As companies look to remain competitive amid the changing market, they are increasingly hiring remote international workers. By 2028, Upwork estimates that 73% of all departments or teams will have remote workers.
Hiring remote workers from other countries comes with various challenges, one of which is payroll. Different countries have different tax and employment laws, and your company has to ensure all the legal benchmarks are met. And these laws often keep on changing, so you have to remain updated to avoid getting into trouble with the authorities.
Due to the complexities of international payroll, your in-house human resource (HR) team may not process and manage payroll effectively and on time. The best option is to outsource payroll to a global payroll provider with expertise in global hiring. Read on to learn how this works.
Benefits of Payroll Services
Hiring a global remote team comes with multiple compliance requirements. Your company must adhere to the employment laws, tax regulations, and data protection requirements of the countries you are hiring. In some countries, the requirements vary by region, making it even harder to maintain compliance.
Global payroll providers can help you run global payroll while fully adhering to all local and national laws. They will take care of all aspects of global payroll processing, including benefits administration, tax calculations, reporting, payslip generation, and compliance. They will also remain updated on any legal changes that may occur in the future.
Managing payroll through emails and spreadsheets can be a slow and inefficient process. You can expect lots of manual data entry and re-entry if you deal with multiple employees from different countries.
Global payroll providers utilize advanced software tools and platforms to automate all your payroll operations. Instead of rolling out 30 employee self-service portals for payslips and tax documents across 30 different countries, you can manage all that using a single platform.
Your employees expect timely and accurate payments. When you make payroll mistakes that affect their salaries or benefits, this can anger or negatively affect their morale. The government of the country where you’re operating may also subject you to fines and cause you substantial reputational damage.
With a dedicated global payroll provider handling your payroll, the chances of payroll errors occurring are almost zero. You’ll be able to administer correct and timely salaries and benefits for your employees so they remain motivated to work.
Easier Entry Into New Markets
Suppose you’re hiring remote workers from another country without the help of a global payroll provider. In that case, you will have to establish a legal entity in that country to deal with all the payroll and compliance issues that may arise. As a result, a lot of time may be wasted before your new employees start to work.
When you hire global payroll services, expanding to new markets becomes easier. A global provider will handle all the legal issues when assembling a global remote team, so you don’t have to establish your legal entity. They will also help you onboard your new employees quickly, so your business keeps running.
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Challenges of Running In-House Global Payroll
Running an in-house payroll can be complicated, particularly at a company with multiple employees, even if they are from the same country and fall under similar legal and tax codes. But running an in-house global payroll is even more complicated when you consider you’re dealing with people from different countries and under various legal and tax regulations.
Below are the main challenges of running in-house global payroll.
Running Compliant Payroll
Your in-house payroll team must adhere to payroll requirements in each country your employees come from. This isn’t easy, considering payroll regulations vary from country to country.
For example, how you fulfill pension requirements for a Danish employee differs from a French employee because their countries fund pension programs differently. Denmark has a fixed annual fee for every employee, while France taxes a percentage of employee income. Without this knowledge, you risk mishandling pension requirements and facing compliance issues.
Apart from pension requirements, you also need to consider other aspects such as income tax laws, data security laws, employees’ leaves and benefits, and the number of working hours. Without the help of a global service provider, keeping up with all these requirements may be difficult.
Getting Accurate Reporting
Your in-house payroll team may also face difficulties when reporting cross-border operations. For example, you need to monitor and compare the performance metrics of your remote teams to ensure business efficiency.
If your in-house payroll team uses separate systems for different countries, tracking and comparing employee metrics becomes a complex process. And even if you have a unified system, ensuring high-quality and quick reporting is another challenge.
You can avoid reporting challenges by hiring a global payroll provider. With an advanced payroll system, you can retrieve crucial data, compare metrics, carry out audits, and complete reporting quickly and with less human involvement. Besides, the single payroll platform allows you to carry out analysis easily. Comparisons between countries can be effectively made on an apples-to-apples basis while tracking other critical factors like compensation costs and productivity levels.
Culture and Communication Barriers
Hiring international teams means getting employees from different cultures and backgrounds. If your in-house payroll team doesn’t understand the languages and cultures of these employees, they may not know how to manage them.
In addition, differences in time zones can be a huge problem for your HR team. Establish consistent weekly or monthly communication or payment schedules with your remote team. The more locations you have, the more these processes get complicated.
With global payroll services, culture and communication barriers will be a thing of the past. The global service providers have helped multiple companies establish remote teams worldwide, so they understand how to manage workers from different cultures. Their software tools and platforms also help to ensure you’re using the correct time zones.
Types of Global Payroll Providers
There are two main models of global payroll providers: the wholly-owned model and the aggregate model.
Wholly Owned Model
In this model, a global payroll provider opens an office in a new country to handle payroll operations in-house. As such, the provider uses their entity in the new country. On the other hand, the customer gets one partner for queries, one service contract, and a single platform for payroll solutions.
In this model, a global payroll provider partners with other local service providers, also known as in-country partners (ICPs), to provide payroll solutions.
The ICPs are often law or accountancy firms with the technical capability to support payroll operations. When you hire a global service provider, you are connected with a local provider that can offer the payroll services you need.
While the wholly-owned seems to be more controlled, it doesn’t offer the flexibility and transparency of the aggregate model. Global payroll providers have an extensive list of ICPs they can partner with, allowing greater flexibility and choice regarding how payroll services are delivered.
Choosing the Right Global Payroll Provider
If you’ve decided to hire a global service provider, you might be wondering how to choose the right one. Here are some specifics to help you choose the right one.
- Automation Level: One of the main goals of hiring global payroll providers is simplifying your payroll operations. Therefore, ensure the provider you choose offers a good level of automation, so you don’t end up handling most of your payroll needs manually.
- Service Features: Consider the payroll features that your provider offers. Do these features fulfill your needs? And do they have extra features or services to take care of your future payroll needs?
- Payroll Performance: How does the payroll provider perform its roles? Is it efficient? How long does it take to correct payroll processing mistakes?
Here are other general requirements that your global payroll provider should meet:
- Cost Effectiveness: While it’s not advisable to base your decision solely on price, the provider you choose should provide good value.
- Expertise and Experience: Ideally, you want to work with a provider with a proven track record of helping companies hire international workers.
- Exemplary customer service: Focus on working with a provider with good customer service, so any questions you have along the journey can be answered correctly and on time.
- Easy-to-use System: The global payroll platform should be easy to use with clear reporting metrics.
Skuad – Your Global Payroll Provider
A global payroll platform like Skuad can enable your organization to expand or build a team by providing efficient and comprehensive global payroll management. Skuad offers you the best employment and payroll solution by enabling payroll management and ensuring compliance with country-specific employment laws. We streamline your global payroll management, keeping you in the driver's seat with our automated payroll solutions.
Partner with Skuad to enjoy expert payroll management support with localized expertise. We operate in over 160 countries and use our in-depth knowledge and experience to help you avoid non-compliance risks. Book a demo today to see how our global payroll platform can fast-track your global hiring ambitions.