When companies begin hiring full-time employees and contractors in new countries, employers must create an easy and effective plan for paying and managing workers in new countries. This process is called managing international global payroll.
For companies with local resources like an entity or HR team, running international global payroll might mean partnering with a global payroll provider that provides assistance with making international payments, administering benefits, tracking PTO & vacation days, tax filings, and other payroll processes.
For companies without a local entity or HR team, managing international payroll might require working with an EOR or employer-of-record service provider like Via. With an EOR solution, companies can manage international global payroll & benefits, as well as HR processes such as onboarding & offboarding, work visas & permit sponsorships, equipment distribution, international background checks, and more.
Not sure where to get started with international global payroll? Read on to learn more.
International global payroll, sometimes called international payroll processing, is the process of making compliant payments to full-time employees and contractors to workers based in more than one country or location, usually through one or more platforms.
When companies expand to a new country, business leaders might be able to add another country to their current payroll provider, or they might need to invest in a better platform or solution altogether.
You have two options to consider for payroll management 1) centralized or 2) decentralized. If you run international global payroll from one platform, then it’s considered centralized. If you run payroll globally from multiple platforms, then your solution is decentralized.
International global payroll includes managing cross-border payments to full-time employees contractors, global employment/HR, and payroll & benefits administrations.
Most international global payroll platforms include the following:
Built-in compliance tools for tax filings, time off tracking, and other HR processes
Dashboard to manage full-time employees and/or contractors in different countries
If you’re working with an EOR, the platform might also include other specific features as well, such as customizable employment contracts.
When choosing an international global payroll provider, companies can choose between two broad categories: Partner/Vendor based and entity-owned/direct.
Partner/Vendor based. With the partner/vendor model, the international global payroll provider outsources much of the work to localized third-parties. While this may increase coverage for the payroll provider, the outsourcing can lead to issues and delays with the third-party vendors.
Entity-owned/direct. When a payroll provider offers direct employment and owns entities (which is the case an EOR provider like Via), the number of middlemen is reduced. This allows your global payroll provider to easily offer seamless service, with fewer changes for delayed payments and other issues.
Many HR leaders believe that Global PEO and Global EOR are interchangeable with global payroll, but that’s not necessarily the case. In general, international global payroll is one of the services offered by a global PEO or Global EOR, however there are clear differences.
If your company has a substantial presence in the foreign country where you’re hiring workers (e.g., you have a local bank account, an entity, registrations with the appropriate tax authorities, and an in-house payroll/HR team with bandwidth), you can pay for a professional payroll software subscription.
With payroll software, you will have features that automate manual tasks, such as generating pay stubs and calculating time off. Keep in mind that you will still need to hire in-house HR members to use the software and manage payroll.
Partnering with a global payroll provider tends to be the cheapest option, since you will still need to manage your own HR processes in the countries where you’re operating. Starting costs tend to be lower, but you will need to pay for establishing and maintaining the entity, building an internal HR team, legal support, and account support.
Working with a global payroll provider can eliminate the need to hire in-house HR specialists while also giving you access to local experts.
By working with a global PEO, for instance, you enter into a co-employment relationship with the PEO. The PEO is partially responsible for ensuring that your company is remaining compliant with internal policies as well as each country’s unique and relevant labor laws. A PEO can help cover gaps in your HR team. You will still need to have an entity in-country to work with a PEO.
This global payroll solution will likely cost more than working with a payroll provider, since you will receive additional HR support.
If you don’t have any local presence–no local entity, no HR team–and you want to get up and running in a new country as quickly as possible, then an EOR is your best option. Partnering with an EOR will cost more than working with a payroll provider, but these solutions handle additional areas, such as HR, legal, accounting, work visa sponsorship, employee relocation, and more. The EOR is solely responsible for maintaining legal compliance.
While this option might be more expensive than working with a payroll provider or PEO, it can save months (or years) of time, as well as reduce overall operating costs by hundreds of thousands of dollars.
Localization. Each country (and each region, for that matter) has different rules, costumes, and regulations that companies need to navigate surrounding payroll. To successfully manage international payroll, you will need to ensure you’re offering appropriate benefits, paying workers at an acceptable cadence, tracking employee hours, and making all relevant payments in the local currency. You will also need to determine what pay frequency makes the most sense (weekly, bi-weekly, monthly) in each country.
Compliance. As you expand abroad, you will need legal experts to ensure that you’re structuring your new team compliantly. With an EOR, for instance, we offer specific legal support to ensure you’re running payroll across borders compliantly with all local, state, and federal regulations.
Tax laws. Taxes become more complicated when you hire across borders. In addition to navigating local payroll taxes, you will need to make sure you’re avoiding double taxation.
Foreign transaction fees. Paying workers in their local currency can be complicated–and expensive. Sending money across borders can be expensive, sometimes incurring fees as high as 15% or 20%. Review and ask prospective global payroll providers ahead of time what fees they charge, as well as how they manage exchange rates.
Bank fees. Banks can also charge hefty fees for international payments. If you have a bank account setup, connect with your payroll provider and bank to see what issues might arise. If you don’t have a bank or a local entity, then you can partner with an EOR like Via and skip the process of opening a bank account abroad entirely. A SWIFT transfer, for instance, can cost upwards to $50 for one payment.
Benefits management. Health insurance, disability, retirement, unemployment insurance, workers’ compensation are just the beginning. When managing international payroll administration, you will need to take into account all sorts of benefits that your workforce will expect, from WFH reimbursements to grocery allowances, depending on the country.
On-the-ground support. As you begin expanding abroad, you will need to find support from local legal experts & accountants to ensure you’re remaining compliant. However, finding local experts when you’re far away can be challenging. An EOR provides you with on-the-ground expertise so you don’t have to spend time sourcing experts or extra money paying them.
Data protection. If you’re hiring workers in Europe and elsewhere, you will need to remain in compliance with the 2018 GDPR (General Data Protection Regulation) standards. You will need to consider that any third-party payroll provider signs a data processing agreement (DPA) to protect your workers, and ensure that all sensitive data is encrypted.
HR expansion. Companies that hire in new countries need to either build out their in-house HR/payroll team or partner with a PEO/EOR for support with HR. While each path has its own pros and cons, companies that are looking to expand quickly and keep their international teams relatively small (e.g., fewer than 100 people in one country) can benefit from outsourcing HR.
When you’re deciding who to partner with as your international payroll provider, ask yourself the following questions:
Does the provider fully offer coverage in the countries or market where I plan to pay workers?
Can I pay full-time employees and/or independent contractors?
Do I need to set up an entity? (If you don’t have an entity, then working with an EOR is your best bet)
Will the payroll provider handle compliance, tax filings, deductions and other legal processes?
Does the payroll provider have a platform where our team can manage PTO, sick leave, reimbursements, and other common HR processes?
Do I just need help with payroll or benefits, or do we require additional support with immigration, local laws, HR, registering workers with government bodies, and local compliance? (If you require support with things like sponsoring work visas, then you’ll need to work with an EOR)
Will sending payments via an international money transfer be sufficient?
If you have an entity, then running payroll internationally is usually more affordable. In general, providers charge a base rate (usually starting at around $35), plus an additional charge (usually around $8-$30) per employee. However, you will need to pay to establish and maintain a local entity and HR team.
If you’re working with an EOR, pricing for contractors usually starts at $29-$39 USD, while pricing for EOR usually starts at $199-$599 per month per employee.
Multi-country payroll means managing payments for full-time employees and contractors in multiple countries from one select platform. If you’re paying workers in multiple countries from one dashboard, then you’re managing both multi-country payroll and global payroll.
If your business is looking to hire international talent in countries where you don’t have an entity, then you can partner with an EOR like Via to manage HR, payroll, benefits, and more, without the need of foreign legal entities, in-house global payroll & benefits specialists, or foreign HR & legal advisors.
In fact, some of Via’s customers end up partnering with a PEO in the US (given they have an entity) and with Via as their EOR partner in Canada, Mexico, Colombia, or one of the other 12+ countries where we have our own established entities.
With Via, you can start onboarding international talent without an entity in days–and remain compliant with all local, state/provincial, and federal requirements. Learn more about our EOR services today.