Payroll compliance is one of the major challenges that all businesses face when expanding into new countries. We explore how to ensure you stay compliant with the laws and regulations in the regions in which you’re expanding.
Each country has its own compliance laws, regulations and norms concerning payroll, labour management, tax withholding and retirement contributions. When expanding into a new country, you must stay abreast of all the relevant regulations so your business complies with them perfectly.
It can be difficult and time-consuming, often taking resources away from your core products or services. This is why CEOs and CHROs are increasingly choosing to outsource their global payroll responsibilities to a reliable third-party provider offering Employer of Record (EOR) solutions.
Let’s look at some of the common payroll compliance challenges:
For businesses that employ a globally dispersed workforce or are planning to expand into new countries, ensuring payroll compliance across borders is critical. Failure to understand and comply with local regulations could lead to legal penalties and reputational damage.
Here are some of the key challenges businesses face when trying to navigate the dynamic landscape of global payroll:
To navigate these challenges, your company must stay up-to-date with the evolving payroll compliance laws in every country where your workers are based. Your team must adapt quickly in response to regulatory changes.
Some important components to keep in mind for multi-country payroll compliance are as follows:
Keeping these components in mind can help companies with a globally dispersed workforce remain compliant while minimising legal and financial risks. The key to success is to monitor regulatory changes and modifications in each country so that your Payroll team can adapt accordingly.
If your company has staff in a certain country or you’re planning to open an office there in the near future, your Payroll team must have a thorough understanding of the local compliance laws and regulations. This will support timely and accurate payroll processing and prevent legal problems and conflicts with local authorities.
Some of the specific information you need to learn include:
Tax laws can vary significantly from country to country, so knowing the tax requirements of any country where your workers are based is vital. Here are some important aspects of tax policy to know about:
Various countries have different systems for payroll processing. So, international employers must learn about the local systems and processes, which is often done by engaging the services of a local expert.
This will help you consolidate the payroll processing systems of different locations and jurisdictions, bringing them under a single, centralised payroll platform used by all your branches.
International employers should learn about the local laws regarding mandatory employee benefits, such as health insurance, paid time off (PTO) and retirement contributions.
These requirements vary from country to country, so many employers rely on a third-party global payroll provider to do all the research on their behalf.
This also includes researching and learning about country-specific time-off laws, encompassing public holidays, paid vacation days, parental leave and sick leave.
These requirements can vary widely between different countries, as well as between regions of the same country. They will dictate the lowest daily or hourly wage you can pay the employees based in that area. You must learn about the minimum wage regulations in each country where your business has employees so you can compensate them per the local payroll compliance laws.
You’ll need to navigate a complex maze of regulations and diverse cultural expectations to effectively manage payroll across geographical borders. Here are some solutions that can help you along this journey:
Reliable and cutting-edge payroll software can help reduce calculation errors, streamline data management and protection and improve compliance across multiple countries.
Key features and capabilities to look for when choosing your payroll software:
Investing in a centralised platform for payroll management will significantly reduce the risk of compliance errors in another country.
While centralised payroll software can be useful, many countries have local compliance tools and practices that should be integrated within your business.
Local compliance tools to consider:
These tools can help bridge the gap between your company’s centralised payroll platform and processes and the specific requirements of a given country.
More and more businesses with a globally dispersed workforce are opting for an all-in-one solution. An experienced global payroll provider like TopSource Worldwide will manage everything – from salary disbursement to tax reporting – on your behalf. As a result, your in-house staff will be free to focus on the core business operations that directly impact your bottom line.
The main benefits of partnering with a third-party global payroll provider:
Before choosing a global payroll provider, look into their track record, customer testimonials, and how long they’ve been in business.
Here are some best practices to help you stay compliant when expanding into new countries and territories:
The importance of establishing a robust internal compliance framework cannot be overstated – especially for companies with staff across multiple countries and jurisdictions. This framework should include:
The purpose of such a framework is to standardise payroll processes across multiple countries and jurisdictions, thus improving efficiency and reducing compliance risk.
To proactively identify and eliminate compliance issues, conduct regular audits and reviews of your global payroll processes. Constant monitoring aligns your payroll practices with the current regulations of the country where your employees are based.
Regular audits also enable your Payroll team to stay on top of – and adapt to – any changes in local regulations that might otherwise have gone unnoticed.
Collaborating with local tax and legal experts in each country can significantly improve compliance and offer your Payroll team invaluable insights into local regulations, laws and tax requirements.
Professionals who specialise in global payroll compliance will help you understand and adhere to specific legal and tax frameworks of each country. These experts can also help you build a payroll system that incorporates the best practices of many different jurisdictions.
Global payroll regulations are always changing and evolving. So, if you have a dispersed workforce you must invest in continuous training and education for in-house payroll administrators. Reputable third-party payroll providers reinvest a significant chunk of revenue into ongoing staff training and education.
In many countries, the government creates digital portals and online platforms to help businesses get accurate and up-to-date information about changes in legislation, compliance requirements, reporting obligations, tax rates, etc.
Depending on the country, there might also be a government portal for easy and seamless tax filing. Utilising these resources will help streamline your payroll compliance process.
Global payroll compliance is essential for businesses hiring international talent and expanding into new countries. The right compliance framework will allow your business to function efficiently and safely in a range of different countries. The price of getting it wrong can be high, leaving your company entangled in a complex web of lawsuits, fines and penalties.
One way to adopt a proactive approach to payroll compliance without overstretching your internal resources is outsourcing responsibilities to a trusted global payroll provider.
With more than 400 employees and 1600 clients across the globe, TopSource Worldwide can cover all your payroll management needs across more than 180 countries.
So, contact our team of global payroll experts to discuss your business needs or explore our global payroll solutions and learn how we can simplify compliance for your expansion plans.