Global payroll: how to pay people in more than one country

There is no such thing as one global payroll. Every country has its own tax, social security, payslip and banking rules, and each employee is paid under the rules of the country where they work. What a global payroll actually means is many local payrolls, run consistently, approved in one place and reported in one currency.

Three ways to employ someone abroad

• Your own entity. You register a company or branch in the country, register as an employer, and run local payroll. Most control and lowest cost per head, but setup takes months and the entity has ongoing filing obligations.
• An employer of record (EOR). A provider that already has an entity employs the person on your behalf and runs payroll. Fast to start and useful for a first hire, but the cost per head is high, and you do not hold the employment contract.
• Contractors. The person invoices you for services. Simple, but only legitimate if the relationship really is independent. If you set hours, supply equipment and manage them like staff, many countries will treat them as employees, with back taxes and penalties.

The common path is a contractor or EOR for the first one or two people, then an entity once headcount in a country makes the EOR fees larger than the cost of running your own payroll. Plan that move from the start, because transferring employees from an EOR to your own entity is a new employment contract in most places.

Permanent establishment risk

Having people working in a country can create a taxable presence there for your company, even without an entity, particularly if they sign contracts or generate revenue locally. This is a corporate tax question rather than a payroll one, but it often decides when you need an entity, so involve your tax adviser before the headcount grows.

What changes from one country to the next

• Tax withholding: monthly cumulative calculations in some countries, annual reconciliation in others.
• Social security: employer and employee rates, wage ceilings and which earnings count.
• Pay frequency: monthly is normal in Europe and India, while biweekly and semimonthly are common in the United States.
• Statutory extras: a thirteenth month salary in several countries, holiday pay in others, gratuity in India and the Gulf.
• Payslip content and language requirements, and how long payroll records must be kept.
• Bank file formats and payment cut off times.

Currency on the payslip

Employees are paid in their local currency, but salaries are often agreed or budgeted in yours. Decide which one the contract is written in. If it is the local currency, the employee is protected from exchange rate swings and you carry the risk. If it is yours, net pay moves every month, which most employees dislike and some countries restrict.

Whichever you choose, put the rate and the rate date on any payslip that involves a conversion, and use one documented source for rates. An employee who can see how their figure was reached rarely raises a query about it.

One calendar for many deadlines

Each country has its own cut off, pay date and filing deadlines, and they do not line up. Keep a single calendar with every country's input cut off, approval date, pay date and statutory deadlines, and run the approvals in the same order everywhere. Consistency in the process matters more than identical dates.

Employee data across borders

Payroll data is personal data, and moving it between countries is regulated. The GDPR in Europe and India's Digital Personal Data Protection Act both restrict what you can collect, who can see it and where it is processed. Limit each country's payroll team to their own employees, and keep a record of where the data is held.

Consolidated reporting

Finance wants one number: total employment cost by entity, country and team, in the group's base currency. That is only straightforward if every country uses the same cost categories, so that employer social security in Germany and employer PF in India land in the same line. Agree the mapping once, before the second country goes live.

How PayLoom does it

PayLoom keeps one employee record across countries and sets pay elements, policies and statutory rules per country. One run can pay people in several currencies, with each payslip in the employee's currency and the rate and rate date stamped on it. Reporting consolidates to your base currency by entity, country and team, so finance sees one figure without assembling it from separate systems.