For companies with local resources like physical or HR teams, running an international global payroll can mean working with a global payroll provider who can help with international payments, managing benefits, tracking PTO and holidays, tax filing, and other payroll processes.
For small businesses that don't have a local entity or HR team, managing international payroll for overseas employees can be challenging. With an EOR solution, small businesses can manage international payroll and benefits, as well as HR processes, which typically include services such as onboarding and offboarding, work visa and permit sponsorship, equipment allocation, international background checks, and more.
Not sure about starting with International Global Payroll?Read on to find out more.
International global payroll, sometimes referred to as international payroll processing, is the process of making compliant payments to employees in multiple countries or regions, often through one or more platforms.
When an employer expands to a new country region, business leaders may be able to add another country to their current payroll provider, or they may need to invest in a better platform or solution.
For payroll management, you have two options to consider: centralized or decentralized. If you run international global payroll management from one platform, then it's considered centralized. If you're running payroll globally through multiple platforms, your solution is decentralized.
International global payroll includes managing cross-border payments to employees, global employment, human resources, and payroll and benefits administration.
Most international global payroll platforms include the following:
Built-in compliance tools for tax filing, leave tracking, and other HR processes.
Dashboards for managing full-time employees and/or contractors in different countries
If you're using EOR, the platform may also include other specific features, such as customizable employment contracts.
When it comes to choosing an international global payroll provider, small businesses can choose between two broad categories:Partner-basedMerchant and entity ownedStraightforward
Partner-basedQuotient。Through a partner** model, an international global payroll provider outsources most of the work to a local third party. While this may increase payroll provider's reach, outsourcing can cause issues and delays for third-party providers.
Entity OwnedDirectly.When a payroll provider provides direct employment and owns the entity (which is the case with the EOR), the number of middlemen decreases. This makes it easy for your payroll provider to provide a seamless service, reducing late payments and other issues with variation.
Many HR leaders believe that PEOs and global EORS are interchangeable with global payroll, but that doesn't have to be the case. Generally, international payroll is one of the services offered by PEOs or Global EORS, but there are significant differences.
If your company has a significant presence in a foreign country that employs employees (e.g., you have a local bank account, an entity, registration with the appropriate tax authorities, and an in-house payroll team with sufficient bandwidth HR team), you can pay for a subscription to professional payroll software.
With payroll software, you'll have features that automate manual tasks, such as generating payslips and calculating vacation time. Keep in mind that you'll still need to hire an in-house HR member to use the software and manage payroll.
Working with a global payroll provider is often the cheapest option, as you'll still need to manage your own HR processes in the countries where you operate. Startup costs tend to be lower, but you'll need to pay for setting up and maintaining the entity, setting up an in-house HR team, legal support, and customer support.
Working with a global payroll provider eliminates the need to hire in-house HR experts, while also giving you access to local experts.
For example, by working with a PEO, you establish a co-employment relationship with the PEO. PEOs can help fill the gaps in the HR team. You'll still need to have an entity in-country to work with a PEO.
This global payroll solution can be more costly than working with a payroll provider because you'll get additional HR support.
If you don't have any local presence (no local entity, no HR team) and you want to get up and running in a new country as quickly as possible, then EOR is the best option for you. The cost of working with an EOR is typically higher than working with a payroll provider, but these solutions can also handle other areas such as human resources, local compliance, accounting, work visa sponsorship, employee transfers, and more. EOR takes care of local employment and supports you in staying compliant.
While this option may be more expensive than working with a payroll provider or PEO, it can save months (or years) of time and reduce overall operating costs by hundreds of thousands of dollars.
Localization。Every country (and every region) has different rules, customs, and regulations that employers need to deal with payroll. To successfully manage your international payroll, you'll need to ensure that you offer the right benefits, pay employees at an acceptable cadence, track employee hours, and make all relevant payments in your local currency. You'll also need to determine the most reasonable payment frequency (weekly, biweekly, monthly) for each country.
Compliance。When you're expanding overseas, you'll need legal experts to ensure you're compliant with your new team. For EOR, for example, we offer specific compliance support to ensure that you run payroll across borders in accordance with all local, state, and federal regulations.
Tax law。Taxation becomes more complicated when you hire across borders. In addition to dealing with local payroll taxes, you'll also need to make sure you avoid double taxation.
Foreign transaction fees。Paying workers in local currency can be complicated and expensive. Sending money across borders can also be expensive, sometimes costing as much as 15% or 20%. Check ahead and ask potential global payroll providers what fees they charge and how they manage exchange rates.
Bank charges。Banks can also charge high fees for international payments. If you have a bank account set up, check with your payroll provider and bank to see what could go wrong. If you don't have a bank or local entity, then you can work with an EOR and skip the process of opening a bank account abroad altogether. For example, a SWIFT transfer can cost up to $50 for a single payment.
Benefits administration。Health insurance, disability insurance, retirement insurance, unemployment insurance, workers' compensation are just the beginning. When managing international payroll, you'll need to consider the various benefits your employees expect, from work-from-home reimbursements to grocery allowances, depending on your country.
On-the-ground support。When you begin to expand overseas, you'll need to enlist the support of local legal experts and accountants to ensure you stay compliant. However, it can be difficult to find a local expert when you're far away. EOR provides you with on-the-ground expertise and guidance, so you don't need to spend extra time finding an expert or paying extra.
Data Protection。Each country has data privacy laws that you must comply with in order to protect an individual's personal information. For example, if you hire employees in Europe, you'll need to stay compliant with the GDPR, which may require data encryption and other data protection protocols.
Human resource expansion。Companies hiring employees in a new country will need to set up an in-house HR payroll team or work with PEO EOR for HR support. While each path has its own advantages and disadvantages, companies looking to expand quickly and keep their international team relatively small (e.g., less than 100 people in one country) can benefit from HR outsourcing.
Human ResourcesPayroll team or withpeo/eorCollaborate for HR support。While each path has its own advantages and disadvantages, small businesses looking to expand quickly and keep their international team relatively small (e.g., less than 100 people in a country) can benefit from HR outsourcing.
When you're deciding who to work with as your international payroll provider, ask yourself the following questions:
Does the provider offer comprehensive coverage in the country or market where I plan to pay workers?
Can I pay my employees?
Do I need to set up an entity? (If you don't have an entity, then working with an EOR may be your best bet).
Will the payroll provider handle compliance, tax filings, social security contributions, deductions, and other legal processes?
Does the payroll provider have a platform where our team can manage PTOs, sick leave, reimbursements, and other common HR processes?
Do I just need help with wages or benefits, or do I need additional support with immigration, local laws, human resources, registering workers with an agency, and local compliance? (If you need support with sponsorship for work visas, etc., then you need to work with an EOR).
Is it enough to send payments via international money transfer?
If you own an entity, it's often more affordable to manage payroll internationally. In general, providers charge a base rate (usually starting at around $35), plus an additional fee per employee (usually around $8-$30). However, you'll need to pay to build and maintain a local entity and HR team.
Multi-country payroll means managing payments for full-time employees in multiple countries through one chosen platform. If you pay employees in multiple countries through a single dashboard, you can manage both multi-country payroll and global payroll.