Avoiding The Missteps Of International Payroll

Hiring global contractors can be a cost-efficient way for organizations to obtain top talent, and with today’s modernization initiatives, access to those workers across borders is easier than ever.

But global hiring and payroll can see employers quickly run into problems that ultimately increase costs, or worse.

Eynat Guez, co-founder and CEO of cross-border payroll technology company Papaya Global, told PYMNTS about the biggest hurdles in international payroll as working from home persists and employment regulations grow more complex. Despite the many benefits of hiring across borders, a lackluster payroll strategy can yield major headaches.

“We see it when companies get wrong advice, such as, ‘hire global contractors,’ when they don’t understand the tax complexities, the Permanent Establish risks, and so on,” Guez warned. “Then they find themselves in a very complicated situation, and have to solve many more problems.”

There are no quick fixes, she said, but with the proper technology and education, organizations can find themselves in a successful position to hire talent abroad.

Localizing The Strategy

Payroll is a complex workflow that combines both the movement of money with regulatory compliance needs. When those needs step onto the global stage, the opportunities for missteps multiply.

Regulations are a particularly complicated matter, considering the rules in each market are not only different, but constantly changing. Worker classification risks are growing, particularly when organizations engage with a professional deemed a contractor. Additionally, local labor, benefits and compliance concerns fluctuate throughout the globe.

“It’s like trying to speak 20 different languages all at once,” said Guez.

The function of actually moving money across borders is a significant pain point for many international employers, too. That’s because, Guez explained, a payroll transaction is not a regular payout, and a standard remittance cannot meet all of the classification needs of a payroll payment. That transaction needs to be classified as payroll in each jurisdiction, she said.

Finally, each market has its own preferences for payment methods, and payroll solutions need to be able to integrate into various payment networks that operate at the national level.

Beware The Quick-Fix Traps

Historically, hiring across borders has not been the strategy of choice for many businesses. Guez said she has seen many organizations assume that consolidating their global payroll is an “unsolvable problem,” highlighting the need to localize international payroll payouts while maintaining compliance in each market.

Not so, she added, but employers do need to be wise about the solutions they use to facilitate cross-border payroll.

“Don’t be tempted to use a ‘fast and easy’ onboarding solution, ‘standard’ templates, or some other magic words,” Guez warned. “They can all harm your company.”

In addition to manual processes raising the risk of fraud and errors, many traditional payroll solutions fail to offer a localized approach to employees in different geographical markets. Papaya Global aims to address this challenge with its own Software-as-a-Service technology that can streamline the international payroll process while still adhering to local rules and regulations.

In support of that technology, investors recently placed $40 million in Series B funding with the company, led by Scale Venture Partners. The funding comes as more organizations gain awareness that hiring across borders can be a valuable strategy to attract talent — though, Guez said, there is plenty of room for error.

“Working globally is not as simple as we want it to be,” she noted, “and making sure the foundation is solid from the beginning is a key to success.”