International global payroll – how to pay employees abroad and stay compliant

Last checked and updated on 8 August 2022

Payroll can be a challenging task, and when you have employees who work abroad it can become even more complex. So where should your business get started? Perhaps this is your first time hiring someone in another country, or perhaps you’re hiring in a territory where your business has never operated before. This is where international payroll comes in.

In this guide we will look at the ins and outs of global payroll and how you can make sure that you remain compliant. 

What is international or global payroll?

International, or global payroll as you might sometimes see it called, refers to the paying of any employees of your company who work outside the country of residence of your organisations. International payroll includes payroll administration and payments for employees working in your business offices abroad, any contractors or staff employed via agencies. 

How does this differ from domestic payroll?

To some extent, both domestic and international payroll are similar; they both apply to the paying of individuals who work for your company. There is however one big difference, and this is that there are different legal systems and legislation that govern payroll in other countries, which can make doing this type of payroll much more complex. 

What factors do you need to consider when paying employees in different countries?

When it comes to paying any employees that your company has in different countries, there are a number of factors that you will need to take into consideration:

  • Government regulations – depending on where your employees are located there are likely to be regulations in place that you will need to observe that are specific to that country – this might be paying into a local bank account or having particular types of employment contracts in place. 
  • Tax laws – Tax laws also differ from one place to another, so it is important to understand every aspect of the tax laws for the country in question and ensue that you remain compliant. 
  • Additional financial obligations – you need to consider other financial costs and your liability – pension payments, social security and more.
  • Work visas or permits – different countries will have visas or work permits that must be obtained to allow a foreign national to take employment in that country.
  • Payroll processes – the above factors may all have a bearing on how payroll is processed, and can also have additional costs to your company both in terms of administration and financially.
  • New employees – all new employees need to be processed onto your system and this can take time and effort, particularly if you have missing information and are in different time zones, making communication a little more complicated. You need to make sure you have enough time to gather and process all of the information before your first pay run that will include them.
  • Exchange rates – there are costs associated with moving money from one country to another and these will fluctuate with exchange rates – an added complication.

Do employment laws vary a lot in different countries?

When it comes to employment laws in different countries there may be some significant differences, and these will vary depending on the countries in question. If you have employees in other countries, it is important that you follow the employment laws of the country they are working in with regards to their employment contract, how their pay is processed and any other issues relating to their work for your company. 

What about international PEO as an option? 

International PEO, Professional Employer Organisation, is an employment solution that exists on a global scale and allows companies to hire employees who are supported anywhere in the world in a quick and efficient manner. It helps them to remain compliant and avoid the burdens of establishing a legal entity in a foreign country. 

On the plus side, it makes it much easier to ensure that you are following all of the appropriate legislation, and this can become particularly important if you need to employ people in a number of countries which would mean keeping an eye on a wider range of different regulations. However it does also take some of the control over who you employ out of your hands and put it firmly in the lap of someone else. This can be a problem for some businesses. 

If you are considering International PEO for your company then it can be a good idea to seek advice from an expert in the field before committing yourself and your company. 

Do you need to have a registered local business entity in a country in order to run international payroll there?

If you want to run your payroll processing in another country, then it is important to look at having a registered local business entity in that country. A separate legal entity can be a valuable move for your company as it will help to protect your UK business, the parent company, from any potential legal risks that can occur by ensuring that there is isolation in place at the subsidiary level.

Unfortunately, setting up and then running a subsidiary in a foreign country in this way can be time consuming and expensive. You may also need to consider the option of having local managers or directors in place. 

Do you need to have a local bank account to pay employees in another country?

If you have employees in another country, one concern that you might have is how do you pay them? If the employee is a UK resident who has made a temporary move to another country to work for your company, then it is possible to keep them on your domestic payroll, depending on the duration of their time abroad. 

If they will be there for a greater length of time, or are a resident of that other country, then the most appropriate course of action that is open to you is to:

  1. Request that a third party company or local partner place them on their payroll
  2. Outsource your payroll in order to be able to pay this remote employee
  3. Pay the individual as an independent contractor

With such a range of different options available to you it may not be necessary to have a local bank account.

Paying employees abroad in-house vs. outsourcing international payroll to a specialist provider

In some instances it will be necessary for your company to have paid employees who live and work abroad, and this can have implications for how you pay them. These employees fall into several different categories. 

Paying a UK employee abroad

They may be someone who has previously lived in the UK, and maybe worked for your company, who is either moving to work abroad on a permanent basis or for a period of time – for example helping to set up a branch of the company in another company. If the move is not a permanent one, then it may not be necessary to move them off your payroll and you may not need to make any changes. If this is a permanent move, then the situation will require a different approach.

Paying a foreign employee abroad

They may also be a foreign employee; someone you employ in the other country to work for you. In this case how they need to be paid will be very different. If your company already outsource your payroll to a specialist payroll company then this is probably an arrangement that you will want to continue for your new foreign employee.

If the company that you currently use do not deal in international payroll then you will have two choices. You could move all of your payroll to a company who can deal with domestic and international at the same time, or place your international payroll with a company that specialises in that field. 

There are so many complexities that surround the paying of employees abroad, as we already discussed, that outsourcing your payroll to a company who specialise in international payroll and know all of the complexities involved with local regulations is a much safer option for your company.

International payroll services – what types of service are available and how to they compare?

With the global market increasing all the time there are now more companies offering international payroll services than ever before, which is great news for your company. Every company will offer the same service of processing your international payroll, ensuring that you are fully compliant with any local regulations and paying your employees.

However because of the complexities that surround the hire and pay of international employees many of them also offer a wider range of services, so you will want to look around to find a company that offers everything that you are looking for. 

Other services that are often offered include (but are not limited to):

  • Assistance with hiring employees on a global scale
  • Assistance with managing contractors on a global scale
  • International payroll compliance

When you select a payroll manager who specialises in this area, their staff will be highly knowledgeable and have access to all of the latest legislation which will allow you company to stay compliant on every front. 

Top 10 best international payroll providers compared

The world of international payroll providers can be a confusing one with so many different companies to consider. With that in mind, we have done some of the legwork for you and put together a comparison of the top 10 international payroll providers to give you a helping hand. 

  1. Papaya Global – Papaya Global have often come top of the list when it comes to payroll providers. They offer fantastic business planning for companies who are looking to expand their international workforce. Papaya offer the full global HR solution with a range of built-in payroll solutions.
  2. ADP Global Payroll – ADP are well known in the world of payroll solutions and if you already use them to outsource your domestic payroll, they would offer the perfect solution. When it comes to international payroll compliance, they are a great choice, and particularly for larger companies. They offer a full PEO solution. 
  3. Immedis – This company offer an HR & Payroll system that is technology-forward and cloud-based giving you great peace of mind over your employee data. They have great processes in place for streamlining all of the administrative payroll tasks that need to be completed in order to ensure compliance.
  4. Globalization Partners – If you are looking to expand into new countries then Globalization Partners have an enviable reputation when it comes to helping this process as smooth as possible. They are great at international PEO and compliance is one of their particular strengths. 
  5. Payoneer – unlike some of the other providers on our list Payoneer do not offer full-service payroll. Having said that, there is a very good reason that they are here and that is that they offer an excellent and reliable payroll solution to companies whose international workforce is made up of contractors, suppliers, contractors, freelancers and remote employees.
  6. Rippling – Rippling brand themselves as an “Employee management platform”. They support the full package when it comes to international employees – HR, payroll, benefits and onboarding. They are one of the best when it comes to fast international payroll runs.
  7. UnaTerra – UnaTerra offer an international payroll service that also includes PEO, HR, accounting and even corporate services. They understand all of the paperwork and compliance that are needed to keep your company in the right place and leave you time for other things.
  8. FMP Global – FMP Global offer a fully comprehensive international payroll solution that ensures you are fully compliant. They use in-country experts to ensure that your company benefits from the best expertise possible, and they operate in 135 different countries giving you great coverage. 
  9. SAP SuccessFactors – Offering localised support in over 45 different counties SAP SuccessFactors ensure that you are compliant with all regulations. They are a great option for growing companies particularly when used alongside some of their other solutions. 
  10. Remote – Offering international payroll and HR Remote operate in over 178 countries. They are particularly good for startups and specialise in companies who hire refugees and contractors. 

International payroll costs – what factors impact the cost, and what are the costs?

The same factors that can have an impact on the cost of your payroll in the UK will also impact an international payroll and how much the service is likely to cost you. 

As there are a number of compliance issues that can impact how you pay employees of your company in another country you may find that it is more cost effective to outsource your payroll to a company who specialise in international payroll solutions. These companies offer a range of different services and the service that you opt for will have an impact on the price.

The number of employees and also the location of these employees will also have an impact on the cost. In general you should expect to pay a monthly amount, similar to what you would pay for an outsourced payroll service in the UK, and then an additional amount per employee per month. This employee amount is often around $18 per month.

Compliance risks when employing or paying employees abroad

There are compliance risks involved when you employ and pay individuals whatever country you are in. However, when you employ individuals to work for your company abroad, this means that you will be opening your company up to even more compliance risks. 

Compliance regulations and risk are not the same in every country, so you will need to ensure that you are fully conversant with the regulations of any other countries where you employ people for your company as well as in the residential country of the company itself. You will need to ensure that you also keep up to date with any changes that are made to these regulations and that you act promptly to put changes in place as soon as they become law. 

Factors such as language barriers and even time differences can add to the complications that you might experience as a result of trying to keep up with the regulations in another country, and may often require specialist knowledge.

Handling employee benefits in other countries

When it comes to handling the benefits of your international employees in other countries, there are numerous pieces of legislation in place. Not every country offers the same benefits to employees nor as there calculated in the same way.

Statutory sick pay for example is paid at a set rate in the UK, where employers do not offer sickness pay as part of an employee benefit package. However, in other countries employees who are off work sick do not receive the same type of benefits. 

It is really important to think about how you will ensure that you are up to date with all of the latest guidelines to ensure that your international employees get all of the benefits that they are entitled to.

The rules around bonuses and company expenses for an employee will also vary by country, and depend on whether you have a local business entity or are paying them from a different country. Common benefits like company cars, gym memberships, health insurance etc, will have to be accounted for on a country-by-country basis and depending on your specific business setup.

Friction points to consider 

International payroll carries a number of different frictions points that you may also want to take into consideration when deciding how best to pay your employees in another country. These include but are by no means limited to:

  • Differences in time zones
  • Language barriers
  • Local authority legislations 
  • Currencies and exchange rates
  • Local customs and traditions – longer lunch hours, working days that start earlier and end later, different cultural days off work

Whilst there are ways to work with all of these frictions, they can make international payroll just a little bit more complicated.

FAQ

What is international payroll?

International payroll is paying those employees of your company who are not based in the country of residence of the business. 

How to organise international payroll?

If you want to organise your international payroll in-house, then this can be done via your business in the UK. You will need to ensure that you understand all of the implications that this might involve and that you follow the appropriate legislations of the country your employee is working in. 

Outsourcing your international payroll to a company who specialise in global payrolls will ensure that any regulations and issues pertaining to the country your employee is working in are followed correctly.

How much does international payroll cost?

The cost of running an international payroll will depend entirely on a number of different factors. These will include the country where your international employee is based, how many international employees you have and the company that you choose to outsource your international payroll to. You should expect to pay a set amount per month for this service in addition to a set fee per employee per month. This is likely to be in line with the type of amount that you would expect to pay per employee per month when you outsource your UK payroll; around $18 per employee. 
 
For this cost you will get the services of a highly experienced payroll provider who is fully compliant with any rules and regulations that are in place, and this will hopefully avoid the chances of you being fined for non-compliance. 

How to pay employees abroad?

If your employee is someone who you have employed in another country, who is resident there and who will work for you then there are a range of different options available to you. The simplest of which is to outsource your payroll to a provider who specialises in international payroll. They will ensure that the payments you make to your employee are compliant and include all of the appropriate benefits. 

Does a US employee working for a US company abroad have to pay Social Security?

If you are working in a foreign country that the United States has entered into a Bilateral social security agreement (sometimes referred to as a Totalization Agreement) and the agreement has provision for your foreign employment to be subject to US social security, then yes you will have to pay. 

What are the tax implications of working abroad as a mobile employee?

If you are a mobile employee working abroad, for example as an employee who has been sent to work in the company’s office in another country for a fixed period of time, it is possible to still remain on the company’s domestic payroll and be paid in your country of origin. When this is the case there should be no tax implications incurred.

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Important – The information provided in our articles is intended to be for general purpose use only, and not advice for you or your business. We strive to publish accurate information, but encourage you to fact-check and seek expert guidance. We recommend that you always speak to a qualified professional to get advice about how to operate your business under your specific requirements and circumstances.