Payroll compliance checklist

What does payroll compliance mean?

Handling payroll across multiple countries is often complex, especially for startups and small businesses. For finance leaders, ensuring payroll meets each jurisdiction’s rules is essential to avoid legal trouble, fines and potential limits on hiring or operating.

Use this checklist to cover the key steps you need to keep payroll compliant when operating across borders.

8-step payroll compliance checklist

Below are the main compliance areas to consider when managing international payroll:

Payroll methods

To lawfully pay staff in different locations, you must adopt an appropriate payroll approach. For example:

1. If you operate a legal entity in the employee’s country, you can run payroll internally or outsource it to a trusted provider.

2. If you don’t have a legal entity in the employee’s country, you can engage an employer of record (EOR).

How does a payroll provider differ from an EOR?

That means you (or your EOR) must register with local tax offices and any other required agencies in every country where your people are located. In some jurisdictions, an in-country bank account is also required.

Payroll schedules

Pay frequency differs markedly between countries (and, in the US, between states). Make sure you follow local pay schedule laws wherever you employ people.

For example, some countries require bi-weekly pay, while others mandate pay at least once per month. Industry rules can also affect frequency.

To stay compliant, understand these variations and operate your payroll in line with local requirements.

Statutory benefits

In most jurisdictions you must withhold and contribute to statutory benefit schemes, such as social insurance, pension contributions and other mandatory programmes.

Make accurate deductions and employer contributions so employees retain entitlement to social benefits and so you avoid legal penalties.

Data protection

Payroll records contain sensitive personal data, so protecting them is a legal requirement. Most countries or regions have their own privacy and data-protection rules, such as GDPR in Europe.

Ensure data is stored securely, encrypted and protected, and that your privacy and handling procedures comply with the laws in your employees’ locations.

When working out pay, take careful note of employment laws where your employees are based. In particular, watch for:

1. Minimum wage requirements. These can vary not only by country but also by state, city and industry.

2. Overtime regulations. Overtime pay rules depend on local employment law and can differ widely in rate and conditions.

3. Collective Bargaining Agreements (CBAs). In countries with CBAs, there may be extra wage obligations for certain sectors or roles.

4. Industry-specific laws. Some industries have particular regulations that affect pay and benefits.

Withholding

Tax compliance is central to payroll. For each employee, make sure you’re deducting and remitting the correct amounts for income tax, social contributions and any other applicable taxes.

This requires you to be familiar with income tax rates, thresholds and any special exemptions across all of your employees’ locations.

Payslip distribution

Each country sets rules for issuing payslips, including which information must be shown and how the payslip should be delivered.

Make sure every payslip lists all legally required details, such as gross pay, net pay, tax deductions and social contributions.

Also note that some countries require paper payslips, while others accept digital delivery.

Reporting and record-keeping

Reporting obligations vary by country, but most jurisdictions expect periodic reports to tax or labour authorities. Many also require payroll records to be kept for a minimum period.

Put a system in place so your payroll reporting is accurate and on time, and records are stored securely for the required duration.

Classifying your team members

When recruiting overseas, many startups and small businesses engage independent contractors. If you plan to do this, ensure you classify workers correctly.

Each country has its own tests for distinguishing a contractor from an employee, and you must follow those rules. Misclassification can lead to significant fines and penalties.

Learn more about misclassification.

Keeping up to date with payroll tax and employment law changes

Bear in mind that employment and payroll tax laws change regularly. For example, minimum wage levels may rise annually in some places, and income tax thresholds often change. Staying informed and up to date with these developments is vital to remain compliant.

Sounds like a lot of work? Let Remote handle it all for you

Keeping pace with constantly changing tax and employment laws across multiple countries is costly, complex and time-consuming. Most startups don’t have the time or resources to take on that commitment, let alone manage the administrative burden of payroll runs.

Fortunately, Remote can manage all of this for you — whatever your situation.

• If you have your own entities, our Payroll platform makes it easy to pay all your employees accurately, compliantly and on time from one place.

• If you don’t have your own entities, our EOR platform covers all of this and much more, enabling you to hire quickly anywhere in the world and manage your global HR needs.

Our local, in-house experts provide support and guidance at every stage, giving you peace of mind and letting you focus your time and resources elsewhere.

To find out how Remote can help your business grow — and to see which approach suits you best — speak to one of our friendly experts today.