Global payroll for remote startups refers to the process of managing and distributing payroll for employees working remotely in different countries for a VC-backed company.
Startups, which are recently formed businesses that fill a market gap with their product or services through rapid growth, are embracing remote work culture at a faster pace. Despite being small, they often hire employees in various countries and allow team members to work from anywhere.
As you can imagine, handling payroll for remote employees in multiple countries can be complex, especially because of differences in employment laws, tax regulations, and local compliance requirements.
In this guide, we’ll explore 6 important steps to consider when creating global payroll for your remote startup and what options you have to run payroll globally for your remote team.
Creating a global payroll plan and executing correctly is one of the fist steps in caring for your employees and business. A payroll plan ensures that your global workforce (including both employees and contractors) are properly paid for their work and that everything is running smoothly.
Payroll in general can be difficult to manage, especially if you have a team distributed across the globe. You need to follow the guidelines for each individual country your employees are working remotely in.
Before you get started on how you want to run payroll, you should consider creating a global payroll plan to ensure that you’re covering all of your bases.
Here are 6 things to consider when creating a global payroll plan for your remote startup.
Operating in multiple countries means you must adhere to various employment labor laws, local tax regulations, and compliance requirements. Failing to comply with local laws can result in legal and financial penalties, especially when misclassifying independent contractors.
A global payroll plan can help you meet all legal obligations, such as proper tax withholding, social security contributions, and employment benefits. This reduces the risk of non-compliance.
Remote employees rely on accurate and timely payment of their salaries for their own livelihoods. Proper and timely payroll management is crucial for employee satisfaction.
Successful payroll management helps:
Build trust between employee and employer
Keep employee retention rates higher
Make onboarding simple
Draw attention for recruiting top talent
Build a reputable image for the company and brand
By having a streamlined global payroll solution, you can ensure that employees receive their payment on time. Most companies choose to administer payroll to remote employees through proper bank transfers or direct deposits that are accurately calculated based on local regulations. This makes it easy to build trust, satisfaction, and loyalty among your remote team members.
A well-designed global payroll plan can streamline payroll processes and minimize administrative burdens.
Employers should decide early on how they plan to administer payments predictably, by either setting up direct deposits through SWIFT or wire transfering money into employees’ bank accounts within a few days via WISE. These two options allow money to be transferred between bank accounts for dispersed global teams.
Decide on a consistent pay date each week, every two weeks, or monthly, that works best for you and your employees and stick to that schedule.
This, in turn, can lead to cost savings by reducing the need for additional resources and mitigating potential payroll-related issues or penalties.
Payroll taxes are a critical aspect of global payroll management.
Each country will have their own specific tax laws. On top of country-specific tax laws, each region/city will have its own local taxes laws you’ll need to understand.
Tax management abroad could mean:
Opening an entity
Registering with local authorities
Hiring a legal team
Creating an HR team (with consistent training of new regulations)
Registering for social security
Deducting the correct taxes from employees paychecks
Failure to consider any of the above tax measures in your global payroll plan can result in significant financial and legal consequences that many new startups may not survive without proper resources.
A robust global payroll plan enables your remote startup to scale across borders with ease. . It provides a structured framework for adding new employees in different countries, ensuring consistent payroll processes, and compliance with local regulations.
Global payroll is essential for startups who plan to recruit and retain top talent anywhere in the world. You don’t want to find the perfect fit for your head of marketing in Mexico and not appear professional and put together because of inconsistent payroll planning.
Managing global payroll involves mitigating risks associated with:
Contractors vs. full-time employees
A well-executed global payroll plan helps minimize these risks by providing clear processes, utilizing secure payment methods, and ensuring compliance with local employment and tax laws. This can protect your startup from financial losses, legal issues, and reputational damage.
A global payroll plan should always include paying remote international contractors, who are helping you build your startup.
International independent contractors should be paid differently than employees or domestic contractors, and you should build your payroll strategy around these distinctions.
Considerations when hiring contractors in another country:
Local pay expectations
Currency rate exchange
Cost of living
Payment terms (upfront, by project, or monthly)
Wire transfers (Swift vs. Wise)
Fully remote tech companies and startups have several options for managing their payroll. Here are some common options:
In-house Payroll: Companies can choose to handle their payroll processes internally by setting up an in-house payroll team or assigning the responsibility to existing HR personnel. This option provides direct control over payroll operations but requires expertise in local employment laws, tax regulations, and compliance requirements for every country where employees are located.
Payroll Software: Utilizing payroll HR and payroll software designed for global payroll management can streamline the process. These software solutions often have built-in functionalities to handle various payroll aspects, such as:
Tracking sick days
Professional Employer Organization (PEO) or third-party outsourcing: PEOs act as an intermediary between the company and its remote employees. If you outsource to a third-party provider in the country, they’ll usually only have first-hand knowledge of the specific country they’re working with. The main downside is that with a PEO, you have to have an entity established in the country. If you have an entity setup, you’re still legally required to handle compliance problems
Hybrid Approach: Some companies choose a combination of in-house payroll management and outsourcing. They may handle payroll for employees in their home country or specific regions while outsourcing payroll for remote employees in other countries. This approach allows companies to retain control over certain payroll aspects while leveraging external expertise for global operations.
Employer-of-record (EOR): Another great option is to hire an employer-of-record. EORs are similar to PEOs however they act on a more global scale. They take on the legal and administrative responsibilities of employing workers in different countries and can handle everything, including payroll management, employee onboarding, tax compliance, contractor management, and benefits administration. EORs already have established entities in the country and a hyperlocal legal team, so you don’t have to worry about misclassification.
Via makes hiring talent around the world and building your global team seamless by helping you onboard workers in as little as 2-3 business days. With our easy-to-use platform, Via helps you manage local HR processes for direct employment such as work visas & permits, employee data privacy compliance, benefits, global payroll, background checks, and more. Our team of local labor lawyers and on-the-ground experts provide 24-hour local support and ensure that your company remains compliant while expanding abroad. As your employer-of-record/entity abroad, Via assumes responsibility for employment liability, so that you can focus on what matters: recruiting and managing your team.