With all the differences in currency, financial regulations and multiple ways of paying overseas employees, it can be easy to get lost in the storm of information. Fortunately, businesses who are looking to expand in the future are in a unique position to benefit from new ways of managing global payroll.
However, they still need to know the basics. We’ve covered some of these fundamentals but also focused on the new global mobility management software you can utilize. Here are three tips on how to pay international employees.
- Consider Financial Changes and Obligations
- Be Aware of Payment Methods
- Improve Your Global Payroll Through Technology
1. Consider Financial Changes and Obligations
Because of the relative importance of paying your overseas employees, it’s not something you should just throw yourself into. There are many considerations and specific circumstances to think over. For example, when paying internationally, consider the following.
Changes in Currency
Currency changes (usually, depending on where you are) border to border. However, some areas rely on the same currency, such as the EU.
Because of fluctuating currency rates, you might have to fix a foreign employee’s salary in their home currency, so that the actual amount they’re being paid never changes.
Taxes and Other Obligations
Having a foreign employee means you may have to pay tax in two countries. However, there may be tax treaties between your two countries, meaning that it’s potentially possible for you to use credits.
Similarly, the home and host countries will likely need social security payments to be made (or other relevant financial obligations). Some tax treaties allow an exception to this, so it’s worth researching the types of help you might be eligible for.
Be Aware of The Regulatory Environment
Have you considered the specific laws in your host country that might be drastically different from your own? For example, in Argentina, employees are paid for 13 months rather than 12. In Spain, annual pay is divided into 14 instalments.
This kind of regulatory knowledge is crucial to remaining compliant with host country legislation. Make the effort to do your research, it will help you in the future.
What Type of Employee Are You Hiring?
When hiring overseas, you need to differentiate between remote employees and contractors. Hiring contractors can seem like the easy option because, as they’re self-employed, any complexities that come with global payroll are eased. However, they may be seen as a remote employee by your home country, depending on how you provide and structure their work.
Remote employees, on the other hand, are eligible for the benefits and protections that are obligations within your host country.
2. Be Aware of Payment Methods
Once you’ve analyzed the previous considerations, you’ll need to determine a way of paying your international employees. This can be done in a number of different ways.
Pay Them as Contractors
If your relationship with the employee is unstructured, where they manage their own time and methods, you can pay them as a contractor. For example, a salesperson who worked on commission or those paid hourly (such as lawyers) can be hired as contractors.
Pay Through Your Home Payroll
If the employee is only being transferred overseas for a short period of time, then you can potentially keep the employee on the home payroll. Although, you’ll have to research if the host country has any specific regulations regarding this.
Work With a Third Party
If you have an existing relationship with a business in your host country, you could ask them to payroll the employee through their company. That business would become the employer for payroll, while you transfer salary through them.
Outsource Payroll Through a PEO
In this situation, a Professional Employer Organization (PEO) will act as the local employer of record. They’re already in place for a number of practices, such as payroll, taxation at source and even hiring. It’s the best way to avoid any issues of non-compliance.
3. Improve Your Global Payroll Through Technology
If you're hiring locally as a formal employee, you’ll need a payroll in their own country for the purposes of both tax, benefits and regulatory compliance. This can be a difficult process, especially if you’re managing it on outdated spreadsheets. There’s also legislation to think about. However, simplifying the process and bringing it up to date isn’t hard.
If you’re considering working with a Global PEO, such as Global Expansion, you’ll benefit from global payroll software. For example, with the Equus global employee management ecosystem, global payroll is made easy. It gives you the ability to do the following:
- Calculate hypothetical and actual tax rates.
- Create pay packages and balance sheets with ease.
- Construct payroll files and instructions in batches.
- Fully manage salaries, alongside adjustments and recalculations.
- Report salaries and pay to either primary, secondary or shadow locations.
- Use local and global pay and wage codes.
- Log payrolls by country and business units.
With global mobility management software such as Equus, you’ll easily track, create and support payroll management for all your employees, regardless of their location. Furthermore, you’ll monitor the performance of your employees remotely, through the integrated, real-time management system.
However, payroll isn’t the only important consideration when it comes to international expansion. Creating success in another market is a great business goal to have, so why not read our guide on getting started on the journey towards international expansion?
Expansion Considerations for Rapidly Growing Businesses
There are many important considerations on top of payroll decisions. You need to determine your growth method, investigate the benefits of international expansion and work towards mitigating any risk that comes with the objective. Essentially, fully preparing yourself is the first step towards success.
That’s why we’re offering a free guide, ‘Expansion Consideration for Rapidly Growing Businesses’ to help you discover all of the right information and much more.
Want to get started? Simply click the banner below.