During international business expansion, many companies end up relocating at least one employee from their home market to their new location. The benefits of this relocation are clear – an experienced employee can bring continuity to your overseas operation, keep lines of communication open and ensure that company policy is adhered to. It is one of the most common business growth strategies for a reason. However, establishing your expat employee overseas can be a complicated affair, especially when it comes to international payroll.
How can you deal with the complexities of global payroll for expat employees and seamlessly expand your business? Here’s how to lay the foundation for effective expat payroll, so you can overcome any difficulties that may arise when sending an employee abroad.
An expat is someone who is outside of their home country; therefore, an expat employee is someone who is working outside of their home country. For the most part, an employee who is working abroad on a short, one-time project does not need to be classed as an expat (though rules vary from country to country).
So what does employing an expat mean for global payroll? In many cases, salaries, taxes and social security need to be calculated differently for expats than for domestic employees. The specific differences will depend on the requirements of local law.
Simplifying Expat Payroll
In order to understand how global payroll works for expat employees, you must be aware of the three sets of rules that determine how international payroll should work:
The laws of your expansion location
Your target market’s rules will typically govern how payroll works for expats, including which taxes need to be paid, how social security plays into payments, the procedure for filings and the timing of payments.
The laws of your home country
Expats usually need to file and pay taxes in their home country, so it is important to fully understand your expat employee’s nationality and tax residency status.
Laws dictated by agreements between countries
Sometimes countries form treaties in order to ease trade and tax matters. These agreements can affect which countries an employee is required to pay tax in, so it is crucial that you are aware of any such measures.
Choosing the Right Approach
When expanding your business overseas through an expat employee, outsourcing your global payroll can help work through the intricacies of paying workers abroad.
According to the global growth experts at Galvin International, an international business expansion concierge service, outsourcing to international payroll providers and local specialists is an ideal strategy because it saves internal resources and ensures that you always have the knowledge of payroll professionals to hand. International payroll services can help you understand the visas and work permits required for your expat employees, which taxes need to be paid and where, which currency you should pay your worker in and more.
Seeking local expertise is key when setting up global payroll, but it’s also vital that you take initiative and develop an understanding of what it takes to pay a worker abroad. After all, you will still need to establish a system that meticulously tracks the benefits and payments you owe your employees. Research the laws of your home country and target market, and equip yourself with the information you need to succeed.
Paying expat employees is an intricate process with a variety of moving parts. Still, by asking the right questions, seeking the right assistance and performing the right research, you can ensure that your expat employee is compensated correctly – and that your business reaps the benefits of sending a trusted worker overseas.