5 mins read
Hiring your first employees in a new country is an exciting milestone. It is also the point where many HR teams discover just how different payroll can be from one jurisdiction to the next. Tax rules, statutory benefits, pay frequency, payslip requirements and data privacy laws all vary, and getting any of them wrong can lead to penalties, back payments and unhappy employees.
The good news is that most payroll problems in new markets are avoidable with the right preparation. Many organisations now use Global Payroll solutions to manage pay across multiple countries from a single view, but even the best setup depends on HR getting the groundwork right before the first pay run.
This checklist covers the key areas to work through.
1. Decide on your employment model
Before thinking about payroll mechanics, confirm how you will employ people in the new country. The main options are:
- Setting up a local entity, which gives you full control but requires registration, local accounting and ongoing compliance.
- Using an employer of record, where a third party legally employs staff on your behalf.
- Engaging contractors, which can be quick but carries misclassification risk if the working relationship looks like employment under local law.
Your choice determines who is responsible for running payroll and meeting employer obligations, so settle this first.
2. Register with the relevant authorities
If you are employing through your own entity, you will usually need to register as an employer with local tax and social security authorities before paying anyone. Requirements and timeframes vary, and some registrations can take weeks. Build this into your hiring timeline so new starters are not left waiting for their first pay.
3. Understand local pay rules
Minimum wage levels, overtime rules and mandatory payments differ significantly between countries. Some countries require additional statutory payments on top of base salary. The Philippines, for example, mandates a 13th month payment for many employees. Check whether employment contracts, awards or collective agreements set further conditions that apply to your workers.
4. Map statutory benefits and contributions
Employer obligations often extend well beyond tax withholding. Depending on the country, these can include social security, pension or retirement contributions, health insurance, unemployment insurance and paid leave entitlements. Document every contribution, who pays it, how it is calculated and when it is due.
5. Set pay frequency and timing
Monthly pay is standard in many countries, while others commonly pay weekly or fortnightly, and some regulate how often employees must be paid. Align your schedule with local law and norms, and confirm cut-off dates for timesheets, approvals and changes so payroll can run on time.
6. Plan for currency and banking
Employees generally expect to be paid in local currency into a local bank account. Work out how funds will move, who manages exchange rate exposure and how long transfers take. A late payment caused by a banking delay still feels like a late payment to the employee.
7. Protect employee data
Payroll involves sensitive personal information, including bank details, tax identifiers and sometimes health-related leave records. Data protection laws such as the GDPR in the European Union set strict rules on how this information is collected, stored and transferred across borders. Confirm that your systems and providers meet local requirements.
8. Get payslips and records right
Some countries specify what information a payslip must contain, and some require it to be issued in the local language. Record-keeping obligations also vary, including how long payroll records must be retained. Check these requirements early so your templates and systems are compliant from day one.
9. Plan for year-end and termination obligations
Annual tax reconciliations, employee tax statements and statutory filings all need to be scheduled. Termination rules matter too. Notice periods, severance entitlements and final pay timing can differ markedly from what your team is used to at home.
10. Choose how you will run it
Finally, decide whether payroll will be handled in-house, by a local provider in each country or through a consolidated approach across all locations. In-house can work for a single country with experienced local staff. As you add more countries, managing separate providers and processes often becomes harder to control, which is why many growing organisations move towards consolidated reporting and a consistent process across markets.
Common mistakes to avoid
A few issues come up again and again when companies expand:
- Starting employees before employer registration is complete
- Treating long-term contractors as employees in practice without adjusting their arrangements
- Overlooking statutory payments or benefits that do not exist in the home country
- Relying on spreadsheets and manual processes that do not scale
- Leaving local compliance knowledge with one person and no backup
Final thoughts
International expansion puts payroll under a new kind of pressure. Each country brings its own rules, and employees judge their employer quickly on whether they are paid accurately and on time. By working through this checklist before your first hire, HR teams can avoid costly mistakes, give new employees a smooth start and build a payroll setup that can grow as the organisation expands into more markets.
