Global HR Glossary

What is Global Payroll? 

Global payroll, also known as international payroll, encompasses the management and processing of compensation for employees who work across multiple countries, ensuring compliance with each country's local laws and taxation systems.

This intricate system manages not only the intricacies of international taxation but also ensures that employees receive all legally entitled benefits such as holidays and insurance.

Setting Up Global Payroll In-House 

Setting up global payroll in-house involves several critical steps, each tailored to meet the complexities of dealing with multiple tax jurisdictions and employment laws. Here’s a detailed guide on how to effectively implement global payroll within your organization:

1. Employer Registration: Depending on the location, you may need to register as an employer in the countries where your employees reside. This process varies significantly from one country to another, with different levels of bureaucratic complexity and legal requirements.
2. Understanding Local Employment Laws: It's crucial to educate your HR team about local employment regulations, which cover everything from working hours to insurance and holiday entitlements. Compliance with these laws prevents legal issues and potential fines.
3. Collecting Employee Information: Gather necessary details from employees, such as personal information, bank details, tax forms, and employment status, using a standardized global payroll form to streamline the process.
4. Data Security and Protection: Ensure that all employee data collected is securely stored and protected, adhering to local data protection laws to avoid penalties for data breaches.
5. Verifying Work Eligibility: Check each employee’s work eligibility through required documents or government verification services like the Employer Checking Service in the UK or E-Verify in the US.
6. Authorizing and Processing Payments: Ensure that payments are processed accurately and on time, according to the local pay frequency and inclusive of the necessary deductions.
7. Confirming Payment Delivery: After processing payments, verify with employees that they have received their funds correctly and on time to avoid any payroll discrepancies.
8. Liaising with Tax Authorities: Maintain good communication with local tax authorities to ensure compliance with tax regulations, keeping track of all necessary payments and forms.
9. Adapting to Legal Changes: Be prepared for frequent changes in local employment laws, which may require quick adjustments to payroll systems and processes.
   

Challenges and Considerations in Managing Global Payroll

Managing global payroll presents a range of challenges and factors that need careful consideration:

• Compliance: Ensure adherence to the diverse and frequently changing legal frameworks across different countries.

• Cost Management: Understand and manage payroll processing costs, which can vary widely due to fluctuating currency exchange rates and local economic conditions.

• Efficient Payment Systems: Choose the most effective payment methods and currencies for transferring salaries internationally to reduce costs and ensure timely payments.

• Technology and Automation: Implement robust payroll software or systems that support compliance and efficiency, reducing the risk of errors and non-compliance.
  

Outsourcing Global Payroll 

For many companies, outsourcing global payroll to an Employer of Record (EOR) is a strategic choice that offers several advantages:

• Expertise and Efficiency: EORs provide specialized knowledge of local payroll requirements and can manage payroll operations more efficiently than in-house teams.

• Cost Savings: By outsourcing, companies can save on the costs associated with setting up and maintaining payroll systems in multiple countries.

• Risk Mitigation: EORs help minimize the risks of non-compliance with local laws and regulations, reducing potential legal and financial penalties.

• Focus on Core Business: Outsourcing allows companies to concentrate on core business activities without being bogged down by the complexities of global payroll management.