6 Steps for Creating Global Payroll for Remote Startups

Global payroll for remote startups encompasses the process of managing and distributing payroll for employees working remotely in different countries. 

Startups, which are recently formed businesses that fill a market gap with their product or services through rapid growth, are embracing remote work culture at a fast pace. Despite being small, they often hire employees in various countries and allow team members to work from anywhere.

As you can imagine, handling payroll for remote employees in multiple countries can be complex, especially because of differences in employment laws, tax regulations, and local compliance requirements.

In this guide, we’ll explore six important areas to consider when creating a global payroll plan for your remote startup and what options you have to run payroll globally for your remote team. 

Why create a global payroll plan for your remote startup? 

Creating a global payroll plan and executing correctly is one of the first steps in growing your team and business. A payroll plan ensures that your global workforce (including both employees and contractors) are properly paid for their work correctly and on time.  

Payroll in general can be difficult to manage, especially if you have a team distributed across the globe, as there are payroll specific laws unique to every country.

6 considerations for creating a global payroll plan for remote startups

Here are six things to consider when creating a global payroll plan for your remote startup. 

1. Compliance

Operating in multiple countries means you must adhere to various employment labor laws, local tax regulations, and compliance requirements. Failing to comply with local laws can result in legal and financial penalties, especially when misclassifying independent contractors. 

A global payroll plan can help you meet these legal obligations, such as proper tax withholding, social security contributions, and employment benefits. This reduces the risk of non-compliance.

2. Employee Satisfaction and Retention

Remote employees rely on accurate and timely payment of their salaries for their own livelihoods. Proper and timely payroll management is crucial for employee satisfaction. 

Successful payroll management helps: 

• Build trust between employee and employer

• Keep employee retention rates higher

• Make onboarding simple

• Draw attention for recruiting top talent

• Build a reputable image for the company and brand

By having a streamlined global payroll solution, you can ensure that employees receive their payment on time. Most employers choose to administer payroll to remote employees through proper bank transfers or direct deposits that are accurately calculated based on local regulations. This makes it easy to build trust, satisfaction, and loyalty among your remote team members.

3. Efficiency and Cost Savings

A well-designed global payroll plan can streamline payroll processes and minimize administrative burdens.

Employers should decide early on how they plan to administer payments predictably, by either setting up direct deposits through SWIFT or wire transfering money into employees’ bank  accounts within a few days via WISE. These two options allow money to be transferred between bank accounts for dispersed global teams. 

Decide on a consistent pay date each week, every two weeks, or monthly, that works best for you and your employees and stick to that schedule. 

This, in turn, can lead to cost savings by reducing the need for additional resources and mitigating potential payroll-related issues or penalties. 

4. Compliance with Tax Obligations

Payroll taxes are a critical aspect of global payroll management. 

Each country will have their own specific tax laws. In addition to country-specific tax laws, each region/city will have its own local taxes laws you’ll need to understand. 

Tax management abroad could mean:

• Opening an entity

• Registering with local authorities

• Hiring a legal team

• Creating an HR team (with consistent training of new regulations)

• Registering for social security 

• Deducting the correct taxes from employees paychecks 

Failure to consider any of the above tax measures in your global payroll plan can result in significant financial and legal consequences that many new startups may not survive without proper resources.  

5. Scalability and Expansion

A robust global payroll plan enables your remote startup to scale across borders with ease. It provides a structured framework for adding new employees in different countries, ensuring consistent payroll processes, and compliance with local regulations. 

Global payroll is essential for startups who plan to recruit and retain top talent anywhere in the world. You don’t want to find the perfect fit for your head of marketing in Mexico and not appear professional and put together because of inconsistent payroll planning. 

6. Risk Mitigation

Managing global payroll involves mitigating risks associated with: 

• Currency fluctuations

• International payments

• Compliance 

• Contractors vs. full-time employees 

 A well-executed global payroll plan helps minimize these risks by providing clear processes, utilizing secure payment methods, and ensuring compliance with local employment and tax laws. This can protect your startup from financial losses, legal issues, and reputational damage.

How does global payroll affect my remote contractors? 

International independent contractors should be paid differently than employees or domestic contractors, and you should build your payroll strategy around these distinctions. 

Considerations when hiring contractors in another country:  

• Local pay expectations

• Currency rate exchange

• Cost of living

• Self-employment taxes 

• Payment terms (upfront, by project, or monthly) 

• Operational costs

• Contractor agreements

• Wire transfers (Swift vs. Wise) 

What options do I have managing global payroll for my remote startup? 

Fully remote tech businesses and startups have several options for managing their payroll. Here are some common options:

1. In-house Payroll: Employers can choose to handle their payroll processes internally by setting up an in-house payroll team or assigning the responsibility to existing HR personnel. This option provides direct control over payroll operations but requires expertise in local employment laws, tax regulations, and compliance requirements for every country where employees are located.

2. Payroll Software: Utilizing payroll HR and payroll software designed for global payroll management can streamline the process. These software solutions often have built-in functionalities to handle various payroll aspects, such as: 

   • Calculating wages

   • Calculating overtime

   • Withholding taxes

   • Generating payslips

   • Tracking vacations

   • Tracking sick days

   • Retirement management

   • Benefit contributions

3. Professional Employer Organization (PEO) or third-party outsourcing: PEOs act as an intermediary between the company and its remote employees. If you outsource to a third-party provider in the country, they’ll usually only have first-hand knowledge of the specific country they’re working with. 

4. Hybrid Approach: Some businesses choose a combination of in-house payroll management and outsourcing. They may handle payroll for employees in their home country or specific regions while outsourcing payroll for remote employees in other countries. This approach allows employers to retain control over certain payroll aspects while leveraging external expertise for global operations.

5. Employer-of-record (EOR): Another great option is to hire an employer of record. EORs are similar to PEOs, but they act on a more global scale. They take on the legal and administrative responsibilities of employing workers in different countries and can handle everything, including payroll management, employee onboarding, tax compliance, contractor management, and benefits administration. EORs will typically have established entities in the country and a hyperlocal legal team, so you don’t have to worry about misclassification. 

Justworks Can Help Manage International Payroll 

Choosing the right EOR to help you expand your business internationally can be a game changer. Justworks’ global EOR services enables small businesses to hire international employees quickly, pay them in the local currency, and provide local benefits. It’s hard to know where to start and what to put in place abroad to protect business and your employees. At Justworks, we have in-country legal teams and entities set up to ensure that your payroll is protected and that you’re remaining compliant abroad. 

From access to top talent pools around the world to streamlined international hiring processes, the advantages of working with an EOR (and using Justworks) are undeniable. Get started today. 

FAQ

How do I run payroll internationally? 

To run payroll internationally, you’ll need to create a solid plan and figure out exactly what laws govern your employees in each individual country. You can then either run payroll yourself, use payroll software, outsource your payroll to a PEO or third-party provider, or partner with a global EOR. 

Is there a global payroll system? 

Yes, there are a few different global payroll systems that you can use to try to manage payroll globally. However, many of these systems can be costly or may not cover everything you need for compliance. 

Can payroll be done remotely? 

Absolutely! Payroll can be done remotely both domestically and internationally depending on if you need to hire employees abroad. You can open an entity and run payroll through your own HR team or you can outsource payroll to a third-party provider or a global EOR like Justworks.

How do I choose a global payroll provider? 

To choose a global payroll provider you’ll need to create a strong global payroll plan and figure out exactly what you need from a payroll provider. Do you need in-depth help with expansion? Do you simply need to outsource your payroll and nothing else? After you decide what type of global payroll provider you need, then you’ll need to make sure that you’re working with a reputable provider by doing the necessary research before making a long-term commitment.