How to Handle Payroll for Remote or International Employees

As businesses increasingly embrace remote and international teams, especially since Covid-19, handling payroll across borders has become a pressing challenge.

Managing payroll for a dispersed workforce involves more than just the logistics of paying employees. It also requires compliance with various tax laws, understanding currency exchange rates and navigating diverse labour regulations, among other things.

Companies that offer payroll software in the UK include:

1. Rippling
2. Pento
3. Deel

 

Understanding Local Employment Regulations and Tax Requirements

 

One of the first steps in managing payroll for international employees is understanding the employment laws and tax requirements in each country where you have workers, as they tend to differ quite a bit from one place to the next.

Employment laws can vary widely, from differences in minimum wage requirements to social contributions, holiday pay and tax withholding obligations. It’s really important to familiarise yourself with these laws or work with an expert to ensure compliance.

In many cases, employers may need to withhold taxes and other contributions on behalf of their employees according to the local regulations.

Countries like the UK, Australia and Canada, for instance, have specific tax obligations for both employees and employers that must be met. Failing to comply can lead to fines or legal repercussions, making it absolutely essential to stay informed about regulatory updates in each region.

Decide on the Method of Payroll: In-House or Outsourced?

 

Another crucial decision is whether you’re going to manage payroll in-house or if you’d rather outsource it.

For companies with only a handful of remote employees, in-house payroll is quite manageable, especially if these employees are in the same country or have straightforward payment needs.

But, as the number of international employees grows, outsourcing payroll to a third-party provider with international payroll expertise can simplify the process and reduce risks.

Payroll service providers can handle multiple currencies, tax laws and compliance issues, taking much of the burden off your internal team.

 

Choose the Right Payment System

 

When paying remote or international employees, using a reliable and cost-effective payment system is crucial.

Bank transfers, while they’re often used, can incur high fees for international transactions and take several days to process which is a bit of a logistical nightmare for both businesses and employees.

Alternatively, many companies opt for digital payment platforms like PayPal, Wise (formerly TransferWise) or Payoneer, which can facilitate faster and more cost-effective payments across borders.

If your team is dispersed across multiple countries, you may also want to consider implementing an international payroll platform. Many of these platforms integrate with HR software to automate payroll processing, convert currency and handle local tax withholdings. This ensures that payments are timely and accurate, reducing administrative work and ensuring employees are paid in their local currency.

Factor in Currency Exchange and Fluctuations

 

Currency exchange rates can significantly affect payroll for international employees, especially if your company operates in a different currency from that of your employees.

Fluctuating exchange rates can impact the actual amount received by the employee, potentially leading to dissatisfaction. To deal with this, companies can work with payroll providers that lock in exchange rates or offer currency conversion options, allowing employees to receive consistent payments regardless of currency fluctuations.

For budgeting purposes, it’s pretty useful to forecast potential currency costs and to monitor the exchange rates between your business’s currency and the currencies of your international employees. Some payroll platforms also allow employers to set fixed rates, reducing the risks associated with currency volatility.

 

 

Factor in Benefits, Insurance and Retirement Contributions

 

Beyond wages, international payroll often involves providing benefits that comply with local employment standards. In certain countries, employees are legally entitled to benefits such as health insurance, retirement contributions and paid time off.

Managing these aspects for a global team requires an understanding of each country’s standards and regulations and making sure that everything’s properly implemented for each employee.

Many companies turn to global benefits providers who specialise in offering compliant benefits packages for international employees. These providers can customise benefits to meet local standards, which helps companies remain competitive in the hiring process and supports employee retention.

Prioritising Accurate Record Keeping and Data Security

 

Managing payroll for remote and international employees also involves keeping accurate records of payments, taxes and benefits. International payroll processing can generate significant amounts of sensitive information which should be stored securely and be accessible only to authorised personnel.

Data protection laws, such as the General Data Protection Regulation (GDPR) in the EU, require businesses to protect employee data, including payroll information.

Ensuring compliance with such regulations is essential, particularly for companies with employees in multiple jurisdictions. Using secure, compliant payroll software can simplify data storage and protect employee privacy.