Hiring remote employees worldwide often makes good business sense. Having access to a global talent pool can help you stack your teams with top candidates and get real results.
Yet, payroll for remote employees can be a thorny issue. Not only are the logistics challenging, but you also have to stay compliant with regulations in every location where you have remote employees.
Luckily, payroll for remote employees doesn’t have to be a source of stress. To streamline the process, you can take advantage of Payroll Companies or international payroll apps. These remote payroll services make it easy to pay your workers and stay compliant anywhere around the world.
At NoHQ, we’ve put together our tips and recommendations for Payroll Companies, so that you can handle remote payroll services without a hitch. Plus, you can get even more resources on our blog and in our toolkit.
Note: This guide is intended as a general source of information about remote payroll services, not as legal advice.
Paying remote employees
What makes payroll for remote employees different?
Essentially, payroll for remote employees is no different from your in-office employees: you have to comply with taxes and regulations in every city, state and country where your employees are doing work.
Sounds simple? We know it’s not. But as a general rule of thumb, you will need to consider compliance in all your remote employees’ current locations.
How do I set up payroll for remote employees?
When setting up payroll for remote employees, you’ll first want to consider the currency and pay frequency, as every worker may have different expectations.
In addition, you’ll need to calculate taxes and withholdings according to the laws in each location. If that sounds tricky, you may lean on remote payroll services to help you out.
Can I pay a remote employee as an independent contractor?
Remote employees and independent contractors are completely different employment categories. You definitely don’t want to misclassify by mistake, or you may face fines or legal battles.
Typically, remote employees will work exclusively and long-term for your company. You’ll set their hours, provide a fixed salary and handle benefits and taxes.
There are plenty of benefits of remote employees over contractors. These workers may be more loyal because of the benefits and job security you offer. It’s also a lower legal risk for you as an employer.
If you’re keen on hiring remote employees as described, don’t use the remote contractor category. Remote contractors typically work for multiple clients and on short-term specialized projects. They use their own equipment, set their own schedule and have a variable salary according to their current projects.
In the case of contractors, they are registered in their home countries as self-employed, and issue an invoice to the employer every month. However, this worker category can be high-risk, so you should make sure they’re truly contractors and not employees.
Why should I use a Payroll Company?
In some cases, you may benefit from using a Payroll Company in order to hire and pay your remote employee. Overall, this can help streamline payroll and compliance in your employee’s location. This is especially true if your remote employee faces certain hurdles, such as:
- If there is a work visa involved, that requires the employee to be employed
- Government-issued pension funds
- End-of-year tax sheets
- Social Service Deductions
- Military Services
- If self-employment requires the creation of an LLC or similar
- If there are costs or time commitments involved, which are above the cut of a Payroll Company
Understanding Payroll Companies
What are Payroll Companies?
Payroll Companies are globally registered companies (or companies registered in a specific country) that allow employers to fully employ people in that specific country.
Through these services, the employee is lawfully employed in their home country, including all benefits that come with that, and all payroll and invoicing goes through the Payroll Company.
How do Payroll Companies work?
Here’s how Payroll Companies work: on the basic side, they simply forward invoice payments according to the currency and payment schedule you’ve previously defined. However, many offer other services in addition to payroll, such as reimbursements, management of PTO days, benefits etc.
Overall, Payroll Companies are legally responsible for making sure your employee payroll follows local regulations. Some may even calculate the correct taxes and withholding for all payments, so that you stay compliant.
How much do remote payroll services cost?
Remember that remote payroll services will take a cut from your invoice payment. Sometimes they have a flat fee (such as $100-$300 per month), or otherwise they’ll charge a rate per employee or a percentage of the payment.
The cost varies widely depending on the location, the number of employees and the payment amounts. In addition, some Payroll Companies offer extra services, which may add to their fees.
Bottom line: Payroll Companies can be expensive, but they’re a good investment for your business. Think of them as a compliance buffer, so that you can have peace of mind that you won’t get fined or cited for not following local regulations.
What are the benefits of choosing a Payroll Company?
Using Payroll Companies can put your mind at ease, as they have the in-country expertise that you need to stay compliant. They’ll know how to handle social security, worker’s compensation and other key legal issues. In addition, they’ll understand the institutions and the paperwork involved.
By hiring remote payroll services, you’ll also get ongoing support for non-payroll matters, such as navigating different languages, currencies and time zones.
What are the challenges of hiring a Payroll Company?
One challenging aspect of international payroll is that you’ll need to hire a different local partner for every new country. So if you have remote employees in a variety of places, you’ll need to hire a Payroll Company for each. As you can imagine, this can get fairly expensive.
In addition, you may face certain language or cultural barriers when working with Payroll Companies, which is why it’s important to hire the right remote payroll services that fit with your company’s needs.
Steps for setting up payroll for remote employees
1. Choose the right employment status
Make sure to pay remote employees as employees – and not contractors. When in doubt, get legal advice about your specific situation.
2. Confirm employee’s location and relevant regulations
It’s important to stay on top of all the logistics. Verify your remote employees’ locations and start digging into the local regulations.
3. Get together all the paperwork
Offer jobs to your remote employees and start putting together all the paperwork you’ll need to hire and set up payroll for remote employees in each of their home countries.
4. Identify the right Payroll Company
Research and reach out to Payroll Companies in the locations you need. You’ll want to make sure to select ones that align with your company needs.
5. Set up ideal payment methods
Now it’s time to pay your workers! Get all your payment methods set up so that you can easily create the invoices and transfer money through your remote payroll services.
Remote payroll services
International payroll apps
Nowadays, international payroll apps (such as Papaya Global and Deel) are becoming a popular option for companies with remote companies. Basically, these apps have created their own network of local partners to handle local taxes and regulations.
Instead of hiring a Payroll Company, you can use an international payroll service, which manages all country-specific compliance from one platform. This may be a good option if you have remote employees in a lot of different locations, though the downside is that these services are often quite pricey.
Global Payroll Companies
Global Payroll Companies are in-country services that handle payroll for your remote employees located there. It’s a great option for companies with several remote employees in the same location or in a handful of countries.
To help you find the right Payroll Company, we’ve put together this interactive sheet. On it, you’ll find a continuously updated list of countries and their respective Payroll Companies (and labour laws).
Streamline payroll for your global remote employees
Paying your remote employees worldwide isn’t an impossible task. In fact, by hiring a Payroll Company you’ll be sure to cover your bases and get your employees reliably paid with the in-country benefits they deserve.
Payroll is just one aspect of remote work your company should consider carefully. As you build your remote teams, you can access guides, tools and advice on NoHQ to support all your remote challenges – for payroll and beyond.