If your company has expatriates on assignment or hires local nationals overseas, payroll administration is a complex hurdle you have to confront. You not only need to manage compliance with the US tax laws and employee regulations, but you also have to follow the requirements established by the other countries where your employees reside and work.
You may be able to manage payroll in-house if you have an expert on staff who fully understands in-country specific tax and labor laws along with the consequences of exchange rates on pay. If you decide to tackle international payroll on your own, it’s typically required to register a local office or subsidiary with in-country authorities to meet compliance requirements to legally hire and pay staff locally.
Keep Current on Withholding Requirements and Liabilities
According to attorney Donald C. Dowling, a partner at K&L Gates in New York City, global attorneys tend to suggest a company register an in-country corporate presence, get a local taxpayer ID and place your local employees on the in-country payroll.
In addition to establishing a local presence, you also need to stay up-to-date on withholding requirements and liabilities in all your host countries. Examples of these requirements include:
- Expertise in each country’s wage and hour labor laws
- Inhabitant taxes in countries like Japan
- Contributions local pension plans
- Social insurance contributions in countries like Switzerland
- Overtime restrictions
- Holiday bonuses
- Exchange rates for each country
- Nationalized health program contributions
- Required annual bonuses
- Contractor versus full-time employee requirements
Outsourcing International Payroll Administration
Monitoring these requirements can easily become a full-time job, which may not be realistic for your already busy team. If you do not have the in-house resources to manage these tasks, you need to outsource payroll. You can hire an in-country firm to run your international payroll and compliance for local employees or hire an organization such as Velocity Global.
Our services are a great option if you’re testing the waters with a smaller team overseas. Managing international payroll services on your own is timely and costly and it may not be worth the investment if your team has less than 100 employees. Plus, if you do not have to use a service like Velocity Global, you need to open a foreign bank account, and that is a daunting process filled with many restrictions.
An international payroll service like ours manages every aspect of compensating for your supported employees through a centralized service and is available in 170 countries. You work with one point of contact and maintain compliance without the stress of juggling the requirements within your headquarters. If you need any advice on international expansion, contact us!