International cross-border payroll compliance
When your business is international, how do you stay compliant with payroll regulations in all the countries in which you operate?
Yours is a global business. It spans countries and continents, and you need people on the ground to be able to service its needs and those of your customers. That presents plenty of challenges and payroll is one of them, because for every person who works over another border, there’s another set of complex payroll regulations to navigate.
Payroll regulations vary by country, and sometimes by regions within countries. In Europe, for example, its common to find a combination of national and local taxes, all of which will need applying to an employee’s pay. The more countries your organisation spans, the harder it is to keep up with changing laws and regulations. That presents risk for your business because failure to comply with local regulations can result in lengthy legal action, fines and other penalties, and reputational damage.
So if your business is an international one – or if you’re exploring international expansion, how can you do it in a way that ensures you correctly navigate payroll rules everywhere? Effectively, there are two approaches to this: do it yourself (with or without local help) or ask a third-party payroll provider to do it for you. So what are the pros and cons of each?
1. Do it yourself
Control: You retain complete control over your payroll arrangements across every border. That can be something of a double-edged sword though, because retaining complete control may be harder (and less desirable) than you imagine.
Resourcing and risk: International payroll regulations are constantly evolving, so it’s important to plan for changes and stay ahead of any upcoming regulatory updates. You’ll need to develop contingency plans for unexpected changes and you’ll want to review and update individual payroll policies and procedures for specific territories on a regular basis.
You don’t need to be a payroll specialist to spot the challenges here. A world of different payroll regulations means there’s lots of potential to miss something and lots of payroll resource required to monitor alerts and follow updates to ensure you don’t.
2. Do it yourself with local help
Assured compliance: If you have employees in a country where you are not familiar with the local regulations, hiring a local payroll expert can provide valuable insights into local tax and labour laws and help you navigate compliance requirements.
Building and managing an international team: Do you happen to know a payroll tax and employment law specialist in Madrid? Or Mumbai? Or Mexico City? That’s the problem with running your own international payroll: you’ll want to rely on the expertise of locals you trust but building that pool of trusted expertise isn’t easy.
Even when you’ve built your team, there’s still a need to ensure everyone works in a consistent way, applying complex local regulations but also ensuring that your internal processes are followed. That can require a significant investment in terms of management of and liaison with your international partners.
3. Do it yourself with automation
Streamlining: Implementing an automated global payroll system can help streamline payroll processing across borders and ensure compliance with local regulations. Systems can automate tax withholding and reporting, as well as provide real-time reporting and analytics.
Understanding the tech: The problem with relying on automation, as good as it is, is that unless you have the payroll expertise to underpin it, you’re relying on everything to work swimmingly every time. When something unexpected happens, businesses that don’t have an in-house international payroll specialist who is also an expert with the tech can find they’re left trying to solve a tech problem and an international payroll problem, without really understanding either issue.
4. Outsource your international payroll
Simple compliance: A payroll provider that specialises in global payroll services can remove the worry and practical challenge of meeting a wide range of varying regulations. With an outsourced international payroll, the third-party provider builds the international network of local experts, so you get to tap into their expertise without having to find, recruit and manage them.
Lower risk and lower costs: With an outsourced payroll provider, you don’t have to build and manage and international team. You don’t have to monitor changing local regulations. And when it comes to problems or questions, you have a single UK-based point of contact. It all helps to keep costs (and frustration) low. It also ensures that, if an error ever does occur, the payroll provider bears the responsibility, not you.
Talk to Just Payroll about global payroll
Navigating complex payroll regulations across borders can be a daunting task, but it’s essential for businesses that operate globally. We believe using our international payroll service can make managing your cross-border payroll easier, with less hassle and less risk requiring less effort and less cost.