Payroll compliance checklist

What does payroll compliance mean?

Handling payroll across several countries is often complicated, particularly for startups and small companies. For finance leaders, making sure payroll meets local requirements in every jurisdiction is essential to prevent legal problems, financial penalties, and potential limits on hiring and doing business.

Use this checklist to work through the key steps required 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

You must put in place an authorised method to pay staff in other jurisdictions. For example:

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

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

How does a payroll provider differ from an EOR?

That means you (or your EOR) must register with the local tax authorities and any other relevant bodies in each country where staff are based. 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). You must adhere to the local pay schedule rules in every country where you employ people.

For example, some jurisdictions require bi-weekly pay, whereas others permit only a monthly minimum. Industry-specific norms may also affect this.

To prevent breaches, familiarise yourself with these variations and operate payroll in line with local rules.

Statutory benefits

In the majority of countries you must deduct and remit statutory contributions, such as social insurance schemes, pension contributions and other mandatory programmes.

Ensure contributions on employees’ behalf are accurate to avoid legal consequences and to preserve their entitlement to social benefits. Also make the required employer contributions where applicable.

Data protection

Payroll records contain sensitive personal data and must be protected by law. Many jurisdictions have specific data protection and privacy regimes, such as GDPR in Europe.

Store and encrypt payroll data securely, and align your privacy and data-handling procedures with the applicable legislation in your employees’ countries.

When you calculate pay, observe the employment laws in each employee’s country. In particular, take note of:

1. Minimum wage requirements. These may differ not only between countries, but also by province, city, and industry.

2. Overtime regulations. Overtime pay may be required under local employment law, with significant variation in rates and applicable conditions.

3. Collective Bargaining Agreements (CBAs). In jurisdictions with CBAs, there can be extra wage requirements for specific sectors or roles.

4. Industry-specific laws. Certain industries may be subject to special rules that affect pay and benefits.

Withholding

Tax compliance is central to payroll. For each employee, you must withhold and remit the correct amounts of income tax, social contributions and other applicable taxes.

This requires familiarity with income tax rates, thresholds and any special exemptions in every location where your employees work.

Payslip distribution

Jurisdictions set their own rules for issuing payslips, including what information must be included and how they should be delivered.

Make sure payslips contain all legally required details, such as gross pay, net pay, tax deductions and social contributions.

Also note that some places require payslips to be issued on paper, while others accept digital delivery.

Reporting and record-keeping

Reporting obligations vary by country, but most jurisdictions require periodic submissions to tax or labour authorities. Many also mandate keeping payroll records for a minimum statutory period.

Put systems in place to ensure payroll reporting is accurate and timely, and that records are stored securely for the required retention period.

Classifying your team members

When hiring internationally, many startups and small firms engage independent contractors. If you plan to do this, you must ensure hires are classified correctly.

Each jurisdiction defines the distinction between a contractor and an employee, and you need to follow those definitions. Misclassification can lead to significant fines and penalties.

Learn more about misclassification.

Staying current with payroll tax and employment law changes

Bear in mind that employment and payroll tax rules change frequently. For example, minimum wage rates may be increased annually in some places, and income tax thresholds can shift often. Monitoring these developments is vital to remain compliant.

Too much to manage? Let Remote take care of everything for you

Keeping abreast of changing tax and employment laws across multiple countries is expensive, complicated, and time-consuming. Most startups do not have the time or resources to shoulder this commitment, let alone the administrative burden of payroll runs.

Fortunately, Remote can manage all of this on your behalf — whatever your situation.

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

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

Our local, in-house experts offer support and guidance at every stage, giving you peace of mind and allowing 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.