Managing a global team is not always a simple task. When you don’t dot all of your i’s and cross all of your t’s, you may be subject to compliance fines and penalties in the country where you are hiring. Truss provides U.S.-based tech companies with an end-to-end global hiring solution and employer of record services to help protect your company from errors and non-compliance.
With an employer of record on your side, you gain peace of mind — but it is still important that you understand what to look for and how to manage global payroll, salaries, bonuses, and tax withholdings, and this checklist for global payroll compliance may be able to help.
Contact Truss to learn more about our global payroll and employer of record services!
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5 Things to Manage on Your Global Payroll Compliance Checklist
When you manage your global payroll compliance, a simple checklist can help you ensure that you are doing everything you can to prevent issues with compliance. There are five primary elements that you need to pay attention to when creating your global payroll checklist — employee classifications and contracts, salary and currency, bonuses and additional pay, tax withholdings, and record keeping.
Here is a better look at five things you need to manage on your checklist:
1. Employee Classification and Contracts
When you build a remote global workforce it is important to understand employee classifications — employer of record, independent contractor, or direct employee. Misclassifying an employee can lead to costly compliance fines, and an estimated 10% – 30% of companies will misclassify an employee. When writing employee contracts or completing tax documents, it is critical that employees receive the correct classification, and an employer of record can help ensure that you avoid misclassification penalties.
- Verify each employee’s legal status under the local laws.
- Ensure you have accurate tax identification numbers and documents for all new employees.
- Write compliant employment contracts for all remote employees that include base salary, currency, and pay frequency.
2. Employee Salaries and Currency Exchange
The number one element of compliance for a remote global team is the salary, and managing employee salaries is an important part of payroll. Managing employee salaries for remote employees includes meeting minimum wage requirements in the hiring country, understanding compliance with local overtime and working hours laws, and being able to securely manage different currencies in payroll.
- Establish employee base pay to meet or exceed the minimum wage requirements in the hiring country.
- Know, understand, and follow local labor laws that manage overtime pay, working hours, and vacation time.
- Find a secure and legal method to manage currency exchange rates with bank transfers.
3. Employee Bonuses and Additional Pay
Employee bonuses are an important part of the payroll that are not always easy to manage and track. Many countries around the world use 13 – or 14-month bonuses employees to increase pay for employees, and it is important for companies to understand the legal aspects of these bonuses and other aspects of pay — like severance pay, employee benefits, pay in lieu of notice, and more.
- Check local labor laws to determine if 13- or 14-month employee bonuses are required.
- Determine if employee performance bonuses count toward severance or other benefits.
- Write and document clear terms for employee bonus structures.
4. Employee Tax Withholding and Deductions
Maybe the most common compliance errors for tech companies with a global team involve tax withholdings and deductions. A failure to calculate, withhold, and remit employee income and social security taxes based on where the company is located is a common mistake that companies make, and a mistake that an employer of record can help you avoid.
- Calculate correct employee income taxes based on the local tax brackets.
- Deduct the required social security, employer, and employee tax contributions from payroll.
- Send withheld taxes and documents to local tax authorities by monthly or quarterly deadlines.
5. Employee Reporting and Records
It is important that for all of the aspects of compliance listed above that hiring companies keep precise records and provide the necessary reports. This includes making sure that these reports and records are compliant with local guidelines, that employee pay is converted to the proper currency, and reports are in the proper language.
- Make sure employee payslips are compliant with the correct language and currency.
- File all required year-end tax summaries and earning reports with local governments.
- Maintain payroll records for mandated retention periods specific to local labor laws.
READ MORE: Hiring in Emerging Tech Markets vs. Established Tech Markets
Improve Global Payroll Compliance with Truss as Your EOR
With a checklist for global payroll compliance that includes salary, bonuses, and tax withholdings, you gain a better understanding of what you need to pay attention to as an employer — and it can be a challenge. This is where an employer of record can help.
With an employer of record — like Truss — as your partner, the EOR provider takes on the legal responsibilities of global payroll compliance, while you maintain day-to-day control of your remote workforce. Truss will help you find, hire, onboard, and manage remote employees in emerging markets like Central Asia and the Caucasus. When you have found the right fit for your team, we will help ensure all employee contracts and payroll are compliant with the local labor laws.
Contact Truss today to find out how we can help you grow your team!
