Payroll Series Part 4: Finance and IT

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New International Payroll Series
PART 4

Who will be hit hardest by new Payroll laws?
Global finance and IT will have to adapt.

Rose McCarter-Field

By Rose McCarter-Field

As companies continue to move to a more remote workforce, some are finding the transition to be permanent. Many have found remote working is resulting in higher levels of productivity and lower levels of expenditure such as travel and office space.

McKinsey research has found that the sectors with a most notable move towards long term remote working are finance, scientific, and IT. The finance sector are finding that the majority of their work can be carried out remotely, without loss of productivity.

In the UK, business and financial services are a large share of the economy. This permanent move to remote working will change the nature of our workplace. A more global operation will also change the nature of all HR functions, especially in finance.

Increased levels of remote working allows for a larger available talent pool, as you can recruit from anywhere. More globally dispersed staff will be followed by a different payroll system. 

This global move to international and remote working has triggered a change in tax legislation in many countries. These changes in legislation were triggered by IR35 in the UK. As a result, there is an increasing liability of the company to ensure staff employment status and income tax payments are correct. These new laws across the globe mean that companies will need complex payroll systems in order to stay compliant with new legislation. Canada, Germany and Italy are the first to make this change. This means that a UK firm with staff in these countries has to make sure the employment status is correct according to the country each member of staff resides in, and that the right government(s) are getting the right amount of tax.

This will be a big change for any internationally operating payroll team, most notably in finance as it effects such a high percentage of staff.

For more information on the coming payroll changes read this article: Workplace Internationalization has Triggered a Change in Tax Liabilities

To ask for help with your international payroll or recruitment: Get in touch.

Got questions about payroll?

If you have any queries or concerns, just send us a message. One of our payroll experts will email you back with relevant information to your query.

Payroll Series Part 3: How We Help You To Stay Compliant

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New International Payroll Series
PART 3

Project Recruit International Payroll Services:
How We Help You To Stay Compliant

Rose McCarter-Field

By Rose McCarter-Field

At Project Recruit we put our clients first. When international recruitment and payroll liabilities change, we work with our clients to meet these new obligations.

As a result of coming global legislation changes, all companies with staff in more than one country will have increased payroll liabilities. At Project Recruit we have worked extensively with our clients to develop internationally complaint payroll, with the customer care of a localised service.

We have developed partnerships with 32 accountancy firms to ensure global understanding of complex legal responsibilities. We have been working with our international payroll teams to develop complex knowledge requirements. Our account managers have been working closely with each client to develop a payroll system that works for them, ensures compliance and is easy to manage. We’re not happy until you’re happy (and compliant).

Our network provides global coverage of payroll legislation and systems. This allows our clients to comply with the laws now, and the laws as they change. If you have any queries about international payroll and how it may affect you, feel free to get in touch. We will get back to you with relevant information, specific to your query.

For more information on the coming payroll changes read this article: Workplace Internationalization has Triggered a Change in Tax Liabilities

To ask for help with your payroll or recruitment: Get in touch.

Got questions about payroll?

If you have any queries or concerns, just send us a message. One of our payroll experts will email you back with relevant information to your query.

Payroll Series Part 2: Insource vs Outsource

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New International Payroll Series
PART 2

Meeting New Payroll Requirements.
Should you outsource or insource?

Rose McCarter-Field

By Rose McCarter-Field

International payroll is changing big time. The legal responsibility is being placed on companies to ensure correct employment status allocation and income tax payments, for every country in which their staff reside. This means international HR knowledge is essential to ensure legal compliance.

So, how can you best prepare for these changes? The depth and breadth of knowledge required to become internationally complaint is vast. Understanding the legal documentation requires the ability to read different languages and understand country specific legal terminology. Also, it isn’t enough just to know the legal framework in each country at the present time, these laws are evolving. A company needs the ability to remain compliant as the laws change.

If you have a legal representative and a payroll team in each of the countries that your staff reside, this is a good start. If you want to run payroll in house, this gives you the chance to adapt to the new laws. You will still need to develop a system for tracking where your staff are and how their payroll should be processed. You will need a system for ensuring correct employment status in accordance with the laws of the country they reside. You’ll also need to be aware of cross-country laws, someone staff may need to meet the legal framework of more than one country.

If you are looking to outsource your payroll, a firm with a UK focus will not give you the legal compliance you need. Be sure to find a firm that has global payroll know-how. Ideally one that operates internationally but treats you with the customer care of a local firm. And of course make sure it is trusted firm that has a good reputation. For many, outside specialist help will be critical for compliance. But make sure you get a firm that covers the countries relevant to your company.

For example at Project Recruit, we have partnered with 32 accountancy firms in order to ensure the acquisition of such complex knowledge requirements. These firms provide global coverage of payroll legislation and systems. This allows our clients to comply with the laws now, and the laws as they change.

If you have any queries about international payroll and how it may effect you, feel free to get in touch. We will get back to you with relevant information, specific to your query.

Got questions about payroll?

If you have any queries or concerns, just send us a message. One of our payroll experts will email you back with relevant information to your query.

Payroll Series Part 1: New Payroll Expectations!

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New International Payroll Series
PART 1

New Payroll Expectations!
Make sure your payroll is in line with new legislation.

Rose McCarter-Field

By Rose McCarter-Field

Did you know that today’s international mode of working is changing tax laws? And that companies are becoming increasingly liable for ensuring correct tax payments, in every country in which their staff operate?

If you have staff in multiple countries, on different types of contracts this can be a mine field.

Since the introduction of IR35 in the UK, other countries have been reviewing how they collect income tax. This includes clamping down on the employment status definitions of residents. It also includes how individuals are paying income tax and who they are paying it to. The trouble is, it’s difficult for governments to track the tax status and payments of every single person. As a result, the onus is being placed on the company. The company is becoming increasingly responsible for correct income tax payments and employment status allocation, for every country in which their staff reside.

This means companies need to get savvy to international employment law. Companies need to fully understand the legal framework for assigning employment status, in every country that their staff are working from. They need to ensure correct tax payments in each of these countries too. In some cases, this may be tax payments to more than one country for one person.

The complexity of this changing legislation is not an easy task if you have 100 staff in Germany, 2 in Spain, 1 in Japan, and so on.

This change will no doubt effect the mobility of the modern workplace, especially for anyone wanting to live in two countries. For instance if someone usually resides in the UK but plans to work from their home in a sunnier country for a few months, the company needs to know details. They need to know how long that person can be in each country before their tax status changes and alter any payments accordingly.

Companies such as GSK have already been called to account regarding IR35. If you don’t have the legal in-house know how, it’s time to get some experienced help with your payroll. Companies need experienced HR specialists that know the laws in the countries relevant to them. At Project Recruit, we have partnered with 32 accountancy firms in order to ensure the acquisition of such complex knowledge requirements. These firms provide global coverage of payroll legislation and systems. This allows our clients to comply with the laws now, and the laws as they change.

If you have any queries about international payroll and how it may affect you, feel free to get in touch. We will get back to you with relevant information, specific to your query

Got questions about payroll?

If you have any queries or concerns, just send us a message. One of our payroll experts will email you back with relevant information to your query.

Workplace Internationalization has Triggered a Change in Tax Liabilities

international team on payroll

Workplace Internationalization has Triggered a Change in Tax Liabilities

The legal obligations of companies are changing as the workplace goes global.



Rose McCarter-Field

By Rose McCarter-Field

We live in a world of international working and localised tax legislation. How do companies manage the complex tax requirements for an international workforce? How is government tax legislation changing to deal with an increasing number of people working for companies in a different country to where they reside?

There is an increasing trend to remote and international working which has been accelerated following the Brexit vote and the pandemic. Following the Brexit vote, the number of people leaving the UK to live in the EU rose by 30% (1). From 2016-18 this averaged at 73,642 people emigrating per year (2). As a response to the pandemic, the 20 countries with the highest number of COVID-19 cases sent 37% of migrants home (3). In both instances, many people continued to work for their UK employer after leaving the UK. But, who is receiving their tax? And who should be receiving their tax? The question may sound obvious, but workforce internationalization is resulting in significant amounts of tax avoidance.

If a programmer for example, has gone home to Germany but continues to work for the same company as they did in the UK, who are they paying income tax to? And is that employee aware that they need to pay income tax in their own country? In this particular instance the two countries have an agreement to avoid double taxation, but it isn’t simple.

If this same programmer is working as a contractor for a UK company and living in Germany, how do the German authorities know they need to collect tax from this person? It is difficult to regulate when each individual is responsible for paying their taxes correctly.

Monitoring who should be paying taxes to whom, is a complex challenge for authorities. As a result many countries are changing their tax legislation to clamp down on tax avoidance. The IR35 legislation in the UK was brought in to ensure UK employers assign correct employment status to their workforce. This legislation places the legal responsibility for paying tax, on the company rather than the individual. This legislation is being adapted and implemented in other countries as a means to tackle this tax collection challenge.

A quarter of the UK workforce has been identified by a McKinsey report to be able to work just as effectively remotely 3-5 days per week (4). That’s a quarter of the workforce that could be recruited from anywhere. With one year’s experience of working remotely employers are now seeing increases in productivity from their remote workers compared to previous office levels of productivity (4). We are seeing a longer term move towards a more remote and internationalized workplace. This opens up huge potential for geographically widening the available talent pool. It also causes a taxation nightmare. 

The lack of standardised global taxation laws means tax and employment status in today’s world is both complex and difficult to regulate. To combat this, the previous onus on the individual to pay the right taxes to the right people, is being changed. The legal responsibility will be placed in the hands of the company. Companies will become legally responsible for correct taxation not just in their country of residence, but in the respective countries of their workers. Thus companies need to understand the laws and tax systems in multiple countries to comply with them, or risk fines and legal implications. These changes will impact tax payments for employees and contractors. 

Canada, Germany, and Italy are some of the first to start to readjust their tax legislation. In some instances these legislative changes are similar to the new UK IR35 legislation. In other instances the changes are quite different, such as a blanket tax.

The enormity of incorrect tax payments has been brought under the spotlight by high profile cases such as the Uber employment tribunal. GSK have also been highlighted as having thousands of contractors that will need to be considered employees from April, when the company will be legally responsible for paying tax directly to the government due to IR35. 

In the UK, business and financial services are a large share of the economy. The most notable sustainable remote working sectors are finance, scientific, and IT (4). These sectors are showing the largest long term move to a remote and internationalized workplace. As a result, these sectors will also see the biggest impact of complex global tax legislation.

Current approaches to payroll compliance are not kitted out for such a complex change. Neither internal payroll teams nor in-country tax specialists have the legal knowledge or the language capabilities to implement legally compliant payroll systems in an international workplace. They are not geared up to deal with this.

Outside specialist help will be critical for compliance. Experienced HR specialists that know the laws in the relevant countries will become essential. For example at Project Recruit, we have partnered with 32 accountancy firms in order to ensure the acquisition of such complex knowledge requirements. These firms provide global coverage of payroll legislation and systems. This allows our clients to comply with the laws now, and the laws as they change.

    1. The Guardian, 2020 https://www.theguardian.com/politics/2020/aug/04/number-of-uk-citizens-emigrating-to-eu-has-risen-by-30-since-brexit-vote
    2. Business Insider, 2020 https://www.businessinsider.com/number-of-brits-moving-to-eu-has-risen-30-since-brexit-vote-2020-8?r=US&IR=T 
    3. Migration Data Portal, 2021 https://migrationdataportal.org/themes/migration-data-relevant-covid-19-pandemic
    4. McKinsey, 2020 https://www.mckinsey.com/featured-insights/future-of-work/whats-next-for-remote-work-an-analysis-of-2000-tasks-800-jobs-and-nine-countries
    5. PWC, 2021 https://www.pwc.co.uk/issues/crisis-and-resilience/covid-19/remote-working—next-steps.html
    6. BBC, 2020 https://www.bbc.com/worklife/article/20201023-coronavirus-how-will-the-pandemic-change-the-way-we-work
    7. BBC, 2020 https://www.bbc.co.uk/news/business-53524486
    8. Lewis Silkin, 2020 https://www.lewissilkin.com/en/insights/home-and-away-when-working-from-home-means-working-abroad

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