll than if they worked for a domestic organisation.
As an employer with international operations, setting expectations and communicating the nature of your relationship is important. By being aware of common pitfalls in the international payroll process, your organisation is better able to communicate the risk of these, and put measures in place to avoid them materialising.
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