Pitfalls of global payroll

As the global economy evolves, businesses continue to build their international presence. The transition into a new business jurisdiction is filled with challenges, including how to pay international staff as a UK entity.

The most powerful tool available to employers is local knowledge. Understanding the specific regulatory and logistical requirements within each country is essential to a successful move into the international payroll arena.

It is therefore essential to be aware of a few key factors in order to avoid some common, and damaging, pitfalls that employers can experience. Here are our top tips for running an international payroll.

Know the local legislations and law

When setting up a global payroll, being compliant with each jurisdiction’s regulations and laws is fundamental as every country will have specific laws and regulations. Before setting up in the new jurisdiction, carrying out some initial research into the country’s main payroll requirements will steer you in the right direction. 

Some key things to consider include:

standard working hours;

• holiday pay;
• benefits in kind;
• sick pay;
• parental leave; and
• location of the work

Payroll accuracy 

Payroll mistakes can be costly, so accurately processing each payroll period is key, irrespective of its size. This can result in possible employer penalties, not to mention the impact on your employees. 

It is therefore important to have trust and confidence in your payroll provider. As the experts in each jurisdiction, they will be able to keep you updated with any legislative changes. This will empower you to sign off your payroll with confidence and provide you with any relevant knowledge to update your employees. 

As there can be variations in pay components from country to country, working on your preferred data output is key to the timelessness of your payroll audits, along with having access to a gross-to-net report and a variance report.

Take expert advice

The complexities and differences in employing staff in new countries mean it is wise to take specialist advice, especially around topics such as tax. It is also worth considering the kind of support you will require to run the payroll; for example, will you need a provider who can offer international payroll or will you have staff in the country to run it in-house? 

Consider resource

The end-to-end payroll processes across different jurisdictions are complicated and asking a UK payroll team to take on international payroll can be unrealistic and very challenging. Taking time to understand information being shared and setting up meetings with local experts adds value and ensures we never work based off assumptions. 

Language barriers and time differences can also cause issues. These tie into the allocation of time needed to conclude on topics due to the country-specific complexities. A small payroll can be as time-consuming as a large payroll. Therefore, it’s wise to think carefully about existing resources within the business that can help deliver on an international payroll.

Allow time for set up and planning

It is worth remembering that before implementing a payroll function and employing staff, you must have certain other major tasks already completed. For example, you will need to set up the company, link to governing bodies for payments such as taxes and social security, set up a local bank account, and understand how to set up employee-level documents for completion. If you decide to use a provider to support payroll, ask if they can also assist with the set-up, as often these are services that can be offered.

For information on how RSM can offer support in moving to new countries, please contact Richard Arthur or Steve Sweetlove.