Global Payroll Tips for Expatriate Employers
Paying expat employees is increasingly more common as companies expand their businesses into global markets. There is not one straightforward way to ensure you’re paying your expat employees given that laws are different in every jurisdiction.
What is certain, however, is that human resources and payroll professionals are required to acquire knowledge of international payroll management systems, which are becoming more complex since they vary from one organization or company to the next.
Therefore, there are varying procedures and methods for how international employees are paid.
We’ve put together a list of our top five tips for dealing with international payroll so you can avoid legal problems. While our firm does not provide global payroll service, we are happy to provide some helpful tips that may assist your organization. We can even refer you to a global HR firm if required.
But first, what exactly is international payroll?
What is international payroll?
International payroll refers to the list of a company’s expatriate employees and includes information on how and when the money they are owed will be paid to them.
There are, generally, two aspects of global payroll obligations to remember:
- Withholding the correct payroll taxes.
- Income/tax reporting.
“Withholding tax” is the amount of an employee’s pay withheld by the employer and sent directly to the government as a partial payment of income tax. These concepts are essential for you to understand so you can avoid problems.
If your expatriate employees are required to travel often, then it is critical to design a payroll policy about how long an employee must stay in one state before withholding must be taken into account.
Remember also that specific expatriate payroll-related concepts include foreign currency exchange transactions as well as US payroll.
Given you need to be compliant with specific laws, rules, and regulations that vary in different areas and are sometimes quite complex and overwhelming, it is recommended that you hire legal or tax professionals to assist you and your firm.
Legal and tax professionals have extensive knowledge of the specific taxation, employment laws, and fluctuating foreign currency trends. These professionals would be able to support you in achieving the best method for setting up a successful international payroll system that works best for both you and your firm.
The International Compensation System
Recognizing international compensation plans when reporting expatriate employees’ income and tax is important.
An international compensation plan may include base salary, benefits, and other incentives as part of the expat employee’s monetary and non-monetary return for work.
Some aspects of international compensation plans include contributions to foreign pension plans, foreign trust reporting, and foreign deferred compensation arrangements.
Some US expatriates working for foreign corporations may participate in international pension plans. However, the tax arrangement may not meet “qualification rules” in the US, so this must be taken into consideration.
Discussing how best to treat contributions to your foreign compensation plans with tax professionals is recommended highly, as they can also advise on reporting requirements that may apply in addition to an expat employees’ tax return.
You’re not alone if you’re feeling a little overwhelmed or even confused about where to start or how to structure or enhance the HR policies in your company or organization to better facilitate the international payroll for expat employees.
We have compiled five tips for you to keep in mind as you go forward.
- Understand the difference between various mobility policies
It is important to hire professional consultants who can provide guidance on a variety of mobility issues by identifying benefits available in the new location. These professionals will also be able to structure a new global employment strategic plan, as well as developing a worldwide expatriate compensation and benefits plan. In some nations, local benefits coverage and medical facilities may be limited. Local currency fluctuations and the financial stability of the local insurance company are significant concerns for expatriate employees. Expat Financial can source international group insurance plans from a variety of large and respected insurance companies for multinational companies, Non-government Organizations, non-profits, governments, and international schools.
Several benefits are available, such as Group LTD, AD&D, Life Insurance, Health, Dental, and Emergency Medical Evacuation & Assistance Insurance. The risk and the administration for numerous operations and countries are pooled under one plan. Benefits can be paid in several major currencies. For companies with less than three expatriate employees or individual expatriates, we can also provide individual International Health Insurance protection as well as individual life and disability plans.
- Tax knowledge is a must
It is critical that you understand the foreign payroll withholding requirement and are able to determine whether the various compensation aspects are taxable or non-taxable. Our firm can often refer clients to expatriate tax specialists and even global payroll firms with excellent global tax knowledge.
Expat Financial may be able to provide international pension plans from large and established insurance company. These plans are usually free of taxes on accumulations, and there are no withholding taxes on benefits paid.
In addition, a variety of investments can be made available. The administration costs are also typically much lower for the company and the employees than setting up individual plans. Check with your tax advisor to confirm your tax status at your location.
- Organize documentation of payroll operations
Managing the documentation of payroll is very important. It provides the payroll team members with operational standards and policies. Due to the complexity of international payroll, different staff members may have different payroll methods. Maintaining payroll documentation can help administrative staff to manage payroll operations efficiently.
A tailored international group insurance plan provides simple administration platform for your HR department. It can facilitate instant communication online between employees, insurance companies and HR administrators. This is most especially convenient for highly mobile expat employees.
It is imperative for your expat employees to move from one country to another without worrying about switching from one local health insurance plan to another. It is crucial that HR managers consider excellent administration when choosing a global medical plan for their expat employees.
Contact Expat Financial to learn more.
- Provide ongoing training for payroll team members
The role of an international payroll specialist requires strong professional skills, as well as extensive knowledge of new technologies and software in an ever-evolving business environment.
Arrange annual training and professional upgrading programs in international payroll for all team members to enhance knowledge, learn trending methodologies, and stay up-to-date on the latest best practices. Training programs should ideally include a comprehensive range of webinars, seminars, and forums.
Opportunities to network are also a great plus. Building an international payroll network can be helpful in advancing your company’s HR team and their performance.
- Optimal payroll productivity
International payroll management usually requires a cross-department effort from the finance, administration, and HR departments. Therefore, it is vital to connect global payroll to the business administration process and continuously update your management strategy.
For example, implementing a reviewing process within each party involved (such as HR & Finance) before delivering the review process results to employees is a great idea that can be used to avoid mistakes and improve expatriate employee satisfaction. Continuously building your communication with employees is critical to a great international payroll procedure.
A Reminder About Global Insurance Requirements
While international payroll is a very complex and vital requirement for expatriate employers, it is also important to consider the insurance needs of your globally mobile employees.
Expat Financial offers international group insurance plans for expatriate employees. We can even source expat group insurance plans for multinationals, NGOs and governments that have groups of three to 1000 expatriate employees working overseas. We offer numerous global benefit plans that are available to meet almost any budget requirement you may have.
With extensive global experience, knowledge, and contacts, Expat Financial is a leading source of group international health insurance plans that offer global health insurance coverage from various leading insurance providers that offer only the best plans.
For companies with only one expat employee, we have excellent global health plans that you can obtain a quote and also apply for completely online. We also offer xpat life and disability insurance plans as well as source special risk plans including war and terrorism insurance.
We are also a major provider of international insurance solutions to companies across many sectors of the economy and regions of the world.
Contact us today to obtain a quote, learn more, and we can answer your global insurance questions. If you require a global payroll specialist, we may be able to refer you to a company which can assist your HR Department and of course your expatriates.