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Avoiding Risk with International Payroll

Organizations must be sensitive to local payment customs and cultural differences that impact how international employees are paid.

Avoiding Risk with International Payroll

This article is sponsored by Globalization Partners.

This story originally appeared in the September/October 2020 print edition of Middle Market Growth magazine. Read the full issue in the archive.

If you are a company looking to hire global talent, you will need to onboard international employees and figure out how to pay them. To avoid encountering any potential international payroll issues, companies need to make sure they are following the rules when it comes to classification, tax withholding and a series of other details.

Aside from complying with the requirements of national authorities, organizations must be sensitive to local payment customs and cultural differences that impact how international employees are paid. For example, a 13-month payroll is commonplace in many South American, European and Asian countries.

Similarly, in the European Union, the working week is capped at 48 hours, while in China, labor law caps the working week at 44 hours. Meanwhile, in the U.S., nonexempt employees receive overtime pay once they have worked more than 40 hours in a week. Therefore, the international payroll system will need to incorporate a method to accurately record and report time.

Here are four additional factors to keep in mind:

The compliance fundamentals: When paying international employees, businesses must ensure they are withholding and paying the appropriate types of tax, and the correct amounts, by the right deadline.

In addition to tax compliance, international payroll will need to follow all national rules that relate to benefits and wages. This may include contributing to an employee’s pension plan and adhering to any minimum wage rules that apply.

Navigating legal concerns: There is an array of legal differences that must be tracked when paying a remote international team. For example, in the U.K., employers need to pay Statutory Sick Pay if an employee is sick and off work for at least four days for a period of up to 28 weeks. In the U.S., however, employers can offer paid time off for sickness, but they are not legally obliged to pay employees.

The practicalities of payment: Employees must be paid according to the laws of the country in which they live and work, but there are exceptions. For example, if a company asks an employee to temporarily move abroad in the line of work, it may be possible to continue to pay them from their home country payroll.

International employers must also juggle fluctuating currency exchange rates to ensure people get paid the correct amount in their local currency—without incurring excessive cost to the organization itself.

Cutting through complexity and staying compliant: To eliminate the complexities associated with onboarding and paying international teams, companies are increasingly electing to outsource the management of their international payroll to a global employer of record.

A global employer of record enables companies to quickly hire talent in countries where they do not have a business subsidiary or branch office. This is because the company’s employees are placed on the existing payroll of the employer of record, with the company benefiting from the global legal infrastructure. This ensures that country-specific payroll requirements are met, and that employees get paid on time and in the currency of their home country.


Nicole Sahin’s mission is to eliminate barriers to doing business internationally and building global teams. As founder and CEO of Globalization Partners, she is recognized for creating an innovative solution that enables companies to hire great talent anywhere in the world, without the complexity of setting up foreign branch offices or subsidiaries. Businesses are able to leapfrog over the legal, HR and tax complexities without having to figure out “how” to do business in a foreign country, while getting all the benefits of a global team.