Paying Your Remote Staff: All About Global Payroll Compliance

Even before the pandemic launched a new wave of remote work opportunities, over 80% of tech companies were looking to expand overseas. One of the biggest reasons was to recruit the best talent.

Then, the pandemic changed the game completely. A slow, organic transition to a global workforce system accelerated overnight.

Now that the dust has settled, the remote staff trends of 2020 have stuck around. Bringing on international employees is commonplace.

The question becomes how to make this accelerated transition sustainable. While you can keep an overseas contractor on your local payroll for a while, it isn’t a long-term solution. So, many companies are now backpedalling to set up the compliant payment structures they should have in the beginning.

But the best payroll process varies from business to business. And payroll compliance changes from country to country. In other words, there’s no blanket rule that works for everyone.

If you’re a global business – or thinking of becoming one – read on for our global payroll compliance guide. It covers your payroll options overseas, and how to decide which is best suited to your business.

How to Hire Remote Staff

Deciding how you pay international employees begins with how you hire them. The options available vary in cost and convenience, and each will suit different businesses.

Hire Independent Contractors

Probably the most common method in recent times is hiring independent contractors. By hiring their services on a freelance basis, your business doesn’t need to offer benefits. And remote staff organise their own taxes locally.

This method is best to support a short-term need. It is the most hassle-free option, and completely scalable.

However, some countries won’t allow you to hire someone as a contractor long-term. And if all your remote staff are freelancers, then you can’t build a team.

For temporary workloads or individual tasks, this is a good option. But if you want to build a company culture and a sense of responsibility, you need to employ your talent.

Hire on the Ground

At the opposite end of the spectrum is establishing your own entity in the country you’re hiring in. There are upfront costs involved, which make this better as a permanent solution.

This is a good option if you’re looking to establish a new branch overseas and hire several employees.

But what about the middle ground? Perhaps you want to hire international employees long-term, but in several regions. In that case, it doesn’t make sense to establish a business entity in each country.

In this situation, it’s best to get a third party involved.

Hire With a Global Employment Organisation

Global employment organisations, or GEOs, work to facilitate the middle ground. They allow you to hire individuals and teams anywhere in the world. But you don’t have to deal with the expense and paperwork of registering your business in each country.

As well as setting up overseas hiring quickly, they keep it flexible and scalable. You can hire new talent in any country in the world, knowing they’re handling the compliance for you. This offers the flexibility of freelancers with the sustainability of employing staff locally.

How to Pay International Employees

Each of these hiring methods comes with its own payroll system. Here is a brief summary and the pros and cons of each option.

Use Your Current Payroll System

For short-term contractors, it may be possible to use your current payroll system. Using a money transferring service sends their pay to them in their local currency. However, they’re likely to lose some of their income to bad exchange rates and third-party fees.

So while this may work short-term, it isn’t a sustainable system, even for paying freelancers. Instead, it’s best to set up an international system of your own.

Use a Local Payment Company

Some third parties will take on the payment roles locally. You send them US dollars and they pay your employees the correct amount of money.

However, you’d have to find a partner you could trust in every location you’re hiring in. This ends up being time-consuming and complicated.

Pay Via Your Local Entity

If you have set up your own business in the country, payments should be simple. Your business income is in local currency, as well as outgoing wages. This is the most reliable system for long-term and significant overseas expansions.

However, as explained, registering your entity in each location is expensive. Outsourcing payroll to a GEO has all the pros of being local without complications.

Outsource Global Payments

Using a GEO to handle your payroll compliance is the best solution by far. As well as the flexibility and scalability discussed, it removes the burden of compliance from you.

Each country has its own labour and payroll laws. That includes the annual leave each employee is entitled to, as well as other benefits. While registering your own entity is sustainable, it requires you to stay up to date with these in each location you’re based.

GEOs take this responsibility off your hands to allow you to focus on your work. Horror stories of huge fines from misinterpreting tax laws won’t become your reality. Instead, you can expand at will, knowing your business practices are always compliant.

How to Overcome Global Workforce Challenges

Managing international processes is doable, but time-consuming. Each time you hire in a new region, you have to make these decisions again. That’s why using a GEO is the best option, whether your business is large or small.

They handle remote staff payments worldwide. And they have the time and experience to ensure you’re not just compliant, but thriving in every region.

Talk to us to see how we can revolutionise your global expansion. Whether you’re hiring a few extra freelancers or setting up a branch overseas, bring in the experts to handle the process.