Tipps on choosing a payroll provider – an overview of how the international payroll field works

Now you may be asking yourself, what do these companies stand for and what’s the difference between these companies – do they offer the same service and is the difference only the price or the platform?

And how are they able to be present worldwide? Is a local payroll provider or a global player the better choice?

International work from home – the modern how-to guide

Let us take a look at some background information so that you will be able to make an informed decision on how best to hire your international personnel.

What is international payroll?

International payroll is the term for having employees based in various countries around the world, but paying them according to the local laws of the country in which they are based.
In the remote-work world, your company may or may not have a legal entity in the country in which your (future) employee is located. If you do not have a legal entity in the country, having the help of an international payroll company guarantees that you will be able to payroll this employee correctly according to local laws.

How does it work?

Your company has decided to employ a candidate in a country, in which they have no legal entity. The candidate is going to need an employment contract according to local laws and the payroll will need to be put together based on the laws of the individual country. How to solve this problem? This is where the international payroll companies come in.

They offer a service called Employer of Record (EOR) or Professional Employer Organization (PEO). This means, they will hire the employee on your behalf and deploy him to your company full-time. On paper, he is the employee of the international payroll company, but in practice he works for you. This method of hiring falls under the concept of staffing or the umbrella company.

 

As the world is large, the next question you may ask yourself is the following:

does the international payroll company really have entities (and sometimes the necessary licenses) all over the world to be able to hire these employees? Companies such as deel, velocity global and globalisation partners may certainly have many of their own entities and teams on the ground in individual countries but it is highly unlikely that a company can have legal entities in over 120 countries (unless you are Starbucks or McDonalds). For these other countries, it is normal to work with something called an in-country partner. This means a local company (such as IPS), with the appropriate licenses where necessary, will act on behalf of the big player such as Oyster, Safeguard Global and Globalization partners.

These local companies hire the employee and deploy them full-time to you with the global payroll company being the facilitator. This way the candidate gets hired according to local law and pays his taxes and social security locally.

I want my international employee to be hired by my company – is there another solution?

This may seem overwhelming at first and a strange new concept – having foreign companies hire your employee.

• You may be asking yourself – is there a different solution?
• Can I still directly hire the employee, even in a country where we do not have a legal entity but still payroll the candidate according to the laws of that country?

The answer is:

this depends on the country and the local legislation. There is a solution to this called a “Virtual Company” or a foreign employer registration. The idea is the same as setting up a Representative Office. The head office (or a branch in another country) is registered as a foreign employer with the local social security and for employment tax withholding. Like that we can arrange for all social security payments to be made on your behalf. This solution is not well known but we have been working with this for years.

Payroll – a matter of humans or machines?

No matter how you decide to outsource your international payroll, let’s face it: while many processes can be automated in payroll, one still needs a local payroll expert to ensure the numbers are entered correctly, the laws are applied appropriately and the direct questions of the employees are answered.

In the field of payroll, we are dealing with humans and people such as you and me like having a person to talk to, not a robot or an automated system, especially when dealing with something as important as salary slips and the timely payment of salaries.