Hiring and managing global teams has become an important way for organizations to maintain a competitive advantage. With the tech crunch and labor shortage, expanding internationally allows your business to hire the best talent for your needs regardless of location. An added bonus is that international workers are often much less expensive to hire.
However, despite the many benefits of working with an international remote team, there are some complexities as well. One of the biggest hassles with remote teams is setting up a compliant remote payroll schedule. Every country has its own regulations regarding payroll schedules, taxes, and withholdings. Some countries have no regulations regarding when employees should be paid while others prescribe a particular schedule.
Challenges of Setting Up a Fully Compliant Remote Payroll Schedule
Following the payroll schedule of multiple countries can be a hassle for even the most sophisticated HR teams. You need a thorough and complete understanding of paydays, tax contributions and withholdings, benefits, leave, and more in order to avoid compliance violations. Violating local labor or tax laws can leave you facing severe penalties, fines, lawsuits, and even result in your company being banned from doing business in some countries.
Some of the most significant hurdles businesses face when setting up a compliant remote payroll schedule include:
Incorporating your international employees into your existing payroll system
Although it may seem easy enough to add your global remote employees to your current payroll, that isn't always the best, or even a legal, option. Most countries grant workers employed by international companies the same protections that those employed by domestic companies have. This means that you have to fulfill the same obligations that domestic employers do.
You may have to pay different employees on different days and follow different withholding and tax contributions for each country where you employ people. To add to the complexity, you'll have to keep track of different benefit and leave requirements for employees from different countries.
Costly bank transfers and currency exchanges can be expensive and affect the consistency of your employee's pay. It's bad for employee morale if they don't know how much to expect in their paychecks. Working with a global payroll partner like Skuad can eliminate this frustration and ensure that your employees are paid on time and compliantly no matter where they're located.
Employer and employee contributions
Although the specifics vary greatly, almost all countries require employer and employee contributions that have to be withheld for benefits such as healthcare, unemployment insurance, or pensions. The exact amounts will depend on where your employees reside. It's vital to establish your employees' tax residences before you hire them so that you can pay them compliantly.
Protecting data security and privacy
The more endpoints you have in your network, the higher your risk of cyberattack grows. Different countries have different laws regarding the procedures and protections you must provide to secure private information and data. Transferring data across borders must be done in compliance with the regulations of both nations.
Overtaxing your in-house team
While your in-house HR team can likely handle your local workforce without any issues, expecting them to handle global payroll may be too much of a burden. Unless you have labor and tax law experts for every country where your employees reside, you risk violating some aspect of international regulations.
Optimizing employee experience
Your employees are your company's greatest assets. Poorly managed payroll puts unnecessary stress on your employees. They have bills to pay and families to support, so worrying about late or inconsistent pay will negatively impact their experience working for you. With the Great Resignation and the labor shortage that's affecting all industries, mishandling something as important as payroll will harm your company's ability to attract and retain top talent.
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The Importance of Complying With Local Laws When Setting up a Remote Payroll Schedule
Companies that fail to effectively manage global payroll will limit their ability to rapidly expand and take advantage of international opportunities. Additionally, the consequences of non-compliance with local laws are significant and include:
Financial and legal risks
Trying to manage your global payroll on your own, even when done right, can be expensive due to the costs associated with currency exchange rates and bank fees. Enlisting experts to ensure you're following local regulations will be costly. However, botching the job and failing to comply will be even more expensive. You can face fines, penalties, and lawsuits for noncompliance.
Failing to adequately protect the data of your employees is another risk associated with poorly managed payroll. The unauthorized disclosure of sensitive information can leave your business exposed to legal consequences, fines, and damage to your brand's reputation.
Changing laws and regulations
Rules that apply in one area may differ significantly from the rules in another area, even if they're in geographically close locations. Employing across borders leads to a hodge-podge of different laws and regulations that must be followed and are often contradictory. Trying to establish your own entity in every country in which you employ is prohibitively expensive and too time-consuming for most organizations.
Another barrier to effective payroll management is that rules and regulations are constantly changing. Procedures that were compliant can become illegal when new labor and tax laws are passed. Staying on top of the changing global regulations requires a team of experts. Outsourcing your global payroll management to Skuad gives you that team of experts who will ensure you're compliant in over 160 countries.
Steps To Successfully Set Up a Fully Compliant Remote Payroll Schedule
Effectively managing your global payroll isn't easy, but it can be accomplished. Here are some best practices for setting up a fully compliant remote payroll schedule:
Understand the complexities involved
One of the biggest mistakes businesses make is thinking that handling global payroll is only slightly more complicated than handling domestic payroll. Regardless of how talented your HR team is, they're probably not equipped to handle the intricacies of international payroll compliance. Understanding the challenges associated with global payroll is the first step in managing it effectively.
Work with local experts
You will need the expertise of local, in-country experts to handle global payroll effectively. You wouldn't seek advice on your country's tax laws from an attorney based in another country. Fortunately, you don't need to hire experts in every country to benefit from local legal minds. At Skuad, we have a team of experts that stay on top of the ever-changing legal regulations across the globe.
Standardize your processes
Although you'll have to handle compliance in different countries differently, your processes should be standardized and incorporated into your company's existing structure and systems. Using standard processes as much as possible will protect your operational efficiency and provide effective reporting capabilities for domestic compliance.
Standardizing your processes also allows you to treat your employees equivalently even when they're entitled to different rights and protections based on their legal residence. Formalizing your compensation structure and being transparent about it will go a long way toward ensuring your employees feel they're being treated fairly.
Things To Keep in Mind
Scheduling global payroll can be overwhelming and the consequences of getting it wrong can be severe. When you're planning the best way to manage your international workforce, keep the following considerations in mind:
As with payroll non-compliance, the consequences of misclassifying workers can be serious. It can be tempting to hire independent contractors instead of employees because the reporting requirements are significantly less. However, classifying an employee as an independent contactor can leave you facing legal penalties as well as back pay and benefits.
There are times, however, when an independent contractor is the better choice. When you're setting up your global payroll system, look for one that includes options for both contractors and employees, so you'll have the freedom to choose the best option for the job.
A comprehensive solution
Managing payroll is only one of the administrative difficulties involved with expanding globally. You will also need a solution for efficient hiring, onboarding, and managing your international workforce. When you're looking for a payroll solution, look for one that includes the other functions you'll need as well. Skuad's all-in-one platform will allow you to focus on growing your business while we handle the time-consuming administrative tasks related to compliance.
Focus on strategy
While there's no doubt that the tasks related to hiring and managing your international staff are administrative in nature, they should be viewed in the context of strategy. Implementing a frictionless global hiring system gives your company a strategic advantage in business. When you work with Skuad, you won't be limited by your borders or your team's expertise.
The digital-first transformation has redefined the face of work. Remote working is here to stay, so you should use it to your strategic advantage. At Skuad, our platform increases your operational efficiency as well as improves your employee's experience and satisfaction, increasing your ability to attract, hire, and retain the top talent you need to drive your company forward. Contact us today for a demo to find out how we can help you achieve your global expansion goals.