What is global payroll? A concise guide plus popular payroll solutions

You want to find the best talent for your business. And with today's recruitment technology, it's easier than ever for your search to take you around the globe. But bringing on employees from other countries complicates compensation. For one thing, managing global payroll means your HR department has to handle cross-border payment and compliance processes.

In this guide, you'll learn what global payroll is and the challenges that come with it. We'll also cover international payroll solutions that allow your company to pay your team members—no matter where they live.

Looking to simplify your international payroll operations? Pay your global team compliantly and on-time with Oyster.

How does global payroll work?

Global payroll is the process of managing compensation, tax obligations, and benefits administration for international employees.

Think of it this way: local payroll deals with one set of rules, while global payroll juggles multiple currencies, tax systems, and labor laws across different countries.

The following are some of the complex tasks involved in running global payroll:

• Collecting employee data: You must have an employee's deposit information before you can make payments. HR teams can securely collect this information on a payroll processing platform, where employees privately enter sensitive data. And when payday rolls around, your People Ops team must also gather invoices or employee hour reports to know how much to pay.

• Ensuring local compliance: Global companies need to comply with international employment laws relevant to payroll like overtime and holiday pay.

• Calculating wages, employee benefits, and taxes: Every country has different tax structures and employee benefit programs. People teams managing a global workforce must know how to withhold taxes and apply benefits correctly for different regions. This also involves covering commissions, expenses, and time-off.

• Managing currency conversions and disbursements: Employees think in their local currency and want to receive payments that don't fluctuate if exchange rates do. Companies doing international payroll should set clear salary expectations in people's home currencies. Businesses must also have secure and efficient processes for transferring funds between countries so payments arrive safely and on time.

• Providing payslips and reporting payroll: HR teams must provide payslips for employees and keep internal payroll records for budgeting and tax reporting purposes. 

Why global payroll matters for growing businesses

Why should growing companies care about global payroll? It's more than just cutting checks—it's a strategic advantage that unlocks several key benefits:

• Stay compliant and reduce risk: Every country has its own tax and labor laws. A solid global payroll process ensures you follow these rules, helping you avoid costly fines and legal issues. It's about building a sustainable, compliant foundation for your global team.

• Support strategic growth: The ability to pay people anywhere means you can hire the best talent, regardless of location. This opens up new markets and gives you a competitive edge without the headache of setting up local entities right away.

• Improve employee satisfaction: Consistent, accurate, and on-time pay builds trust. When employees feel secure in their compensation, they are more engaged and likely to stay with your company long-term. A great payroll experience is a core part of a positive employee experience.

• Gain financial efficiency: Managing payroll through a single, unified system saves your People and Finance teams valuable time. It reduces manual errors, streamlines reporting, and gives you a clear view of your global workforce costs in one place.

Common challenges in global payroll

Managing payroll locally is already complex. Going global? That complexity multiplies fast.

Here are the main challenges your team will face:

Compliance with payroll and tax regulations

When running payroll across borders, every country has its own rules for pay frequency, tax withholdings, and reporting requirements. What's standard in one region could be noncompliant in another, so understanding these differences is key to avoiding penalties and ensuring that employees get paid accurately and on time.

Protecting data

Different regions have varying laws around collecting, storing, and processing sensitive employee data. When running global payroll, your company must handle and process employee data in compliance with all applicable data privacy and protection laws, such as GDPR, SOC II, and others. Being compliant means ensuring that your payroll software, sub-processors, and staff involved in payroll processing always prioritize data security and privacy.

Labor-intensive payroll admin work

Conducting global payroll is task-intensive since it involves collecting information, tracking expenses, monitoring time off, applying policy changes, validating data, reconciling reports, and more. These tasks are crucial for ensuring accurate and timely payroll, but they can be time-consuming and overwhelming for busy People teams to manage in-house.

Global payroll solutions to consider

So, what are your options for handling global payroll? Each approach has trade-offs, but some are definitely more complex than others.

The following are different options for handling global payroll:

Running payroll in-house

For the in-house global payroll model, your HR and payroll teams must process payroll worldwide. This entails researching compliance considerations like labor laws and payroll regulations, and knowing how to apply benefits and tax withholdings correctly. In addition, your in-house team will have to adopt a suite of tools for payroll cycle management, time tracking, and payroll processing.

The in-house method requires significant time and resources, as your HR and payroll teams need to learn about other countries' laws. Plus, there are many risks: An accidental omission can quickly spiral into an undesirable tax or legal issue.

Using multiple local payroll providers

Companies looking to hire globally might work with multiple local payroll providers, one for each country or region where they have employees. While local payroll providers can ensure compliant payroll processing in each location, this approach requires managing multiple vendors, systems, and processes, which can quickly overwhelm your HR team.

Using a global payroll provider

A third option is to use a global payroll provider like Oyster that has the local infrastructure to process payroll compliantly across countries and jurisdictions around the world. This approach helps you avoid juggling multiple providers resulting in fragmented and inconsistent processes. Instead, you can view and manage payroll for your global team from a single platform, ensuring more streamlined operations for your HR team and a consistent experience for your employees.

Tips for choosing a global payroll provider

Ready to choose a global payroll provider? The right partner handles the complex compliance work so you don't have to become a tax expert in every country.

Here's what to look for if you're considering using an international payroll provider:

• Country-specific expertise in running payroll: Consider payroll companies that know how to effectively handle payroll in the countries they're covering.

• Up-to-the-minute compliance support: Letting compliance questions go unanswered is a considerable risk. Look for global payroll providers with a dedicated support team that can provide updated guidance on changing compliance obligations.

• Excellent data privacy and security standards: Your payroll provider should follow zero-trust data privacy practices throughout the entire employee life cycle, from the initial onboarding process to a secure, compliant offboarding. Use a payroll solution that implements GDPR standards, encrypts data, and allows you to modify privacy controls.

• Transparent pricing: Reputable payroll providers offer transparent pricing so you know what you're getting. Before working with a payroll service, understand how much you'll pay, when, and how many employees your package covers.

• A system that integrates with your HR tools: Avoid the hassle of training your HR team on entirely new tools by finding a payroll solution that plugs into your existing ones. Oyster integrates with dozens of platforms, from Slack and Zapier to QuickBooks and Expensify.

• An excellent employee experience: Choose a reliable payroll management service that protects employee data and makes sure everyone gets paid on time—no matter the location. Better yet, use a payroll provider that provides personalized support not just to HR teams but employees, too.

How a global payroll solution like Oyster can help

Here's how Oyster simplifies global payroll for growing teams:

• Automated compliance: Local experts monitor changing laws and handle filings in 30+ countries

• Unified reporting: See all your global payroll data in one dashboard

• Multi-currency payments: Pay employees accurately and on-time in their local currencies

• Employee self-service: Team members can access pay stubs and request time off independently

Start building your global team with confidence

Navigating the complexities of global payroll can feel overwhelming, but it doesn't have to block your expansion goals. With the right approach and a supportive partner, you can pay your international team accurately, compliantly, and on time. This allows you to focus less on administrative burdens and more on what truly matters: building a thriving, distributed workforce.

Ready to turn global employment from a challenge into an advantage? Start hiring globally and let a unified platform handle the complexities for you.

FAQs

How is global payroll different from regular payroll?

While regular payroll deals with one country's set of tax laws and a single currency, global payroll manages these processes across multiple countries. This involves handling various currencies, complying with different labor and tax regulations for each location, and navigating cross-border payment systems—making it significantly more complex.

What exactly are global payroll services?

Global payroll services centralize the process of paying international employees through a single platform. They handle wage calculations, tax withholdings, benefits administration, and ensure compliant payments across multiple countries.

Can small businesses benefit from global payroll solutions?

Absolutely. Global payroll solutions give small businesses the power to compete for top talent anywhere in the world without the high cost and complexity of establishing legal entities in each country. It levels the playing field, enabling them to scale their teams globally with confidence and efficiency.