As the world grows more accustomed to remote work, the barriers between businesses and global talent are lower than ever. That’s great news for employers: there has never been a better time to build an international team than today.

And why not take that plunge? The benefits of global workforces are incredible. Remote companies — and international companies in particular — tend to be more productive, more inclusive, and more sustainable than their local, office-bound counterparts. Creating a culturally diverse workforce brings untold value with new energy, ideas, and insights. Unlocking the power of international hiring means access to a much wider talent pool, while your current employees can relocate without having to leave the business. Everyone wins.

But hiring international employees can be risky if you’re not familiar with local payroll, taxes, benefits, and compliance in every country where you source talent. This guide was developed to answer all your international hiring questions to help you feel comfortable and confident as you begin onboarding international employees.

How would you like to tap into a new talent pool? Hiring internationally offers the chance to find skilled professionals in new locations you previously could not access. You can invigorate your team by hiring global employees who have hard-to-find or highly specialized skills that are in short supply. Even your most senior employees can benefit from skills transfer in these situations. 

If you’re looking to expand into global markets, hiring internationally can provide legitimacy to your brand, whether you’re in startup mode or you’re a firmly established company. Employees who are familiar with a local market can guide you through the pitfalls of opening an office by providing:

Knowledge of local business customs and etiquette

Local business knowledge and contacts to pave the way for introductions

Insight into employee expectations for pay and benefits

Professional and social support for your staff who relocate to open a new office

In other words, hiring international employees gives your company a soft landing when entering new markets and allows you to build trust quickly in new places. 

One benefit to hiring internationally is the ability to work across different time zones. Overall productivity increases when your team is distributed around the globe and work is performed continually in a 24-hour period. There is even a positive trickle-down effect on mental health, as your employees don’t need to work long or unusual hours to meet variable needs.

Going global also allows your company to lean into the power of asynchronous working. When you free productivity from hourly constraints, you will be shocked at just how much more productive your team members (and, as a result, your company) can be.

Increased diversity, equity and inclusion (DEI)

It cannot be overstated how much genuine value a business derives from having a diverse group of skills, opinions, and experiences. Repeated research shows that diversity increases profits for businesses. When you hire an international workforce, your whole team gets a boost from DEI, including:

Reduced turnover of employees and contractors

Don’t be afraid to take the leap with your first international hire. If you are not sure whether you’re ready to hire full-time help, you can always get started with international contractors. As long as you stay compliant in your international hiring practices, it’s all upside for the business and for your team. Hiring internationally could be the secret sauce to gaining competitive advantage and solidifying your DEI.

Unique challenges for employers hiring internationally 

The benefits of international hiring are undeniable, but if you don’t have a lot of experience, there are a few things to consider before you get started. Setting up local infrastructure requires expertise in tax law, contract law, and HR compliance. Defining a company process for international expansion is one thing, but implementing that process is a different experience in each location.

There are four basic strategies for hiring international employees. Many companies use a combination of the four:

Set up a legal entity for your business in the country where you want to hire employees.

Contract a professional employer organization (PEO) to co-employ remote workers where you already own an entity.

Work with an employer of record (EOR) to employ workers on your behalf in countries where you do not own an entity.

Hire international contractors to work on specific projects or for specific time periods.

See also: Learn the difference between an EOR and a PEO. 

Keeping up with local employment legislation

Setting up a global infrastructure for hiring can be an expensive, time-consuming exercise. You can set up a local HR team on every continent — and staff each country with HR and legal specialists — or you can find a partner who offers an easier way to grow your global team compliantly. If you do work with a partner, make sure they have wide global coverage. 

Once you’ve found the right people to hire, paying them can pose another set of problems. Each country where your employees work has regulations about how to pay workers. This can include everything from frequency of pay to withholding tax. It’s important to know the compliance regulations so you don’t expose your company or your employees to unnecessary fines, fees, or penalties. 

Other considerations deal with the mechanics of paying international employees. Questions to consider include:

Do you have currency accounts for every country where your workers live?

How will you transfer money? Will you use a bank or a fintech service provider?

How will you pay employees if they are not in a stable country, are displaced, or have become a refugee?

What payment arrangement does your new employee prefer? Do they want to be paid in their local currency or in yours? Is it legal to pay in a currency other than the local one?

How will you manage foreign exchange fluctuations?

See also: How to pay international employees

If you plan to onboard international contractors in addition to employees, there are a few other factors to consider. You will need to take additional steps to ensure you’re not encountering unnecessary risk. One of the most common pitfalls is misclassifying employees as contractors – the consequences of which can be severe from both a financial and a reputational standpoint. 

See also: How to pay international contractors

Before you extend an offer to an international employee, it’s important to determine your global compensation policy. There are a number of approaches you can take, but you need to be consistent and transparent so every employee is treated fairly and feels valued. 

Your strategy for paying international employees should take into consideration:

How many international employees you expect to hire

How many countries your employees will reside in

Whether your current employees will move to another country to reside

Considerations for compensation packages include:

Standard of living for employees in your company

Government entitlements in each country, including social programs like health-care coverage

Customary fringe benefits for each location, which differ from country to country

Relocation costs, depending on whether you initiate the move or the employee makes a request to relocate

Ongoing expenses for expats who may be maintaining residences in two countries

Tax equalization for employees who have tax obligations in more than one country

If that sounds like a lot, don’t worry. You can use Remote’s global compensation strategy, which is fully transparent, as a blueprint to establish your own international plan.

If you have employees working in more than one country, you’ll want to determine your global compensation strategy early to avoid difficult situations down the road. Here are ways both large and small companies are paying their international employees. 

Develop a customized compensation plan for each employee.

Pros: If you expect to never have more than a limited number of employees, this could be a good option.

Cons: The onus is on you to ensure each package is in line with other employee compensation. If your company grows more quickly than expected, this approach can become cumbersome. Once you set an expectation for customized packages, it’s hard to wean employees off the strategy, especially if they like to negotiate. 

Set pay grades based on seniority level and title. Everyone, everywhere in the world, earns the same amount of money, which usually hinges on the currency used by the company headquarters. 

Pros: There is no dispute about whether people are being paid fairly. Everyone knows they’re making the same amount as their peers. If you avoid using the region with the highest cost of living as your base, the company can save money on global compensation.

Cons: Cost of living varies greatly from country to country. Attempting to standardize compensation by paying the same rates to everyone can lead to problems. You may not be able to attract employees who live in high cost of living (HCOL) areas unless you pay top rates for everyone, which can be extremely expensive and not sustainable.

Set compensation for each region to give employees an equitable standard of living. This works best when all salaries are completely transparent and accessible to all employees. 

Pros: Employees understand their compensation is designed to ensure everyone with the same jobs and similar experience has the same lifestyle opportunities and buying power. The company can offer competitive packages in different areas, allowing the business to compete for talent anywhere.

Cons: People with highly desirable skill sets may leave to make more money working in a different region or for a different employer. If an employee moves to another country, reducing wages can make employees feel devalued. 

Managing global compensation has a lot of moving parts. Pay inequality can lead to low morale, so it’s critical your global compensation policies are easy to explain and maintain.  Complications arise when employees live in areas where the local currency isn’t stable; that are suffering from high inflation; or with a high cost of living. Thinking through all the variables before you make your first offer saves you time in the future and helps build trust with your global workforce. 

See also: How to calculate compensation for remote employees

How you classify employees when they begin working with you is critical to staying compliant with hiring practices in each country. You cannot simply pay people as contractors, even for a little while, if they are performing the duties of employees. Many countries have strict labor laws to protect worker rights and ensure employees are being fairly compensated and receiving necessary benefits. 

Companies violating labor rights deny local governments the revenue they need to provide essential services, so governments tend to take these cases seriously. Governments expect employers to pay employment tax, social security levies, or premiums for national healthcare programs. When you misclassify your employees as independent contractors, either willfully or accidentally, local governments react with fines and penalties which usually include interest. The last thing you want is to get caught in the crosshairs of a government official who realizes you’re not compliant in your hiring practices. 

Permanent establishment risk is a tax terminology that indicates a company has a presence in a country sufficient enough that the country in question charges the company corporate taxes. In certain cases, this can lead to double taxation, both in the country where the company is headquartered and in the country where international employees work.

One thing to keep in mind is you don’t need an office to be considered permanently established. If you’re conducting business, especially if you’re making sales or generating revenue in the country, you need to be aware of permanent establishment risk. Working with an employer of record (EOR) or professional employer organization (PEO) does not affect your permanent establishment risk either way.

The popularity of work-from-home arrangements has made governments more aware and more vigilant about enforcing permanent establishment. Before you hire internationally, it’s important to speak with a trusted partner who has local expertise to understand your permanent establishment risk.

See also: What companies with remote workers should know about permanent establishment risk

A critical part of international hiring is ensuring your intellectual property (IP) is protected. If you’re hiring remote workers, you’ll want to keep your innovations and inventions firmly in your control.

IP laws are different in different countries. In some areas, IP rights could be assigned to local workers unless you have specific language in your employment agreements. Common types of IP which may be at risk include:

Hiring international employees can be risky if you’re not familiar with local payroll, taxes, benefits, and compliance in every country where you source talent. This guide was developed to answer all your international hiring questions to help you feel comfortable and confident as you begin onboarding international employees.

Guide to hiring international employees

https://www.expatica.com/es/finance/taxes/taxes-in-spain-471614/ 

https://www.investopedia.com/terms/t/tax-relief.asp 

https://lexbeckham.com/beckham-law/what-is-the-beckham-law/?gclid=CjwKCAjwkMeUBhBuEiwA4hpqEPiyxIa-oMMP8u-of4mYrPMdKE79I_ypfZ3-kFGhWMGnPRqNRdnkPBoCqpQQAvD_BwE 

https://balcellsgroup.com/beckham-law-spain/https://balcellsgroup.com/beckham-law-spain/ 

https://www.madridmetropolitan.com/what-is-the-beckham-law-guide-to-expat-tax-in-spain/ 

https://bleacherreport.com/articles/2715165-the-defining-games-of-david-beckhams-real-madrid-career 

https://www.britannica.com/biography/David-Beckham 

https://www.spanishpropertyinsight.com/tax-and-pensions/property-taxes-for-non-residents/ 

http://www.dmulchi.com/index.php/columns-4/item/101-special-tax-regime-beckham-law 

https://tejadasolicitors.com/blog/what-is-the-beckham-law-spain/ 

https://myspainvisa.com/beckham-law-spain/ 

https://sede.agenciatributaria.gob.es/Sede/en_gb/normativa-criterios-interpretativos/fiscalidad-internacional/convenios-doble-imposicion-firmados-espana.html 

https://www.football-espana.net/2019/12/19/explained-la-liga-stars-and-tax-issues 

https://taxsummaries.pwc.com/netherlands/individual/deductions 

https://www.iamsterdam.com/en/living/take-care-of-official-matters/highly-skilled-migrants/thirty-percent-ruling 

https://www.iamsterdam.com/en/living/take-care-of-official-matters/highly-skilled-migrants/thirty-percent-ruling/30-percent-ruling-indepth 

https://www.expatica.com/nl/finance/taxes/the-dutch-30-ruling-explained-101641/ 

https://www.dutchnews.nl/news/2022/05/30-ruling-to-be-capped-corporate-and-asset-taxes-increased/ 

https://www.ecovis.com/global/italian-tax-residency-rules-tax-benefits-for-inpatriate-workers/

https://brighttax.com/blog/us-expat-taxes-americans-living-spain/ 

https://taxing.it/tax-break-to-attract-human-capital-to-italy/ 

https://www.agenziaentrate.gov.it/portale/web/english/benefits-for-transferees-of-residence-to-italy 

https://arlettipartners.com/the-special-tax-regime-for-inpatriate-workers/ 

https://wts.com/global/publishing-article/20210315-italy-gmnl~publishing-article?language=en 

https://www.agenziaentrate.gov.it/portale/web/english/nse/invest-in-italy/tax-regime-for-new-residents

Sources for Data and Laws

Resources

Your employee has just made the move to work for you in a new country. As an “inpat” — a foreigner who takes up long-term temporary residence in a different country — they’re adjusting to a new time zone, a new culture, and maybe a new language. With so much involved in relocating, it's no wonder most inpats don't have enough time or specialized knowledge to figure out which tax relief programs they are entitled to.
At Remote, our team of international experts is already fluent in the tax relief schemes that apply to foreign workers in a wide range of countries and industries. That translates into expertise in handling the process of filing tax relief applications from start to finish. Our help with this process as it applies in each country is absolutely free to you and your team. All you — or your individual employees — need to do is ask!

A tax relief scheme is a governmental program with the goal of lowering an individual’s tax burden. Numerous countries, including Spain, the Netherlands, and Italy, have opted to grow their economies by incentivizing relocation for talented, high-earning foreigners through targeted tax breaks. These programs typically apply over at least the first few years of an inpat’s residency. 
For example, Spanish law permits inpats to register as non-resident taxpayers, allowing them to elect a flat personal income tax rate of 24% on the first €600,000 they earn annually. Residents, on the other hand, are subject to a progressive tax rate that can approach 50%.
Tax relief schemes and associated eligibility requirements vary widely from one country to another, even sometimes from one part of the same country to another. They can change quickly with the shifting winds of politics. Many of these tax relief schemes involve lengthy, tedious application processes requiring attention to fine regulatory details, multiple deadlines, and multiple cycles of document submission and authentication.
At Remote, we have an in-house team of tax specialists from all over the world who stay up-to-date on changing regulations. Their expertise is available to help our customers and their team members optimize their experience when relocating and working in a new country.
Leveraging our in-depth knowledge, employers can provide their inpat employees with support that will save them time, effort — and, most importantly, money — as they take advantage of whichever tax relief schemes are available to them. 

See also: Remote Relocation: Help your employees relocate internationally

Here are some examples of country-specific tax relief schemes we can help your employees navigate:

These are the primary benefits foreigners registered as non-resident taxpayers enjoy under Spain’s “Beckham Law:”

A non-resident taxpayer has the option to be taxed at a rate lower than the maximum marginal rate of the normal personal income tax in Spain. The 2022 flat rate under this regime is 24% (19% for European Union citizens) for earnings below €600,000, and 45% for earnings above that figure. The regular progressive tax rate, on the other hand, raises some residents’ obligation all the way to 47%.

While residents are required to pay a separate wealth tax on property located anywhere in the world, the Beckham Law only taxes wealth situated in Spain.

Non-resident taxpayers can begin exercising these rights during the tax period in which they relocate to Spain, and for the five following tax years.

Be relocated to Spain through contractual requirements of employment or appointment to a board of directors with minimal participation in share capital.

Since 2015, work for the employer does not actually have to be done in Spain, and the headquarters of the company need not be in Spain.

Register with Spain’s social security system, then wait six months before eligibility to apply for non-resident tax status.

Not have resided in Spain for the 10 tax periods before relocating.

Anyone who resides in Spanish territory for more than half the tax year (January 1 - December 31), 183 days, is considered a tax resident. So is anyone who maintains the central part of their economic activities there. 

Spanish tax law is especially complex, with everyone who is considered a tax resident normally required to pay at progressively higher rates. This applies to all income, regardless of where it is generated. The greater the worldwide income, the larger the tax liability. 
But in 2005, the Beckham Law changed things for the better for inpats in Spain, allowing them to choose whether to pay under the special non-resident, instead of the resident, regime. 

English footballer David Beckham moved to Spain in 2003 to join Real Madrid at a salary of €35 million. In 2005, he became the most famous inpat to take advantage of the new tax law. Ironically, an amendment later made this popularly named “Beckham Law” inapplicable to professional athletes.

Learn more about employing workers in Spain

Under the “30% Ruling,” foreigners who have relocated to the Netherlands can enjoy a refund-based tax relief scheme.

Every year, qualifying employees can claim a tax-free sum equal to as much as 30 percent of their annual salaries.

The benefit continues over the first five years an employee lives and works in the Netherlands.

An employee can claim this relief directly from their employer. Typically, an employer will cut an employee’s taxable salary by 30 percent, then return that 30 percent as a tax-free allowance. The idea is that these non-taxable funds ease the financial burden of relocating to a foreign country.

Be recruited or transferred from outside the Netherlands.

Possess skills and knowledge rare in the Netherlands.  

Earn a salary that meets a minimum threshold. (The bar is lower for PhD and master’s degree holders under 30.)

Not have lived closer than 150 kilometers from the Dutch border for six months or more, over the previous two years.

Conclude a written agreement with the employer structuring the employee’s salary under the 30% Ruling. 

This policy benefits highly talented professionals recruited into the country by companies registered with the Dutch tax authorities. Through a loophole, it may also apply to entrepreneurs who can claim themselves as employees. 

Keep in mind that the 30% Ruling has received some public criticism and legislative scrutiny. In May 2022, legislators opted to cap income eligibility at €216,000. Any part of a salary above that level will be taxed at 49.5%. 

Learn more about employing workers in the Netherlands

Foreign workers resident in Italy can take advantage of a partial exemption from regular taxation on monies earned as an employee, through business income, or through self-employment. 

Qualified inpats are taxed on only 30% of the income earned in Italy for the first five years they live there. 

Those who move to specified areas in the center and south will only be taxed on 10% of their Italian-earned income, provided they have at least one child under 18 years of age or purchase property in Italy in the 12 months prior to relocation or after relocating. 

For the second five years of residency, qualified inpats can claim 50% of their Italian earnings as exempt. Those qualifying through having minor children or residential property in Italy still only pay tax on 10% of their Italian income. 

Recent changes in Italian tax law have made things easier for foreign workers. They are no longer required to demonstrate any particular skill or to work for an Italian-owned company. But they must:

Have relocated to Italy in connection with work.

Pledge to live in Italy for a minimum two years and work there at least half of every year. 

Not have lived in Italy over the two tax years prior to relocating.

Claim this tax relief by addressing a written request to their employer. (Self-employed individuals can claim the relief on their tax returns to receive a direct payment or credit from the government.)

Learn more about employing workers in Italy

Support your team while recruiting the best global talent 

When you hire top talent from all over the world, they — and you — deserve the best. Connecting your inpat workforce with all available benefits and tax relief assistance can help you stand out in a competitive talent market. It also builds the trust of your team, showing them your investment in their success. 

Remote’s concierge-model tax relief application service can assist your employees in taking full advantage of legal, country-specific ways to reduce their tax burdens as they comply with all pertinent regulations. 

You and your employees can feel confident that our tax specialists can help save them the maximum amount of time and money possible. Your team will be able to focus on enjoying their earnings and elevating their quality of life, wherever they’re based.

Like our other specially designed services, Remote’s tax relief application assistance is purpose-built to be seamless and easy. Taking advantage of this valuable benefit of your relationship with Remote means you can leave the details to us, while you focus on scaling your business.

How Remote simplifies tax relief application process for inpats

Running payroll is a complex process, even for companies operating 100% locally. If you’re thinking of hiring international talent, it’s easy to feel overwhelmed at first. There are a variety of factors to consider, including global payroll compliance, currency exchange rates, how to factor in cost of living, and offering local benefits packages, all of which can make global payroll management a tall task. 

That’s the bad news. The good news is that global payroll doesn’t have to be a chore — if you know how to manage it.

Whether you’re planning a big global expansion or simply looking for a better way to manage payroll for your existing international staff, this guide is for you.  

What is the definition of global payroll?

Global payroll is an umbrella term for practices related to onboarding and managing payroll for international employees and contractors. Depending on the employees’ or contractors’ host country, global payroll can include a number of actions, including:

Let’s take a closer look at how the different components of global payroll work together to support international teams.

The ultimate guide to managing global payroll

This resource offers an introductory level overview of global payroll. For a deeper dive, we also recommend downloading our Global Payroll Management Guide. Remote’s Global Payroll Management Guide provides actionable advice on how to manage payroll for your global team while keeping your business compliant with international labor laws.

For anyone new to global payroll, it’s important to understand the options on the table. There are three main methods of establishing a payroll process. 

An employer of record is a service through which a designated company manages your entire payroll process in a foreign country. EORs make it possible to employ international staff without the need to set up a legal entity in each country. From a legal perspective, they are the employer for your international staff. Apart from ongoing payroll management, an employer of record can also help manage the hiring process and formalities.

PEO, just like the above-mentioned EOR, acts as your HR. However, if you opt to use a PEO, you have to own your legal entity in the country or region. Working with a PEO means entering into a co-employment relationship with your employee and another provider. Both of you employ the person simultaneously, while your PEO manages HR functions on your behalf.

In-house payroll operations and workforce management

Global payroll can also be managed internally, provided that you have the time and resources to handle compliance in house. Before deciding on this approach, you need to make sure that you can:

Launch legal entities in all of the countries where you employ workers

Centralize and monitor the payroll process

Have sufficient local legal representation

Have relationships with local benefits administrators

Understand the cultural nuances of payroll, benefits, and taxes in each country

To run in-house payroll successfully, it’s essential to use software that will automate at least part of the process and analyze employee payroll data. 

What are the challenges for global payroll?

Let’s now take a look at the main challenges associated with global payroll.

Setting compensation for your remote workers. Should you pay everyone the same amount or account for cost of living? What should you do if employees in one country receive a government benefit that employees in another country do not? To answer these questions, check out Remote’s guide to global compensation.

Employee classification. Do you know when to classify your workers as employees or contractors? If you get it wrong, you can be subject to fines, penalties, and even business bans. Be diligent and review employment relationships regularly to maintain compliance.

IP and invention rights. As remote workers can do their job in various locations, you have to abide by different intellectual property laws wherever you do business. Failing to understand local laws can not only result in the loss of IP rights but can also lead to legal battles and reputation damage. 

Tax management. Hiring remote workers also means you need to know where to pay income taxes and who’s responsible for settling each payment. Employers are usually required to withhold taxes for employees, while contractors tend to be fully responsible for their own taxes. See where remote workers pay taxes to learn more.

Permanent establishment risk. Permanent establishment is a tax status that refers to companies with an ongoing presence in a country. Whether permanent establishment applies to your company depends on the local governments understanding of your operations within that country. Working with an EOR or PEO does not have an affect on your permanent establishment risk either way, but a good partner can help you understand and manage your risk exposure. See our guide to permanent establishment risk for more information.

The challenges of global payroll can be steep, but the right partner can help you build an international team with minimal risk quickly and easily.

Here are a few reasons you may want to consider working with a global payroll provider:

Compliance with laws in multiple countries. Hiring talent from a number of countries doesn’t automatically mean you’ll have more paperwork to take care of. Remote makes it easy to abide by each country’s legal requirements, such as tax, benefits, and social contributions.

Access to in-house payroll knowledge. Worried about fines for noncompliance? Not clear how to handle withholding for foreign social programs? Your global payroll provider should understand the payroll customs in every country where you hire.

Save time and money. Global payroll is a faster and less expensive alternative to setting up your own entities in multiple countries. Opening an entity can cost tens of thousands of dollars and take months to complete. By working with a global payroll provider, you can hire international candidates immediately instead of months down the line.

On-time payment. Reliable payroll is absolutely critical to keeping your team happy. If you keep payroll operations in house when you expand into new countries, you could inadvertently cause delays in payment, leading to frustration and mistrust within your team. A global payroll partner helps you guarantee on-time payments to your whole team every time.

Increased productivity. How much time does your human resources team spend going through spreadsheets, double-checking figures, and making calls with benefits providers? When your global payroll solution handles the details, your team is free to focus on the most important thing: your people.

What are the responsibilities of global payroll?

To decide whether you’re better off using in-house resources or partnering with a company like Remote for global payroll, it’s important to understand the various responsibilities of a global payroll provider. Here’s a breakdown of the main areas.

Legal registration of your entity in the local market, if applicable

Timely payment of taxes and other local obligations (both yours and the employee’s)

Statutory benefits (for instance, 13th salary or holiday bonus), as well as optional benefits that are sought after by top talent

Ever-changing regulations and rule amendments.

Before you hire staff in a new market, you must be sure to stay compliant throughout the entire payroll process. Understanding these responsibilities is the first step toward successful international hiring.

There are several cultural factors to consider when hiring internationally. Your global payroll provider should be able to help you with:

Public holidays. When you hire in multiple places, you are expected to provide a variety of public holidays to team members. Your global payroll provider can help you track these days for your distributed team.

Paid time off. Different countries have different laws regarding when employees receive PTO and for how many days. It’s not always a flat number, either — many countries have different rules about paid leave for illness, family care, bereavement, maternity, paternity, and other situations.

Time zone differences. Ready to run payroll but the banks in your employee’s country closed six hours ago? Your global payroll provider can keep you ahead of any potential mishaps.

Salary and currency considerations. First, you must set salaries that are competitive in the market and legal under the local government’s rules. Salaries employees in the US, for example, are subject to minimum wage laws much higher than the federal minimum in certain states. In addition, the salaries you set for your employees must remain consistent in the currency in which they are set — converting currencies can quickly become difficult without a little help.

When you hire international workers, you become responsible for their data. Your global payroll solution provides a way for you to safeguard that data by placing it in the hands of local experts who understand where data can and cannot be hosted or transferred.

Every company with data of European citizens is subject to GDPR, but your responsibilities become even broader when you hire Europeans to your team. Different countries around the world all have different laws relating to data protection, and they all have processes to enforce steep penalties for companies out of compliance. If you do not have full-time data protection teams with local knowledge within your company, you could benefit from working with a global payroll provider with team members on the ground in every country where you hire.

What are the different types of global payroll providers?

Earlier in this resource, we mentioned the differences between PEO, EOR, and in-house payroll management. To expand on that knowledge, global payroll providers can be widely divided into two types:

Partner-dependent providers – With a partner-dependent provider, your payroll is managed by third-party entities located in the country where you hire. Avoid partner-dependent providers whenever possible. Not only do they have limited control over your employees’ experience and payroll, but they also provide limited IP protection and tend to have lots of hidden costs.

Owned-entity providers – Owned-entity providers only operate in countries where they fully own and operate their own legal entities. That means they have full visibility into the payroll, benefits administration, taxes, and contracts of your employees at all times. If you ever have a question or need assistance, an owned-entity provider can help right away, while a partner-dependent provider has to pass the message along to an unknown third party.

For more information on the differences between owned-entity and partner-dependent global employment partners, read our guide on owned-entity global employment.

So if a PEO involves a co-employment relationship, and an EOR hires employees on your behalf but does not involve a co-employment relationship, is a global PEO any different? And is the term any different from global payroll?

A global PEO is still a PEO — just one that can provide companies with PEO services in multiple countries. While a global PEO may be able to act like an EOR and take on certain legal responsibilities in the countries where your employees live, you can only work with a PEO (global or otherwise) if you have your own local legal entity, as an entity is a prerequisite for entering into the co-employment relationship.

So, in summary: any partnership with a PEO requires you to own a local legal entity and enter into a co-employment relationship. An EOR can hire employees on your behalf in other countries without a co-employment relationship and without requiring you to open a local legal entity.

Global payroll is a general term that refers to paying employees internationally. It can come under different names such as payroll outsourcing, managed payroll, or payroll services, and may include working with a PEO or an EOR. Global payroll may even include making payments to independent contractors in other countries.

However, there is a more specific definition of global payroll as well: working with a company to run your payroll in a country where you own your own local legal entity. Some companies offer global payroll services in addition to PEO or EOR services. If you are not sure about which type of global payroll service you need, Remote can help you understand your situation and recommend the best approach.

What is a professional employer organization, or PEO? – Learn more about how PEOs work and what they do for businesses with local legal entities.

When should you use an employer of record, and which one should you choose? – So you want to hire in a country where you don’t own a legal entity? This guide will help you get started.

Hiring global employees is easy and scalable with the help of the right global payroll partner. Whether you’re planning a global expansion, or looking for payroll efficiency, this guide will help you understand global payroll and its benefits.

Global Payroll

Guide to hiring international employees

How Remote simplifies tax relief application process for inpats

What is global payroll?

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Written by • Peter La

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Reducing payroll expenses for businesses

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What is the Society for Worldwide Interbank Financial Telecommunication (SWIFT)?

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Should your small business outsource payroll?