Checklist: payroll compliance

What does payroll compliance mean?

Running payroll across several countries is often complex, particularly for startups and small businesses. Finance leaders must ensure compliance in every jurisdiction to avoid legal disputes, financial penalties and possible limits on hiring or operating.

This checklist outlines the key steps to keep your cross-border payroll compliant.

Eight-step payroll compliance checklist

Below are the primary compliance areas to address when managing international payroll:

Payroll methods

To lawfully pay employees in other jurisdictions, you must put an appropriate payroll method in place. For example:

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

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

How does a payroll provider differ from an EOR?

Accordingly, you (or your EOR) must register with local tax authorities and other relevant agencies in every country where your employees are based. Some jurisdictions also require a local bank account.

Payroll schedules

Pay frequency can differ greatly between countries (and, in the US, between states). It is essential to comply with local pay schedule laws in each country where you have employees.

For example, some jurisdictions mandate bi-weekly pay, whereas others permit a minimum of one payment per month. Industry rules can further affect these requirements.

To prevent non-compliance, familiarise yourself with these variations and operate payroll accordingly.

Statutory benefits

In most jurisdictions, you must withhold and contribute towards statutory benefits, including social insurance schemes, pension contributions and other mandatory programmes.

Make accurate contributions on employees’ behalf to avoid legal consequences and to protect their entitlement to social benefits. Also make the necessary employer contributions where required.

Data protection

Payroll records contain sensitive personal data, so legal safeguards are necessary. Most countries or regions have their own data protection and privacy rules, such as GDPR in Europe.

Ensure that your data is securely stored and encrypted, and that your privacy and data-handling procedures comply with the applicable legislation in your employees’ countries.

When calculating salaries, pay close attention to the relevant employment laws in your employees’ countries. In particular, note the following:

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

2. Overtime regulations. Overtime pay may be required under local employment laws, with considerable variation in rate and applicable conditions.

3. Collective Bargaining Agreements (CBAs). In jurisdictions with CBAs, additional wage requirements may apply to specific sectors or roles.

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

Withholding

Tax compliance is a core element of payroll administration. For every employee, ensure you're withholding and remitting the correct amounts of income tax, social contributions and other applicable taxes.

As part of this, you must familiarise yourself with income tax rates, thresholds and any special exemptions across all locations where your employees work.

Payslip distribution

Each country sets rules for payslip issuance, including what information must appear and how it should be distributed.

Ensure every payslip includes the required details under local law, such as gross pay, net pay, tax deductions and social contributions.

Also note that some jurisdictions mandate paper payslips, whereas others accept digital delivery.

Reporting and record-keeping

Reporting obligations differ by country, but most jurisdictions require periodic reporting to tax or labour authorities. Many also mandate retaining payroll records for a minimum period.

Implement processes to ensure payroll reporting is accurate and timely, and that records are securely retained for the required duration.

Classifying your team members

When hiring overseas, many startups and small businesses engage independent contractors. If you plan to do so, you must ensure hires are correctly classified.

Each country defines the difference between a contractor and an employee differently, and you must follow those definitions. Failure to comply risks misclassification, which can lead to substantial 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. In some jurisdictions, minimum wage levels increase annually, and income tax thresholds may be adjusted frequently. Staying informed of these developments is essential to remain compliant.

Seems like a lot of work? Let Remote handle everything for you

Keeping pace with constantly changing tax and employment laws across multiple countries is costly, complex and time-consuming. Most startups lack the time or resources to manage this commitment, let alone the administrative burden of payroll processing.

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

• If you have your own entities, our Payroll platform ensures that all your employees are paid accurately, compliantly and on time, from a single place.

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

Our local in-house experts provide support and guidance at every stage, giving you peace of mind and freeing your time and resources for other priorities.

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