Payroll compliance checklist

What does payroll compliance mean?

Running payroll across several countries is often complicated, particularly for startups and small businesses. For finance leaders, making sure payroll is compliant in every jurisdiction is vital to avoiding legal problems, fines and even limits on hiring or operating.

This checklist outlines the key steps to keep your payroll compliant across borders.

8-step payroll compliance checklist

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

Payroll methods

To lawfully pay employees in different locations, you must have the correct setup. For example:

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

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

How does a payroll provider differ from an EOR?

For this to work, you (or your EOR) must be registered with the local tax office and any other relevant authorities in each country where your employees are based. In certain countries, an in-country bank account is also required.

Payroll schedules

Pay frequency varies widely between countries (and, in the US, between states). It’s essential to follow local pay schedule laws in every country where you employ people.

For example, some countries require bi-weekly pay, while others set a minimum of once a month. Industry rules can also affect pay frequency.

To remain compliant, make sure you understand these variations and operate payroll to match local rules.

Statutory benefits

Most jurisdictions require employers to withhold and remit statutory benefits like social insurance, pension payments and other compulsory schemes.

Make sure contributions on behalf of employees are accurate to avoid legal penalties and to protect their access to social benefits. Also, meet any employer contribution obligations where applicable.

Data protection

Payroll contains sensitive personal data, so protecting it is a legal requirement. Most countries or regions have specific data protection and privacy rules, for example GDPR in Europe.

Keep data securely stored and encrypted, and make sure your privacy and handling procedures comply with the laws in each country where your employees are located.

When working out salaries, closely consider the employment laws in your employees’ countries. In particular, watch for:

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

2. Overtime regulations. Local laws may mandate overtime pay, with varying rates and conditions.

3. Collective Bargaining Agreements (CBAs). Where CBAs apply there can be extra wage rules for particular sectors or roles.

4. Industry-specific laws. Some sectors have particular regulations that influence pay and benefits.

Withholding

Tax compliance is a key part of payroll management. For every employee, make sure you're withholding and paying the correct amounts of income tax, social contributions, and other applicable taxes.

You’ll need to familiarise yourself with income tax rates, thresholds and any exemptions in each location where your employees work.

Payslip distribution

Each jurisdiction has rules on issuing payslips, covering what must be included and how they should be delivered.

Make sure each payslip lists the details required by local law, for example gross pay, net pay, tax deductions, and social contributions.

Also note that some places insist on paper payslips, while others permit digital delivery.

Reporting and record-keeping

Reporting requirements 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 in place processes to keep payroll reporting accurate and on time, and to store records securely for the required retention period.

Classifying your team members

When hiring internationally, many startups and small businesses use independent contractors. If you choose this route, make sure you classify hires correctly.

Each country defines contractor versus employee differently, and you must follow those definitions. Misclassification can lead to substantial fines and other 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 often. For example, minimum wages may rise annually in some places, and income tax thresholds can shift regularly. Staying informed about these changes is essential for compliance.

Sounds like a lot of work? Let Remote take care of everything for you

Keeping up with constantly changing tax and employment laws across multiple countries is expensive, complex, and time-consuming. Most startups lack the time or resources to manage this, not to mention the admin involved in payroll processing.

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

• If you have your own entities, our Payroll platform makes sure all your employees are paid accurately, compliantly, and on-time, from one place.

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

Our local, in-house experts offer support and advice throughout, giving you peace of mind and freeing you to focus your time and resources elsewhere.

To learn more about how Remote can help your business grow — and to see which approach is right for you — speak to one of our friendly experts today.