Global Payroll Compliance | Why Is It Important for Your Business?

Whether taking a DIY approach, or engaging an outsourcing company, compliance is essential to enable growth on a global scale.


A compliant business is one that maintains industry standards and legal regulations within its operations. A compliance management framework complete with payroll compliance is 100% necessary if you want to avoid regulatory risks, and potential penalties.


If you’re paying international employees or plan to create a multinational network, implementing a solid global payroll compliance strategy is essential. With the right international payroll management system, you can execute globalization properly and expand your business safely.

What Global Payroll Compliance Regulations Do You Have to Navigate?

Payroll compliance at its most basic level includes complying with basic payroll regulations. These include but aren’t limited to calculating wages, withholding payroll taxes, depositing your tax liability, and filing payroll tax returns; You may need an accounting certificate for these tasks.


In addition to standard payroll compliance regulations, you also have to keep track of:

  • State requirements, which vary from state to state.
  • Federal requirements, like FLSA, FICA, FUTA, EPA, and Davis-Bacon Act.
  • International payroll rules, which change based on the country.


Keep in mind that you still have to stay up to date with payroll compliance regulations to satisfy local and international requirements. The IRS will not take ignorance or inexperience as an excuse.


In the 2022 tax year, the pre-tax contribution level for 401(k) increased to $20,500, the FSA contribution limit increased to $2,850, and the Social Security wage base increased to $147,000. If you weren’t aware of these changes, you may break several payroll and/or legal rules/laws.

What is Involved in International Payroll Management?

Globalization provides a whole host of benefits for your company. From new revenue potential to greater access to talent, globalization, when done right, can help your business scale quickly.


However, globalization presents another problem: international payroll management. There’s no one-size-fits-all approach to payroll when conducting business overseas. To top that off, the global marketplace is packed with highly regulated rules that may come with a learning curve.


Fortunately, the basics of payroll compliance (calculating wages, withholding payroll taxes, etc.) stay the same no matter where you go, so adjusting to a mobile workforce won’t be so hard.


Here are a few international regulations that could affect your employee payroll:


  • Labor Law of the People’s Republic of China
  • UK Employment Rights Act
  • European Union Working Time Directive (WTD)
  • Wages Protection System of the United Arab Emirates (UAE)
  • German Act on Part-Time Work and Fixed-Term Contracts
  • Labor Standards Act of Japan


If you’re doing business with another country, you’ll need to look up their laws before you do anything else. Everything from employee health and safety, contracts, wages, labor disputes, welfare, working conditions, and overtime could change based on the country you reside.

Why Should You Invest in Global Payroll Compliance?

Global payroll compliance, while difficult, is more than worth the cost, time, and effort. Here are 5 reasons why you should invest in international payroll management and compliance immediately.

  1. Improved Consumer, Partner, and Client Trust

Companies that follow proper government and compliance policies quickly gain the trust of their consumers. That’s because you’re showing respect for the country you’re working with/in.


Your customers can easily look up information about your company and whether you’re treating your employees properly. If you have a history of payroll errors or late payments, customers will avoid you. On the other hand, a trusted employer is more well-liked by the general public.

  1. Avoid Legal Risks and Liability Costs

Employers often make international compliance mistakes that could cost them a hefty fine or their whole business. These errors include misclassifying exemptions and freelancers, Equal Pay Act non-compliance, and workers’ compensation errors, all of which are easy to prevent.


As a multinational corporation, you have to deal with rules and regulations being imposed in several countries. When you invest in global payroll compliance, you minimize legal risks and fees. If you use payroll compliance software, you can easily stay up-to-date with regulations.

  1. Eliminate Future Expenditures and Lost Time

Being “future-proof” should be the goal of any startup. International payroll management software can save you time, money, and resources, but even a manual system can reduce costs.


However, manual compliance is a repetitive process that requires a lot of routine tasks, so it’s better if you automate some of the process. Putting a proper structure in place reduces the need for extra staff because you can monitor and adjust to regulatory changes in real-time.

  1. Increased Security Across All Systems

According to Advisor Smith, 42% of small businesses experienced a cyberattack in 2021. Even though the chance of getting hacked is almost as likely as a coin flip, most businesses don’t have any cyber security systems in place and don’t know how to successfully prevent ransomware attacks. But security becomes more vital on a global scale.


It’s virtually impossible to run a global business without software, so choose an international payroll management platform that restricts access to unauthorized employees or hackers. By enhancing data security, you’ll be able to stay compliant with data storage and exchange laws.

  1. Centralized Payroll and International Growth

Payroll compliance requires a centralized system, especially when operating globally or looking to expand globally. This involves centralized invoicing, with a single invoice and currency conversion, enabling you to pay in a single currency.  Your outsourcing company would manage paying your workers in their local currency, wherever they are located.  This also extends to account management and having a single point of reference. All necessary to ensure global payroll compliance. Otherwise, it leaves the door open to errors and risk and possible subsequent fines to your business.

International growth requires an holistic approach, and may be better handled by an outsourcing company. Whether taking a DIY approach, or engaging a third party outsourcing company, you need to have compliance measures in place to enable growth on a global scale, or your reach could be cut short before you leave US shores.


CXC is a global HR outsourcing organization with 30 years of experience in workforce management. Our innovative and cost-effective solutions help companies gain a competitive advantage by improving efficiency while reducing risks

Contact CXC today to start enabling your future workforce.