Navigating the intricate world of payroll requirements for a new location can be an overwhelming experience. As a global employer of record (EOR) and agent of record (AOR) provider, People2.0 understands the compliance risk and administrative burden of managing payroll across borders and overseas.
That burden is further compounded by the absence of comprehensive payroll software that effectively addresses the complexities of taxes and payroll requirements in every country.
To underscore the diversity of payroll regulations worldwide, and the myriad of details payroll professionals must consider when managing workers in multiple countries, here’s a brief overview of some notable differences in requirements between Hong Kong, France, and the United States—just a few examples among many nations with distinct approaches:
|No obligation to pay
|Discouraged (not part of salary)
|Required for hourly workers
|Mandated paid sick leave
|Mandated paid sick leave
|No federal mandate
|13 mandatory paid holidays (17 total by 2030)
|11 mandatory paid holidays
|No mandatory statutory holidays
This is merely a glimpse into the complex array of payroll considerations that businesses face when managing workers in different countries.
At People2.0, we have over two decades of experience and expertise in ensuring our clients maintain compliance with labour regulations, regardless of location, worker type, or work arrangement. In this post, we share our insights into four key areas of payroll that demand research and diligence due to their variations across countries: taxes, benefits, workers’ compensation, and banking requirements.
1. Payroll and Taxes
Each country has tax regulations and varying requirements. Companies opening offices abroad are sometimes unaware that employees who go to work in another country must be set up to pay taxes in the new country and comply with all requirements, even if the assignment is not permanent.
While it can be tempting to cut expenses by keeping payroll in-house, doing so comes at a huge risk to your organisation and possibly your bottom line. Your in-house payroll team may not have the experience they need to handle payroll in another country, and that gets risky if they aren’t aware of the considerations necessary for international payroll.
Not only do tax laws vary from country to country, but other details are unique to each country. There are differences in how and when workers are paid, what should be listed on a pay slip, and whether an employee must be paid directly into their bank by direct deposit or must deposit it themselves using a paper paycheck.
That’s where an employer of record (EOR) comes in. At People2.0, we recently helped a US-based staffing firm by serving as the EOR for a client who assigned a temporary worker in Hong Kong. The staffing firm did not have operations in Hong Kong and wasn’t sure how to manage this placement.
Because People2.0 has a team in Hong Kong, we were able to take care of the payroll for the worker compliantly, meaning that taxes, registration, banking requirements, and other matters were all handled efficiently and legally.
If you’re looking to do business in a new country, partnering with an expert that’s already based there will save you time and help mitigate risk because they’re already up-to-speed on all of these variations.
Healthcare and other benefits are delivered in different ways in countries around the world, which adds another layer of complexity to payroll processing. Government-provided healthcare and other benefits are the norm in many countries, but there are nuances. If your company is based in Europe, you may already be familiar with the concept of mandatory healthcare benefits. However, it’s important to consider that some countries, such as the United States, may have different regulations where certain benefits are considered optional.
If you plan to handle payroll in-house for workers in foreign countries, you’ll have to do your homework on the distribution of benefits and employer requirements in the country where you plan to do business. Again, outsourcing to a global talent partner with local experts in those countries can help.
For example, People2.0 helped a staffing firm that needed a local partner in Singapore to support a project with a large US-based technology company. The talent was available, but the staffing firm did not have local resources to support HR administration, payroll services, benefits administration, equipment provisioning, and other tasks. With People2.0 as the EOR, the details were handled, and the technology company was able to expand.
Many countries have special regulations or insurance programs to address occupational injuries or illnesses. In some countries, the government covers and pays for injured workers, but the differences vary drastically from country to country. This can affect the cost of employing a worker and is a detail that is best researched well in advance of a company’s expansion to a new location.
Partners like EORs handle the research so you don’t have to. EORs like People2.0 have local experts on staff who are familiar with the laws concerning injured or ill workers, so you don’t have to worry about missing any details. Their knowledge and experience help mitigate risk and ensure that your organisation stays compliant while expanding globally.
Getting funds to employees on payday is no small matter, especially when you employ workers in multiple countries. As with other payroll details, getting this right comes down to in-country expertise. Some countries require workers to be paid through banks in the countries where workers are employed, and things can get even more complicated when it comes to territories.
Take Puerto Rico for example. Because the unincorporated territory is still a part of the United States, its citizens are legally US citizens. However, the law states that companies paying workers who are based in Puerto Rico must use a bank based in the island locale.
Pretty complicated, right? But unfortunately, it’s necessary for expansion. You can’t grow your business in a new country unless you have a way to pay employees who live there. Laws can be tricky to navigate. Don’t hesitate to bring on a partner who is familiar with the area or based in the country of interest.
If you want to deliver success, you need an EOR partner with expertise and presence in the locations where you are placing employees. This way, you have payroll experts who are up to date on legal and tax changes.
People2.0 is the EOR or AOR for more than 150,000 workers in more than 50 countries. We help staffing firms and companies address complicated staffing and payroll challenges so they can focus on the revenue-generating activities they do best.
We’ve been in business for over 20 years and supported 16 audits with no recommendations overturned or fines paid. If you’re ready to start hiring and payrolling with peace of mind, we’re ready to help you.