Understanding Global Payroll

Any company that has employees in more than one country needs to understand the complexities around not just paying people but also adhering to legal and financial standards for each country.  

So, what is global payroll, exactly?

Global payroll is the start-to-finish process of paying international employees, in multiple languages, while staying compliant with each country’s labor laws, tax codes and reporting standards. Global payroll processing, one aspect of global payroll, can be time-consuming — and costly — if not done correctly. It’s no wonder companies often seek out global payroll services to reduce errors and streamline the process.

Global payroll compliance

Think not just about different time zones, languages, and currencies, but an entire regulatory landscape to navigate when it comes to global payroll. Global payroll compliance may include anything from proper classification of workers to accurate calculation of leave and benefits to complying with local tax laws. Let’s take a closer look at how different laws and standards may impact global payroll.

Understanding international labor laws in global payroll

Every country has its own labor laws, which are in place to protect employees. Violating labor laws can result in stiff penalties, legal action, loss of local operations and increased regulatory scrutiny, among other consequences. Here are some risks companies face when it comes to global payroll compliance: 

• Misclassification of workers – Labeling employees as “contractors” vs. “employees” may violate employment laws in different countries. In South Korea, for example, a contractor that’s required to follow company rules and uses company tools while also receiving a fixed salary may count as an “employee,” by law.
• Late or incorrect payments – Missing scheduled payment dates could breach a country’s employment laws. Consider Australia, which has a single-touch payroll (STP) reporting obligation that calls for real-time reporting of employee wages and pay-as-you-go tax withholding, among other requirements.
• Non-compliance with working hours – Some countries have stringent rules around the working week and what counts as paid overtime. In France, for example, among other European countries, the “right to disconnect” after work hours (and not respond to work communications) is legally backed.

Managing taxes in global payroll systems

Payroll for global teams becomes particularly complex when it comes to taxation. The impact could be steep for violations like these:

• Not complying with local tax laws – Not withholding the correct amount of tax could result in fines as well as heightened tax scrutiny
• Incorrect or missing social security contributions – Many countries have systems similar to U.S. Social Security. Singapore, for one, has a Central Provident Fund (CPF), a mandatory savings plan that covers retirement, healthcare and housing. Employers have to contribute to it by a certain date each month or risk penalties or legal action.

Reporting requirements for global payroll

Each country’s reporting requirements are also different. This may include anything from filings to data submission — critical aspects of global payroll compliance.

• Improper data handling – You may be familiar with GDPR, which refers to data handling in the European Union. Mishandling of data used in payroll could lead to fines and investigation.
• Delayed or incomplete year-end reports – Global payroll processing requires meeting critical deadlines for submitting payroll documentation.
• Not providing payroll slips or records – Accurate and transparent reporting to employees and government authorities is a requirement in most countries. Not reporting could have monetary and legal implications.

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A centralized global payroll platform

Using a global payroll platform means having the ability to automate the trickiest parts of paying international employees, such as complying with country-specific wage and hour rules. With global payroll processing, employers should be able to manage their entire payroll from a single interface that stores and automatically applies the relevant rates and regulations for each employee. Rather than having to source multiple payroll companies to handle employee payroll for different countries, international employee payroll can be brought into one system that reliably helps companies meet local laws and standards.

Explore Check out ADP’s global payroll services

Why global payroll expertise matters

Having a global workforce requires global expertise. ADP’s global payroll services combine a single platform for payroll processing with local expertise to help companies pay employees accurately and on time while adhering to local standards and laws. Our payroll solution allows you to leverage our secure platform to run payroll yourself or outsource it to our local tax and compliance pros. We also keep you in the local loop with timely communications about changes in legislation that might affect your business as well as data-driven insights and reporting tools to help you make better business decisions.

Are you compliant across countries?

We track government regulations and local laws for you — in 140+ countries across the globe.

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Support with global payroll compliance

When you’re paying international employees, it helps to have the support of a team that has global payroll know-how. Beyond our payroll platform, ADP offers hands-on support, bringing decades of experience and expertise to long-term partnerships with companies of all sizes across the world.

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ADP Editorial Team The ADP editorial team is comprised of human resource professionals with extensive experience solving complex HR challenges for businesses of all sizes.