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Global Payroll – How to Get it Right

By June 1, 2016October 7th, 2020No Comments
Global Payroll - How to Get it Right

Global payroll is one of the most important factors to any international operation because, frankly, employees won’t work for free. If you’re in the process of preparing for international expansion, you have probably dabbled into the complexities of global payroll and how it’s consumed with regulation after regulation. Not to mention, the differences between working with local nationals and expats. It’s a complicated topic that you should not try to combat without an expert.

We put together a few pieces of information you need to be aware of to ensure you’re on the right path.

International-payroll

1. Understand the Labor Laws and Regulations in your Business’ Target Country

Each country has its quirks when it comes to international payroll, which regards withholdings, pensions, insurance and paid time off. Work with a trusted advisor or outsource your international payroll to ensure that you are meeting all of these requirements to avoid hefty fines and court battles.

For example, in Brazil, an employee’s annual leave can only be taken in one or two chunks of time, each for at least ten days. It is a requirement that is encoded into the country’s labor law. If an employer doesn’t abide by this law, the employee can challenge them in court, and this often happens often in Brazil, according to the Economist. In 2009, more than two million Brazilians opened cases against their employers in labor courts. And from our experience, international courts typically side with the employee.

2. Global Payroll Requirements Vary for Expats and Local Nationals

With local employees, your payroll resource will need to withhold income taxes (if that is a requirement in your new country), benefits, and pension, along with other conditions that vary in each region. These can change, and your payroll manager needs to stay on top of the laws to remain compliant.

Expats’ payroll is more difficult. This type of employee may owe taxes in their home country and the country where they work. If your expat is from the US, the IRS has two provisions that ease the burden of income taxes. According to SHRM, the first provision is Internal Revenue Code (IRC) Section 901, which states that if the US tax is higher than the host country tax, the employee pays the US tax. The second provision is IRC Section 911 that minimizes the amount of foreign income burden placed on expats.

3. Choosing the Best Global Payroll Provider

There are key factors to look for when determining the best provider to manage your global payroll.

•Employers should check to see if the firm is managed or unmanaged. Mostly discovering if they have support to handle the complexities of these complex operations.

•Also, businesses should work with a local company with extensive knowledge and experience working in your target country. Ask the global payroll provider if they have resources that know the language, labor laws, and compliance requirements before signing and contracts.

•Finally, a global payroll partner should have accessible tech that integrates with your already established processes. Ask the provider if they can integrate payroll into your accounting software. Also, ensure that there is a representative that can assist you if you have an immediate need.

Managing global payroll is just one of the many complexities associated with expanding into international markets. To avoid errors and headaches, give Velocity Global a call today to discuss your plan with an expert. We will give you the confidence to move forward with your strategy.