Global expansion is a top priority for today’s enterprise business leaders, as a recent survey revealed that 97% of companies plan to enter new markets by the end of 2023. But with international expansion comes the complex challenges of global payroll—most notably, legal and tax compliance.
At Deel, we’ve streamlined global payroll, HR, and compliance with a flexible, centralized platform that allows your global team to scale within legal boundaries. This guide explains the key compliance elements mature companies must consider to run successful cross-border payroll.
Legal and regulatory compliance
Each country has unique tax laws, labor regulations, and reporting requirements. These requirements can even change from one US state to another.
In the United States, business owners need to consider payroll tax, garnishments, federal income tax, and Federal Insurance Contributions Act (FICA) taxes. All of these requirements are stipulated by federal laws and state laws, and mandated by governing bodies such as the IRS (Internal Revenue Service) and the Department of Labor.
When expanding beyond the US, payroll management becomes a complex task that requires great attention to detail on a global scale. Some key considerations include navigating:
- Varying currencies
- Different pay cycles
- Diverse employment contracts
- Compliance with local laws
- Ever-changing regulations
Employers also need to take into account social security taxes, benefits, and tax treaties to ensure accuracy and timeliness in their payroll. Failing to comply with legal regulations can result in long-term consequences for a company, such as:
- Legal repercussions that carry heavy fines, penalties, and potential litigation
- Loss of licenses or permits that disrupt operations and lead to financial losses
- Labor disputes and employee dissatisfaction that contribute to reduced productivity and hindered growth
- Tax audits and demands for back taxes that place financial pressure on an organization
- Strained relationships with international partners that impact expansion opportunities
To avoid issues such as misclassification and tax liabilities affecting your company’s bottom line, you need to stay up-to-date with payroll laws in every jurisdiction.
Deel’s compliance-driven strategies proactively identify and address potential risks to shield your company from potential penalties and reputational damage. Our key areas for legal compliance range from minimum wage agreements and overtime pay to fringe benefits and foreign entity registrations.
Watch the video below to see what else you can accomplish with Deel’s Global Payroll.
Mitigating payroll errors
Payroll errors expose businesses to financial and operational business risks. According to a 2022 report, companies make an average of 15 payroll mistakes per payroll period, with each mistake costing the company an average of $291 USD.
Consider how errors in employee wages, taxes, or benefits can lead to incorrect calculations that result in underpayment or overpayment of employees, and may impact employee morale and even trigger legal action.
Errors in tax calculations or misreporting can also attract the attention of tax authorities, leading to audits and potential penalties. These operational risks can cause disruptions in your internal processes, resulting in delayed payments, dissatisfied employees, and reduced productivity.
Companies that use Deel for payroll management experience a lower risk of legal consequences and penalties, as well as:
- Correct and timely employee payments
- Reduced likelihood of disputes and labor-related issues
- Improved tax reporting accuracy
- Ensured compliance with local and international payroll regulations
- More accurate budgeting and financial planning capabilities
Not sure if you should classify a worker as an employee or independent contractor? Follow these three US tests for guidance.
Retaining top talent as you expand
By ensuring accurate and timely payroll processing, you demonstrate commitment to your workforce, instilling a sense of trust and reliability. When employees receive correct and consistent payments, employees experience higher job satisfaction, contributing to a positive work environment.
In contrast, payroll errors can cause financial stress, erode trust, create dissatisfaction, and contribute to a higher attrition rate. In fact, 41% of companies say that payroll errors have resulted in declining employee morale, and 38% experienced an increase in employee turnover.
With a global payroll provider like Deel, you can:
- Ensure employee payments are made accurately and on time, which fosters financial security
- Demonstrate the company’s commitment to fair labor practices and ethical conduct
- Reduce the risk of disputes and grievances in the workplace
- Provide employees with the confidence that their rights and benefits are protected
- Facilitate transparent communication about policies and regulations, which promotes clarity and understanding
When employees are onboarded into Deel’s Global Payroll platform, they receive a simple checklist to follow to gather their personal information, bank details, and compliance documents in one easy step:
Maintaining a positive reputation
Expanding your company into new markets means your actions will be closely watched by local customers and international stakeholders, making prioritizing compliance all the more important.
By committing to ethical practices and responsible business conduct, you not only build trust with international customers, investors, and partners, but also establish a positive reputation in the global marketplace.
This puts you ahead of your competitors, as a strong compliance track record enhances your company’s reputation. Keeping accurate payroll records is a crucial part of recordkeeping, as it ensures the satisfaction of your employees and upholds your ethical reputation.
It’s important to remember that non-compliance can lead to negative publicity that damages your brand image and corporate reputation. But by demonstrating transparency, accountability, and fairness in all your business interactions, you’ll ultimately enhance your reputational integrity.
Cost efficiency and profitability
Payroll compliance is not only legally necessary but also has numerous advantages that can boost efficiency and profitability for an enterprise company. By adhering to local payroll regulations, companies can save money on hefty penalties and legal fees while minimizing the risk of financial losses.
Compliant practices also promote a standardized and efficient payroll process across multiple locations, reducing errors and redundancies while optimizing resources. This, in turn, allows the human resources and payroll teams to focus on core business activities, such as driving productivity and profitability.
A compliant payroll system also provides valuable insights for better financial planning and decision-making, paving the way for sustained growth in the international market.
Ability to seize global opportunities
Deel helps companies achieve global growth by guaranteeing payroll compliance. This provides a solid framework for expansion, allowing business leaders to confidently navigate the complexities of different markets while ensuring their operations align with local laws and regulations.
With Deel’s Global Payroll solution, enterprise companies can enhance and leverage their compliance track record to build trust and credibility in a new market and differentiate themselves from competitors. Our robust legal team will ensure you adhere to the required compliance regulations in each market by:
- Staying ahead of the payroll and tax compliance requirements in your target markets
- Maintaining clear policies and procedures for compliance across all HR and payroll functions
- Reviewing localized contracts every quarter to ensure they’re up to date
- Regularly monitoring and auditing compliance practices to proactively address any issues
Running global payroll without switching between payroll providers—music to your ears? See how consolidating payroll sounds so good.
Top tips for maintaining compliance with global expansion
To further increase your global payroll efficiency, consider taking the following steps:
- Assemble (or outsource) a global payroll team to manage global compliance
- Draft an international payroll process that can be adapted as needed
- Implement a centralized payroll and HR management system
- Leverage local expertise in compliance and regulatory requirements
- Take advantage of technological solutions that streamline functions, allow for scalability, and automate time-consuming processes
These tips can also be applied to local payroll tax compliance. Choosing a reliable payroll system will help enterprise businesses run payroll according to local law. In the US, this involves adherence to the Fair Labor Standards Act (FLSA), including exemptions, guidance on FICA, and more.
Certain aspects of payroll, such as federal minimum wage, tax rates, and requirements for income tax withholding, are standard worldwide, with differences depending on the jurisdiction. Follow the checklist below to ensure compliance before, during, and after running payroll.
For more actionable information on payroll compliance, download our free resource: Global Payroll Compliance Checklist
Improve your global payroll compliance with Deel
By investing in a compliant payroll management system like Deel, enterprise companies can pave the way for successful global expansion.
Deel’s award-winning platform is designed to streamline payroll, HR, and compliance for global teams and has helped thousands of companies expand internationally.
Learn more about how Deel helps enterprise companies ensure global payroll compliance by requesting a 30-minute product demo. During this time, an expert will walk you through the platform and answer any questions you have about Deel’s payroll, HR, and workforce management solutions.
