In this guest post, Chantal Smith of Vineforce offers a comprehensive guide to outsourcing payroll processes and looks at the pros and cons of global payroll providers.
Payroll. Every credible business with a staff of employees needs one. It is a system of calculating and processing your staff’s pay by accurately considering time spent working, the number of people to be paid, distributing such payments on time, and some other factors such as tax payments, labor laws, and payment slips, depending on different regions or countries.
Operating a globally remote staff for your remote business is no easy feat in the initial stages until you get the hang of it. Therefore, your system of processing payroll should not add to those challenges. Whatever the size of your company, there are some crucial elements to consider before implementing any process for payroll.
In this article, you will find out if adopting a global payroll provider is the right choice for your internationally distributed remote team. In addition, you will also learn what to consider before doing so, and the types to consider. There are two ways to manage your global payroll:
Managing Payroll In-House
When payroll is done in-house, this means your company does all payroll-related duties for itself. Your employees who manage this may need to consider understanding details like cultural variations for payroll in the countries of all your employees and making the payroll process centralized with strict monitoring, to name a few. This management mode is more beneficial than outsourcing when the organization is small or a startup, as there are fewer people to pay.
Outsourcing Payroll to a Global Payroll Provider
Most global payroll providers provide two distinct types of services:
Employer of Record (EOR)
The employer of record is a third-party company or the legal employer of your employees. They take care of not only employment on behalf of your company but also all compliance regarding payroll, taxes, benefits, etc. An EOR becomes the sole and formal employer of your employees offshore.
Professional Employer Organization (PEO)
A PEO acts like an EOR in that they are your HR. The only difference is that the PEO is a co-employer. You and the PEO can employ people at the same time while they handle all other HR duties for you.
These options are best suited for larger companies with a higher volume of employees and payroll that want to shift the liability of local labor regulations to a third party. It allows them to have the flexibility of having a workforce of employees versus contractors, with the ability to provide benefits that help attract and retain top talents.
What is a Global Payroll Service Provider?
The processing of payroll on a global scale for employees in multiple countries is known as global payroll. It may include all practices involved in onboarding and managing payrolls for all your international employees and contractors. Global payroll providers can manage some or all payroll duties for companies anywhere they operate. They help to ease the challenges that arise when expanding globally while reducing the risks and headaches that come with complying with local laws.
Types of Global Payroll Providers
Full-Service Payroll Provider
They supply an end-to-end solution for hiring and paying workers abroad. These include tax filings and payments, processing payroll, direct depositing, employment contracts, and printing of checks, to name a few. It is best suited for more established companies as they may need a full range of services and have a larger pool of international workers.
Basic-Service Payroll Provider
This provider mainly only allows you to pay people in different countries and nothing else. Workers paid by this method usually are contractors that handle their own taxes. This basic type is more favored by small and medium enterprises which usually opt to manage their payroll in-house rather than outsourcing. Some of the basic services may include payroll and payments in multiple currencies, API interfaces, and integrating with other accounting software.
Pros and Cons of Full-Service Providers
- Saves time: Doing in-house payroll requires extensive employee data across departments, especially in a large company. For this reason, checking and ensuring processes are done accurately can become time-consuming. Outsourcing the specialists to cover these duties saves you ample time and energy to focus on other strategies for marketing and improving employee efficiency. For this reason, checking and ensuring processes are done accurately can become time-consuming. Outsourcing the specialists to cover these duties saves you ample time and energy to focus on other strategies for marketing and improving employee efficiency.
- Prevents mistakes: When you use professionals to handle your payroll, it reduces or prevents the occasion of payroll tax and returns mistakes, missing deadlines, late tax filings, and omissions. They efficiently manage most or all your HR needs.
- Eschew penalties: When done manually, payroll mistakes are bound to happen. One such mistake is overdue payments. With a global payroll system, the chances of this are reduced as these solutions use automated means to ensure taxes are filed on time, thus buffering you from incurring penalties.
- Guaranteed compliance: Payroll outsourcing providers are knowledgeable about labor codes and employment regulations, allowing employers to remain compliant.
- Inflated costs and additional expenses: Many global payroll tools, especially the popular ones, tend to be too expensive for small start-ups until they reach a considerable workforce size. In addition, sometimes they do not offer the best exchange rates or they have added functions that start-ups may not need, equating to unnecessary other expenses.
- No data or internal control: When a payroll provider controls your HR operations, you have little to no control and access to data and internal processes. You must adhere to that third-party’s terms and conditions concerning your data acquisition and storage. This leaves you depending on the provider to secure your sensitive data.
- The risk of using the wrong provider: If the provider you choose has no experience with the unique or distinct aspects of your company’s payroll, errors are bound to result in fines and legal problems. For that reason, consider the following in choosing a good provider: (1) being up to date with compliance regulations, (2) pricing that aligns with your budget or value for your money, (3) use of the best technology, and (4) internal control.
- Coordination difficulties: This may arise in bringing together specific tasks and responsibilities with your provider and giving continuous support, so they give you the results you need. This can be time-consuming, especially in the first stages of the partnership.
Pros and Cons of Basic Service Providers
- Fast: Batch payments are quick
- Cheap: Most cost little to nothing
- Easy to get started
- No pay stubs: If a pay stub is needed for tax purposes, this can be a disadvantage. It means there is no way to supply benefits, and employers and employees are not legally bound.
Examples of Full-Service and Basic-Service Global Payroll Providers
This global payroll provider is ideal for remote-first startups with foreign contractors and hiring refugees. However, it does help companies of any size hire, pay, and manage full-time, part-time, and contract workers from around the world with its self-serve platform. The services they offer are:
- Global payroll services
- Employer of Record services
Deel specializes in international payroll for remote teams. They allow you to compliantly hire anyone (employees and contractors) from anywhere (over 150 countries) in minutes. In addition, it allows paying and managing your global team with ease and in one place.
- Hire employees and contractors
- Government declarations
This HR solution is award-winning and trusted by popular names such as Wix, Intel, and Microsoft. It is also an EOR which makes hiring internationally compliant without you needing a local setup. They make hiring and onboarding easy and do this in over 160 countries worldwide.
This is a good consideration for startups, small businesses, and entrepreneurs as it targets what they need most that other solutions do not provide. If you have a combination of employees and contract workers in your small workforce, then Gusto was made for you.
- Employee and contractor payroll
- Tax filing and compliance
- Facilitates employee benefits
TransferWise cuts costs for payroll by instead offering batch payments, payments made in multiple currencies, and the ability to integrate with accounting software at no monthly fee. Up to 1000 payments can be made with just one simple click, saving you tons of time spent on payroll.
Other services offered:
- 38 currencies for payroll with the right exchange rate on each payment
- Payments made in USD
Other Low to No-Cost Global Payroll Providers for Small Businesses:
So, before you consider using any global payroll provider, consider the following first:
- The size of your workforce
- Your budget
- The functions you want to be covered
- Control of your data
- Data security
- The amount of time you wish to save
- The mistakes and penalties involved if something goes wrong
Chantal Smith is the lead content writer for Vineforce. Before working at Vineforce, she practiced dental hygiene in her home country, Jamaica, for a few years. She has always had a knack for writing for as long as she can remember and dabbles a bit in writing for her blog, but after retiring as an RDH, she decided to plunge fully into writing and has not looked back. When she is not writing professionally, she volunteers as a live experience host for her church online and makes homemade skincare products.
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