As companies embark on global expansion, how they approach international payroll can have a large impact on the outcome of their global growth. When considering expansion into the EU, companies need to be aware of how the different employment laws in participating countries affect their payroll requirements. However, partnering with an experienced EU payroll provider can help companies ensure compliance and better navigate the ever-changing business landscape in the EU.
Establishing Payroll in the EU
The 28 countries in the EU may have some similarities in regards to employment law, but the specific requirements and expectations that companies need to meet vary in each country. These expectations can include differences in termination requirements as well as how to properly manage payroll in a country.
When establishing payroll in the EU, there are a few common challenges companies face, including reporting frequency, employee entitlements, data security, income tax systems, unionization, and day-to-day management. These requirements can fluctuate based on a variety of circumstances. For instance, payroll reporting frequencies in the EU vary based on industry and country, or countries, of operation. Similarly, each country has a unique approach to employee entitlements such as pay rates and paid leave, and those entitlements can be influenced by a number of factors, such as the European Works Councils. When determining how they will implement payroll operations in the EU, organizations need to take the above challenges into consideration.
Brexit Effects on EU Payroll
In June 2016, the UK voted to withdraw from the EU in a move that has been nicknamed “Brexit.” This move caused a ripple of uncertainty across the EU, as companies and individuals tried to figure out their next steps, and how they planned to overcome the potential ramifications of this decision.
Currently, the UK is still a member of the EU. However, once Brexit goes into effect, EU nationals can expect changes to how business is done with the UK. For example, the UK’s departure could potentially result in a more difficult immigration process for EU nationals. Additionally, employment law within the UK is expected to change to more closely mirror Britain’s less regulated labor market. Businesses that plan to enter the EU or the UK need to stay updated on how Brexit will affect their business and payroll once the change is in full effect.
Employer Social Contributions
One of the most important aspects of payroll is meeting social contribution requirements. As companies expand into new markets, they need to be aware of the required employer contributions for tax, social security, and more. Employer contributions are paid on top of gross salaries for employees and those contributions have increased by an average 0.3% over the past two years in the EU. Total contributions are a combination of various fees, and the overall amounts can change based on country-specific regulations.
To illustrate, companies operating in France need to make social contributions of more than 40% of the cost of a salary to the government. This cost is due to an increase in social contributions such as those for sickness and transportation, despite the fact that contributions for family allowances decreased.
Social contributions in any region are difficult to navigate, which is why many companies benefit from working with an experienced EU payroll provider. These providers will not only know what is required but also can walk companies through the legal specifications for a country in order to ensure compliance.
Selecting an EU Payroll Provider
Finding the right international payroll provider is key for companies as they try to understand the required taxes, benefits and reporting frequencies within foreign countries. Global payroll providers can also help with benefits and withholdings, and take the burden of international invoices off of a company’s internal operations. As companies begin operations in the EU, the right payroll provider can give them expert insight that will help them understand what is expected and required by companies in each of the EU member states.
Reach out to the experts at Velocity Global to see how our international payroll solution can help you navigate requirements in the EU. We will help you establish a compliant payroll administration so you can focus on the opportunities waiting for your business.