With apologies to Dr. Seuss, it really is true that a globally expanding employer can pay their employees in any country these days.
The key, of course, is to choose the right provider who can help you withhold and remit the correct taxes while also allowing you an enterprise-level view and overall efficiency across the entire organization.
While organizations have historically operated in a decentralized way to pay their staff in different countries, there are many reasons why as an international employer, you should choose to do things differently. Multinationals have to already deal with many new factors as they move into new markets. Figuring out what labor laws and taxes apply to them and their employees should be a worry that is shunted off for easily available solutions.
The major worry to offload as you expand overseas is that of compliance with foreign government taxes. Regardless of which geography you’re operating in, chances are while you may receive some leeway in certain aspects of business operations set-up, withholding and paying the correct taxes to the local authorities will not be one of them. While the OECD countries may have better infrastructure and sophistication to track down non-compliance, other countries are not far behind in ensuring all potential income is being collected within their borders. The stronger the social welfare system in a country, the more stringent the requirements for remittance as well as awareness of employees’ rights. Audit risks, fines and penalties would add up real quick if you have someone handling local payroll who doesn’t have their eye on the changes to federal legislation that often appear to change lightning fast. However, working with systems that provide you with all relevant the labor laws, as well as an idea of all the deductions and withholdings that would apply to your workforce, would help alleviate and minimize the risks involved. Most importantly, they would highlight areas where you should focus before they turn into problems.
Another major problem that could be addressed with a global payroll is your Finance department’s deep seated desire to have one system to rule them all! An enterprise-level solution allows them to balance their general ledger and close out their books on a regular basis without having to chase down local accountants in each individual office across the globe. This would be a major time-saver and would land you on the Finance team’s ‘nice’ list forever!
Finally, as you worry whether each individual accountant you’ve hired or inherited is truly experienced in that market or paying attention to all the statutory changes in that country, consider that a good global payroll provider will have a thoroughly vetted network of in-country specialists with whom they’ve been partnering for years, who know all the tricks and shortcuts to save you time and money, all within compliance of local regulations. They would also walk you through an implementation process that would educate you on the country’s requirements and quirks as well as how to use their system most efficiently while preserving your internal culture and processes. And in the end, you will have moved one step closer to truly being one company regardless of where all your people are located.