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6 Global Payroll Challenges + How to Solve Them

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Sourcing global talent allows companies to find the right employee for their specific needs. However, managing talent worldwide is challenging—especially regarding payroll.

Companies must navigate obstacles such as paying talent in different currencies to protect sensitive employee data and adhering to evolving compliance requirements.

To maximize reward and minimize risk when hiring internationally, companies must stay ahead of these payroll challenges. Read this guide to learn six common global payroll challenges companies face when paying international teams and suggested solutions for overcoming them.

1. Complying With Employment and Tax Laws

Every country enforces unique requirements for compliantly paying international employees. A few examples of differences between countries include:

  • Statutory minimums for paid vacation
  • Requirements for overtime pay
  • Contributions toward social security and healthcare
  • Employee vs. contractor classification
  • Tax regulations
  • Unemployment benefits
  • Process for employee severance

Payroll administration teams must understand the payroll requirements in each foreign market where they pay employees or risk noncompliance.

Running payroll in various countries also requires staying current with changes made to contribution rates, minimum wage increases, and other payroll-related regulations.

Solution: Outsource Payroll to an Expert

If payroll teams lack the resources to routinely track regulation changes and ensure distributed employees receive accurate payments, they can outsource payroll to a third-party expert. A global payroll partner is dedicated to ensuring all payroll processes follow local laws and stays current with country-specific legislation changes, so you don’t have to. ​​

Learn more about the benefits of international payroll outsourcing.

2. Ensuring Accurate Payroll Every Time

Retaining talent requires a smooth back-end employee experience, which includes paying talent accurately and on time. HR, finance, and legal teams must be on the same page regarding employee time off, bonuses, promotions, and terminations to avoid payment inaccuracies.

Inaccurate payroll is not only a legal and financial risk for the company but also negatively impacts employee morale and your company's reputation.

Solution: Standardize Country Payroll Systems

Companies need a streamlined and standardized payment platform that their global teams can easily navigate. This platform should consolidate all payroll streams and be customizable to account for different payment types, payment schedules, and local benefits and taxes.

If you do not have the resources to invest in adopting, customizing, and maintaining a standardized global payroll system, you can partner with a global payroll provider that offers a centralized solution for managing payroll around the world.

3. Overcoming Cultural Barriers

In addition to keeping up with unique payroll contributions, payment types, and pay schedules for employees in different countries, companies must also overcome cultural barriers that may result in inaccurate and delayed payroll.

Cultural differences that further complicate global payroll include:

  • Currency exchange rates
  • Maintaining foreign bank accounts
  • Language barriers
  • Working across timezones

International money transactions often include high conversion rates and fees, and some foreign employees may only accept payments to government-approved bank accounts. Companies must prepare appropriate payroll documents in the local language and provide real-time payroll support to employees spanning multiple time zones.

Solution: Rely on a Payroll Partner With Local Expertise

A reliable global payroll partner works with in-country professionals to overcome cultural barriers around the world and ensure global payroll processing remains compliant with country requirements. They also provide local, real-time support to your talent—no matter the time zone.

4. Protecting Employees’ Personal Data

Employees worldwide rank security as their most important priority associated with pay. Still, employee satisfaction should be just one of several reasons companies ensure all employee payroll data stays private and secure.

Data protection laws vary across the globe and come with severe penalties for violations. Consider the Global Data Protection Regulation (GDPR), which standardizes data privacy laws across the European Union. Serious GDPR violations can result in a fine of up to €20 million or 4% of a company’s annual revenue from the preceding year—whichever is higher.

When paying international employees, companies put themselves at risk of having their data hacked. Payroll teams must stay aware of data collection and privacy requirements that vary per country. In addition to the EU’s GDPR, countries such as Australia, Brazil, Japan, India, and New Zealand have their own data privacy protection laws.

Solution: Double Down on Data Protection

Payroll teams must ensure data privacy is a key component of their payment and time-tracking systems. They should also set up practices to ensure they stay current on evolving data protection legislation in every country they operate.

If your company lacks the resources to build internal legal and finance teams to assist with employee data protection, consider working with a vetted global payroll partner. A reliable partner provides a secure, centralized payroll solution that complies with mandatory data encryption, storage, reporting, deletion, and other data security requirements worldwide.

5. Maintaining Transparency and Visibility

When processing payroll for talent in multiple countries, data can quickly become siloed in various locations and formats—especially if a company uses several in-country payroll vendors with different platforms and standards. Lack of consolidation and standardization makes it difficult for teams to efficiently oversee and report on payroll data across countries.

Solution: Choose a Centralized Payroll Solution

Companies with several remote employees in multiple countries should consider using a centralized payroll solution that coordinates all payroll streams into one platform and standardizes them into a single format for easy management and reporting.

A centralized payroll solution allows you to track, report, and compare payroll the same way for every employee. It serves as a single source of payment—reducing redundancies, human error, and other risks that may come with using disparate payroll vendors in each country.

6. Choosing the Right Global Payroll Method

Despite its many benefits, centralized global payroll may not be the right solution for every business. Finding a suitable global payroll model requires careful consideration based on your circumstances and goals. Below are three common global payroll methods to consider:

  • In-house global payroll. Run payroll internally with in-house teams in each country. This method gives you complete control over how you pay your global workforce, but it’s not scalable, and you must handle payroll and compliance challenges on your own.
  • Decentralized global payroll. Outsource payroll to local payroll providers in each country. This method is an affordable option for businesses hiring talent in one or two markets, but it negatively impacts standardization and visibility as you scale.
  • Centralized global payroll. Outsource payroll to one global payroll provider. This method consolidates in-country payroll processes to one partner to reduce risk and increase efficiency. Still, companies should vet providers for reliability and compliance.
Global Payroll Challenges Graphic

Solution: Consider Your Unique Business Needs and Goals

There is no one-size-fits-all global payroll solution, so companies must ask the right questions when choosing a payroll method that best suits their international expansion goals.

Do you plan on establishing a long-term presence in one country? Are you interested in quickly hiring and paying a few employees in multiple markets? Do you lack the resources to manage payroll compliance internally? Does your current payroll method support your future growth goals? Questions like these will help guide you toward the right global payroll method for you.

Learn more in our complete guide to global payroll.

Overcome Every Global Payroll Challenge With Velocity Global

Managing payroll for international employees is critical to any global expansion strategy. By partnering with a global payroll provider like Velocity Global, companies forgo every challenge of running payroll for talent worldwide.

As part of our Employer of Record (EOR) solution, we help companies compliantly hire and pay teams in 185+ countries. Provide accurate, on-time payments to your team through our integrated Global Payroll solution, which consolidates payroll streams into one centralized platform and offers international employees local, ongoing support whenever they need it.

By partnering with Velocity Global, you can quickly enter new markets and hire globally without setting up an entity. We handle everything from onboarding and payroll to benefits administration and compliance so you can focus on daily tasks and big-picture goals.

Contact us to learn more about how our solutions simplify hiring and paying global teams.

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