9th May 2017
When a company has the requirement to hire employees in other countries, they are required to comply with the countries payroll procedures and regulations as well as their HR laws just as they would with employees based in their own country. With expertise needed in country-specific tax and employment laws, and the effects of exchange rates on pay, the question to ask is ‘Where can and where should payroll be processed and who by?’
When paying employees in foreign countries from the home-country payroll, expertise in international tax requirements is essential. Whether a business chooses for its payroll to be done in-house or outsourced, knowledge of country and state requirements is required to ensure businesses are compliant.
As an example, in the USA these requirements may include issues such as income tax withholding and reporting; unemployment contributions; retirement and social services withholding and filing; and record retention requirements, all of which must be filed in the country the work was performed in. For example, is your payroll department knowledgeable about taxes in Japan, or required contributions to aand more recently Auto Enrolment, or social insurance contributions in France? Is the department equipped to make these contributions and filings on time to the other country? If not, a globally outsourced payroll may be more appropriate and be cost and time effective.
Employing in France?
There are many things that must be considered when hiring employees in a different country. Below is a list of initial questions you’ll need to answer when setting up in France, for example. As you can see from the list this can be very complicated;
- Will your business activity attract Principal Place of Establishment tax status?
- Will your first employee be working alone reporting directly to management in your home country?
- Will your employee (and you) pay social security in the home country or in France
- Which collective bargaining agreement applies to your industry?
- Which category of employee will your employee belong to?
- Is there a trial period? How long would you like the trial period to last?
- Will the employee be working from home?
Above all, the message when deciding how to manage international payroll is consider all of your business requirements currently and in the future. Almost every business has a desire to be multinational and they want to get to market as quickly as possible.
Some don’t do it correctly.
The key is to take the time to understand everything about the countries you are in and turn to the experts when required. The last thing a business needs is multiple fines for not adhering to a country’s employment regulation.
Speak to the experts – IRIS FMP’s International Payroll division is 100% focussed on International payroll. Click on this link for more details- International payroll .