As the pandemic eases, employers are facing a changing workplace. Remote working and an international workforce for even small firms are big parts of the new norm. This change has forced companies to swiftly adapt how they operate, and one of the biggest areas where change is required is payroll.
This rapid change of working practices was always on the cards but was undoubtedly accelerated as Covid-19 swept the world. For firms of all sizes, this has left a significant problem in how to deal with the payroll for such a diversely situated workforce.
Payroll was never simple beforehand. No matter what country a firm is based in, constantly changing legislation, complicated tax rates, pension scheme complexities, and intricate leave and sick pay regulations made the task an administrative nightmare.
But the nightmare is a lot worse when multiple sets of payroll legislation need to be considered. This is where international services for payroll can come into play.
An increasing number of firms are outsourcing their payroll to companies offering international payroll services.
What are international payroll services?
Using international payroll services means outsourcing a company’s payroll to a third-party payroll specialist.
The payroll services company will take over most of the payroll duties usually undertaken in-house, including:
- Dealing with employee enquiries
- Tax reporting
- Holiday pay and benefits
- Pension and voluntary contributions
- Compliance with payroll regulations
- Record keeping
The main roles of international payroll services
The moment a company employs overseas personnel, the whole payroll game changes. Payroll has always been a major source of stress, but this multiplies exponentially the moment it goes international.
International payroll services can act as a bridge that will traverse the administrative nightmare of a multi-country payroll. To do this effectively, it uses several key components:
1. An understanding of local payroll regulations and laws
One of the biggest headaches caused by an international workforce is the compliance with local tax and payroll legislation. This is all well and good for multinationals with overseas offices, but increasingly this isn’t always the case.
For smaller companies, this creates many problems; some of the main ones are listed below.
- Software updates – Most firms will be using payroll software that is tailored specifically for the country they are based in. This means that expensive software updates or new packages will be required to cope with an international workforce.
- Staff Training – Payroll staff will require training in the nuances of the laws governing payroll in potentially numerous other countries.
- Accidental non-compliance – It is hard enough to produce an error-free payroll every month in one country, multiply this several times and add factors like language barriers and ignorance of the laws then the chances of issues arriving from non-compliance rises exponentially.
2. Social Security
Taxes are one of the major problem areas when it comes to international payroll, but most countries will also have some form of social security scheme to be considered.
Many countries will have obligatory contribution schemes for the employer that firms need to be aware of and comply with. These are usually payments to contribute for services like unemployment benefits, healthcare, government pension schemes, sick pay, and work-related injuries.
Just to add a little more uncertainty into the mix, certain countries will also require an employee social security contribution.
As with tax and other legislation, it is essential to comply with any mandatory schemes.
3. Employee (and employer) benefits
The benefits that are due to employees vary wildly from country to country; maternity pay, holiday entitlement and sick pay are amongst the most variable. Knowing what is expected in each country is essential for keeping on the right side of payroll legislation.
It is also easy to miss out on employer benefits. Many countries offer incentives to firms that employ people under circumstances where they are bringing new employment into certain areas or are otherwise helping to develop a local economy.
4. Dealing with the changing face of the modern workforce
The rapid rise of freelancing has seen a rapid shift in the way people work and also in the way companies employ a workforce. International payroll services can deal with both scenarios.
As well as offering the complete range of services to pay “traditional” employees, outsourcing of payroll can also ensure that independent contractors are also paid in compliance with local legislation.
5. Data Protection
Data protection is something that all companies need to have a good handle on. Falling foul of these regulations can result in large fines and a lot of major hassle.
This is another area where the legislation can vary hugely from country to country and, in certain instances, can also be covered by an entirely new set of laws the moment the data is passed from country to country.
Ensuring that payroll data is only visible to relevant parties is a critical aspect of an international payroll operation.
What are the benefits of outsourcing to an international payroll service?
Knowing the problems that face companies dealing with a multinational and multicultural payroll makes some of the benefits of outsourcing your payroll immediately obvious. Other benefits are not quite so obvious.
Here are the main reasons that an increasing number of businesses are outsourcing their payroll.
1. Cut costs
Software updates, staff training, hundreds of hours each month on administration tasks can all be substantially cut by outsourcing payroll services. These are the main areas, but many companies will also have dedicated servers and other IT hardware that become unnecessary once payroll has been outsourced.
2. Increased accuracy
As noted previously, it is incredibly difficult to get the payroll right time after time, even for a company where all the employees are located in the same country. Stick one or more other countries into the mix, and the task of repeatedly running an accurate payroll becomes almost impossible.
Companies that specialise in multinational payroll can bring a level of expertise to the table that otherwise simply isn’t possible. This expertise ensures that each run of the payroll is accurate, and employees are paid exactly what they are due.
3. Break the language barrier
Communicating with officialdom in your own country is bad enough; add a communication barrier, and the problems just multiply. Outsourcing to an international payroll services company means outsourcing all those stunted conversations and badly translated emails that can lead to potentially expensive misunderstandings.
This can also be applied to cultural differences too. These can often lead to misunderstandings that can have unforeseen repercussions.
4. No more worrying about time zones
Having to deal with a tax office that is located halfway around the world is not something you want to spend your time doing. This is particularly true when you have to get up at 3.30 in the morning to do so.
Even with email and other communication methods, it is often the case that the only way to resolve an issue is through a phone call. This is truer in certain countries than in others, where red tape and sometimes just pure pig-headedness means long drawn-out phone calls are almost mandatory to get anything sorted.
5. Stay on the right side of the law
It should be clear by now that one of the major hurdles facing companies with a multinational workforce is complying with the local employment and payroll laws.
This is perhaps one of the most important benefits of outsourcing payroll. No matter what country you are based in, you will likely think that the legislation governing payroll is a minefield of potential issues.
But this is nothing when it comes to trying to figure out the vagaries of a foreign countries’ laws. When it comes to local laws, you will have an inherent understanding of the structure that governs payroll matters in your own country.
This gives a foundation of “understanding” that the governing laws can be applied to. This is not the case when it comes to trying to figure out the laws and the bodies that govern the laws in a foreign country.
6. Peace of mind
Last but definitely not least is the peace of mind that comes from knowing that each payday, your employees are paid timeously and accurately, and you don’t have to worry about falling foul of a foreign country’s obscure legislation.
The challenges of payroll have always been a source of stress for businesses. Outsourcing your payroll also outsources much of the associated stress that comes with it.
The move to a more global workforce is well underway and is only going to accelerate as we move into the future. This has brought many benefits to firms that now don’t have to worry about sourcing quality employees from local areas where there can be shortages of suitable people.
But while there are definite benefits to be gleaned from this move towards a widely distributed workforce, there are perils to be considered and high on that list is the problem of maintaining an accurate cross-border payroll.
Outsourcing your payroll to a company that specialises in international payroll services could just be the solution your business is looking for.