payroll compliance requirements

How Payroll Compliance Requirements Impact Enterprise Growth

Curious about the real impact of payroll compliance requirements? Here’s how they can influence an enterprise's talent retention, reputation, and profitability.

Shannon Hodgen
Written by Shannon Hodgen
August 16, 2023
Contents
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Key takeaways

  1. By understanding global payroll compliance requirements, enterprise companies ensure smooth cross-border operations while mitigating legal and financial risks.
  2. Prioritizing compliance builds trust among employees, clients, investors, and stakeholders, fostering a positive brand image and reputation in the global marketplace.
  3. Enterprise companies can use Deel to fortify their global payroll compliance around the world.

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. 

We were apprehensive about the costs and legal responsibilities for compliance in the United States. We didn’t want to hire full-time HR people to figure out things like health benefits and filing tax returns with the IRS. Now we know we can trust Deel to manage the complexities…

Matthew Buchanan, CEO, Letterboxd

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:

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

payroll compliance requirements

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

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
All of our employees and developers love Deel as it’s very easy to use and intuitive, even for people that are not so familiar with these tech products.

Kyle Yoon, CEO, Supercoder

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: 

payroll compliance requirements

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.

payroll compliance requirements

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.

How Deel helped Clara expand its business without increasing expenses

Clara offers a comprehensive solution for managing business expenses, including corporate credit cards, a payment product, and a digital expense control platform. Recognizing that talent is not limited by location, Clara sought a way to provide the same flexibility without unnecessary complexity. 

By partnering with Deel, Clara can grow without incurring exponential expenses, keeping operating costs stable. 

“For global payroll, you would need a minimum of one software and one collaborator per country; this, on average, would cost us about $2,000 USD per month. Deel gives us economies of scale because it allows us to hire talent without additional costs. Also, those $2,000 are not fixed; as the operation grows, that number grows.” — Carolina Astaiza, Global People Director of Clara

Read more about how Clara uses Deel.

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. 

[Deel] enabled us to be more ambitious in our expansion plan. Growth is definitely the name of the game for us, and so I hope that Deel will be able to keep pace with us as we grow into other markets as well; to date, they definitely have.

Saran Somaskanthan, Head of International Expansion, Zoomo

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 

 

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.

payroll compliance requirements

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.

Running payroll in a country, if you have one entity, it’s manageable. When a CFO starts having ten or fifteen of them it starts to be a real mess to manage. They work with local payroll managers, get Excel files, and they try to consolidate. They have no real visibility on what Social Security is in France versus the Netherlands versus Japan, it starts to be really complicated.

Alex Bouaziz, Co-founder and CEO, Deel

Deel’s award-winning platform is designed to streamline payroll, HR, and compliance for global teams and has helped thousands of companies expand internationally.

global-payroll-badges-spring-2023

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.

 

Deel makes growing remote and international teams effortless. Ready to get started?

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