Nicole Sahin, CEO and Founder at Globalization Partners
Regardless of whether organisations are seeking to locate talent abroad to fill a skills gap or are looking to expand their business into new geographic regions, they will be confronted with the challenge of onboarding overseas employees and figuring out how to pay them. To avoid the risk of encountering any potential international payroll issues, organisations will need to be certain they are following the rules when it comes to classification, tax withholding and a raft of other details.
Aside from complying with the requirements of national authorities, organisations will also need to be sensitive to local payment customs and cultural differences that will need to be reflected in how international employees are paid. For example, a 13-month payroll is commonplace in many South American, European, and Asian countries.
Similarly, in the EU the working week is capped at 48 hours, while in China labour law caps the working week at 44 hours. Meanwhile, in the US non-exempt employees receive overtime pay once they have worked more than 40 hours in a week. Therefore, the international payroll system will also need to incorporate a method to accurately record and report time.
Let’s look at some of the key areas that organisations will need to consider when hiring and paying international employees.
International payroll – the compliance basics
When paying international employees, businesses must ensure they are withholding and paying the appropriate types of tax, and the right amount of taxes, by the right deadline.
Alongside any applicable regional or state income tax, many authorities collect some form of social security tax from both employees and employers. Similarly, in numerous countries, employers are expected to contribute to payroll taxes – such as unemployment tax and worker compensation – for every employee.
In addition to tax compliance, international payroll will also need to follow all national rules that relate to benefits and wages. This may include contributing to an employee’s pension plan and adhering to any minimum wage rules that apply.
Tax and wage compliance aside, in many respects international payroll is similar to domestic payroll. Decisions will need to be made on the frequency with which employees are paid (monthly, bi-weekly, and on which days of the month), and whether monies will be distributed to remote employees via direct deposit or paper cheques.
Navigating other legal concerns
There is an array of legal differences that need to be kept track of when paying a remote international team. Here in the UK, employers need to pay Statutory Sick Pay if an employee is sick and off work for at least four days for a period of up to 28 weeks. In the US, however, while employers can offer paid time off for sickness they are not legally obliged to pay employees; the Family and Medical Leave Act (FMLA) in the US protects people who need to take up to 12 weeks leave due to sickness or other health concerns, but this leave can be unpaid.
Documentation is another challenging area to manage when hiring and paying international employees. Employees may need to provide proof of citizenship or their right to work in the country (such as a passport) when they are hired. In many countries, an employee is required to present a national insurance number before they can be hired.
The practicalities of payment
Employees must be paid in accord with the laws of the country in which they live and work, but there are exceptions. For example, if an organisation asks an employee to temporarily move abroad in the line of work, it may be possible to continue to pay them from their home country payroll.
However, companies usually find there are a limited number of options when it comes to establishing a separate payroll for each country in which it operates. Setting up a subsidiary to manage all business and handle payroll makes sense if there are plans to permanently expand internationally. But this becomes a time consuming and costly proposition when companies need to hire just a handful of people in multiple countries.
Finally, international employers are also faced with juggling fluctuating currency exchange rates to ensure people get paid the correct amount in their local currency – without incurring excessive cost to the organisation itself.
Should international employees be independent contractors?
At first glance, classifying international workers as independent contractors rather than employees might seem like the ideal way to streamline payments and reduce the complexity of the payroll process.
The advantages of this approach are appealing; organisations that work with independent contractors are not responsible for withholding taxes, paying social security or unemployment taxes. Plus, contractors are not subject to the same hour restrictions as employees, and an organisation does not have to be registered in the country the contractor lives in to pay that person for the work they do.
However, most countries have strict definitions and rules that need to be met before an individual can be considered an independent contractor rather than an employee. Companies that try to classify international employees as independent contractors run the risk that if local authorities determine they have misclassified any employee as a contractor, they will face considerable legal and financial repercussions.
Cutting through complexity – and staying compliant
To eliminate the multiple complexities associated with onboarding and paying overseas teams, companies that need to manage flexible working on a global scale are increasingly electing to outsource the management of their international payroll to a global employer of record.
A global employer of record gives companies the ability to quickly place workers in countries where they do not have a business subsidiary or branch office. This is because the company’s employees are placed on the existing payroll of the employer of record, with the company benefiting from its global legal infrastructure.
This eliminates any need to set up a subsidiary to onboard employees, ensures that country-specific payroll requirements are met, and that employees get paid on time and in the currency of their home country.
It is a cost-effective approach to handling the compliance burden that companies typically encounter when onboarding and paying international teams, making it easy to acquire the agility they need to capture talent and market opportunities – without compromising their operations or their international reputation as an employer of choice.
Bio: Nicole Sahin, CEO and Founder at Globalization Partners
Nicole Sahin’s mission is to eliminate barriers to doing business internationally and building global teams. As founder and CEO of Globalization Partners, she is recognised for having created their innovative Global Expansion Platform™, which empowers companies to hire anyone, anywhere within a few business days – expanding their global footprint without the need to set up in country branch offices or subsidiaries.
ENLISTING TECHNOLOGY TO HELP FIGHT FINANCIAL CRIME
By Rachel Woolley, Director of Financial Crime Fenergo
Million-dollar properties, private jets and parties on luxury yachts with celebrity friends. Although it might sound like the plot for a new reality series, this is what corruption, illicit funds and political connections can buy at the expense of ordinary citizens.
Following an investigation by the International Consortium of Investigative Journalists (ICIJ), thousands of leaked documents, known as the Luanda Leaks, suggest that the daughter of Angola’s former president, Isabel Dos Santos, acquired her enormous wealth through favourable access to lucrative deals. These activities were often to the detriment of Angola’s poorest citizens.
We’ve also started to see the application of unexplained wealth orders (UWO) in the UK, with the first UWO issued in 2018. The latest UWOs relate to the grandson of Kazakhstan’s former president, Nurali Aliyev, is currently being investigated by Britain’s National Crime Agency (NCA) to explain where he got the money to buy a £80 million house in one of London’s most expensive neighbourhoods. It is thought that the funds used to buy the property have criminal origins.
But these aren’t isolated stories. There have been countless examples in recent years of how corruption, fraud and political connections has resulted in billions of dollars being stolen worldwide in countries such as Brazil, Malaysia, Gabon, Russia and many more.
A recent report by Fenergo found that regulators have issued over $36 billion in AML/KYC and sanctions-related fines (and rising) since the financial crisis. This staggering number shows that related financial institutions had inadequate policy, processes, procedures and systems, in addition to poor governance and oversight in many cases. Interestingly, a similar report found that the vast majority of these regulatory costs were associated with an AML/KYC-specific labour force.
Not surprisingly, the methods used to hide the illicit wealth are pretty similar; invoice fraud, suspicious transfers, offshore companies and complex ownership structures to disguise beneficial ownership of assets and property. Another commonality is the detrimental impact this has on some of the poorest citizens in these countries and the global economy.
But what can we learn from these scandals? And perhaps more importantly, what can be done?
For financial institutions, the importance of leveraging technology to unwrap complex hierarchies, related parties and identifying individuals with political connections cannot be understated. Understanding the ownership and control structure when onboarding entities is critical, along with robust screening practices to enable sufficient oversight of the relationship, accounts and transaction activity. Enhanced due diligence measures must be applied to politically exposed persons (PEPs), their immediate family members and known close associates. Relationship patterns are also significant, as the same service providers are often used, as was the case with Mossack Fonseca in the Panama Papers scandal.
It’s critical that financial institutions are vigilant in the detection and prevention of financial crime before it’s too late. By automating KYC/AML compliance and leveraging rules-based technology, financial institutions can ensure that internal policies are fully in-line with constantly changing regulations across multiple jurisdictions. However, human input will still be necessary when red flags are identified by the system.
Rachel Woolley, Global AML Manager at Fenergo, has over 10 years’ experience in the Financial Services industry having worked primarily in the funds industry and retail banking. She has a strong background in regulatory compliance, particularly in the areas of anti-money laundering and counter terrorist financing (AML/CTF).
Rachel holds a BSc (Hons) Degree in Applied Accounting from the Oxford Brookes University and is an ACCA Affiliate. She currently holds three professional designations; Licentiate of the Association of Compliance: Officers in Ireland (LCOI), Certified Financial Crime Prevention Practitioner (CFCPP) and Certified Data Protection Officer (CDPO).
CONSUMERS ARE READY FOR BIOMETRIC PAYMENT CARDS
Lina Andolf-Orup, Head of Marketing at Fingerprints
We’ve come a long way in the evolution of digital payments. Magnetic stripe cards, chip & PIN and contactless technology have all played a role in dethroning cash as ‘king of payments’, with many countries well on their way to becoming cashless economies. As with all tech innovation, though, consumer readiness is always the deciding factor in the crowning of new payments royalty.
Now there’s a new technology on the block, ready to help contactless offer even more value: the biometric payment card. In recent years, biometric payment cards have been steadily gathering momentum, currently being trialled by over 20 banks across the world, with the first commercial launch announced last year. A mass-market roll-out is imminent.
But with all the noise from the payments world, it’s important to answer the de facto question that’s key to any technology’s success: are consumers ready?
Contactless is (almost) king
Contactless has achieved great success globally, and are now seeing a steep increase across the world.
In addition to consumers being frustrated with having to remember a plethora of PINs and passwords, the current pandemic has also brought to light the unhygienic nature of cash and PIN-enabled payments. Now more than ever, consumers are eager to use a secure, convenient, and hygienic payment method. And contactless almost fits the bill.
Although consumers want to use their contactless card more often, security worries, payment experience frustrations, and the limiting payment cap are all preventing the card from reaching its full potential usage.
The missing link
This is where biometrics comes into play: the missing element that can take contactless into the era of worriless and limitless payments, and provide consumers an experience they expect in the 21st century. With consumers clear about what they want, let’s take a look at what’s top of their checklist and how biometrics can fill in the gaps to realize their ideal payment experience.
- Smarter, safer contactless. Just for you.
Security is a primary concern for consumers when it comes to contactless, with 38% of consumers citing security as the main reason they are hesitant to use the payment method. For older generations, this number rises to almost 50%.Yet with hygiene concerns at an all-time high, many consumers aren’t eager to use PIN-pads to secure their payments either. By moving the authentication onto the card itself, biometrics secure payments in a way that allows consumers to never touch a PIN pad again.
With the rise of data privacy concerns, consumers can rest assured that their biometric data never leaves the card and won’t be shared with third parties or cloud-based databases. Everything remains securely stored on the payment card itself.
- Let’s talk about UX
Although every generation is keen to use contactless more, millennials are especially eager to take greater advantage of this convenient payment method. 87% of millennials that own a contactless card use it regularly and three quarters are set to use it more often.
Biometrics bring additional trust to contactless payments, while keeping the same level of convenience, allowing consumers to make a secure payment in less than a second. And with a unified experience so you know what to expect every time you pay; not PIN code sometime, contactless another time, it always works the same no matter where you are in the world.
Because a biometric payment card does not need to be charged – it’s powered from the payment terminal in the same way traditional contactless is – there is nothing standing in the way of efficiency-loving consumers embracing this technology.
- Contactless made limitless
To offset the lack of PIN security, traditional contactless payments are capped. In light of the current hygiene concerns, countries around the world have already raised contactless payment caps in a bid to reduce PIN entry and cash use. But without any additional strong authentication, the limit has not been lifted completely anywhere to date. This is not only frustrating consumers, but our recent research found this was the primary frustration banks felt regarding contactless.
With the touch of a finger, biometrics brings the robust security needed to remove contactless payment limits altogether. Across contactless cards, mobile, wearables – and even future payment options – biometrics can provide a strong and seamless authentication solution to however we choose to pay or whatever contactless form or shape. Limitless payments with a harmonized UX, wherever consumers are, however much they spend, and wherever they pay: the perfect companion in the age of convenience.
- Tech nation
A less pressing, although by no means trivial matter, is that consumers are simply ready for something new. Over a third of consumers want to use more modern and personal payment cards, and biometrics sits alongside metal cards, tailored designs and other innovations to do just that. Not to mention that the standard contactless card, the last great innovation in card payments, is now over a decade old!
Featuring the latest fingerprint sensors and an advanced algorithm with AI, biometric payment cards not only meet the criteria for a modern and next-generation payment card but offer the most personal touch imaginable. Your fingerprint.
- Ready to roll…
We’ve arrived at a crucial point in the evolution of payments. With the technology tested and accredited in line with the rigorous standards of the payments ecosystem, the mass market adoption of this technology is just around the corner. But most importantly, consumers have never been more ready to embrace limitless and worriless contactless.
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