How to Pay International Employees: A Complete Guide (2025)

Hiring global talent certainly comes with its perks. You gain access to a talent pool that isn’t constrained by geographical constraints, often at competitive rates that benefit your bottom line.

However, different labor laws, currencies, and payment systems pose a complication here. Make a mistake, and you may face penalties or even legal action. The psychological impact of payment problems also directly affects employee satisfaction and retention. The SD Worx survey found that 44% of employees consider quitting their jobs after experiencing a payroll error.

In this article, we’ll walk you through how you can pay international employees, build a happy global workforce, and ensure you run no risks of penalties or unnecessary charges. 

And while you read, consider utilizing our free cost-savings calculator to determine how much money you’re spending by hiring internationally. Budget away!

Challenges of Global Payroll Management

Let’s look at the main problems you’ll likely face with international payments. 

Never-ending paperwork

Managing international payroll means juggling multiple systems across different countries with changing time zones and currencies.

Say you’re responsible for payroll at a growing company with team members in seven countries. Each morning, you log into different systems, communicate with various local providers, and track different pay periods across several time zones.

Your calendar becomes color-coded by country to track when each payment must be processed. You’re constantly converting amounts between currencies, hoping the exchange rates don’t fluctuate too dramatically before payday. 

Regulatory complications 

Employment laws, tax requirements, documentation standards, and reporting deadlines vary dramatically between countries. Local tax requirements include different income tax structures, social contributions, and withholding obligations. 

Imagine discovering that what’s perfectly legal in your home country violates employment regulations in another where you have team members.

Perhaps you’ve been classifying workers as contractors when local laws consider them employees, or you’ve missed a critical tax filing deadline because it differs from your domestic schedule. The first you hear about it might be when the penalty notice arrives, putting both your finances and employee relationships at risk.

What’s more, these laws frequently change, requiring constant monitoring.

For example, as of January 1, 2024, Italy pays parents of children under 12 years old 80% of their salary for the first month of leave and 60% for the second month, according to Ogletree Deakins. 

In addition, the following things can affect international payments:

• Each country has unique tax identification systems and filing schedules.
• Reporting obligations extend beyond tax filings to statistical reporting and industry-specific requirements that differ across countries. Saudi Arabia is a good example of this point here. As of 2024, they require all private companies with 50 or more employees to submit annual reports on their workforce training activities.

Increased spending on transaction fees 

The financial drain comes from multiple directions: vendor fees across different providers, unfavorable currency exchange rates, maintaining duplicate systems, and the administrative hours spent managing everything.

Consider the hidden costs when paying a team across borders. Beyond their salaries, you’re paying premium fees to multiple payroll vendors, losing a percentage on every currency conversion, maintaining separate systems that do the same thing, and dedicating valuable staff hours to administrative tasks instead of strategic work.

These costs seem small individually but can add significant percentage points to your global employment expenses.

Technical barriers

Legacy system limitations hamper global payroll integration, as older platforms were designed for single-country operations.

Data synchronization problems occur when connecting HR systems with various payroll platforms. Employee information, time data, and compensation details must flow between systems.

API compatibility issues may also emerge when connecting different technology platforms across borders, preventing automated workflows.

Security requirements vary across jurisdictions, with regulations from GDPR in Europe to LGPD in Brazil establishing different standards for data handling.

Operational inefficiencies

If you opt for manual data entry despite technological advances, you’ll spend much time re-entering data into multiple systems, increasing errors and processing time. Duplicate processes waste resources as teams perform similar functions for each payroll cycle on different platforms.

This may lead to inconsistent reporting formats and complicated analysis. When each country delivers payroll data differently, consolidating information requires significant data transformation.

Consider a hypothetical scenario: A software company grows from 50 to 200 people working in 12 different countries. They’re using eight separate payroll systems, spending over 40 hours each month just handling paperwork and paying $12,000 monthly fees. Even worse, they made three legal mistakes in just six months because they couldn’t keep up with all the different rules.

Evaluating Your Global Payroll Options

When expanding your team internationally, you’ll face critical decisions about how to manage payroll across borders. HR managers often choose between three approaches, each with distinct implications for your budget, timeline, and team resources.

Traditional entity setup

Setting up a legal entity in each country represents the most established approach to global expansion. This involves creating a local subsidiary or branch office. The process typically takes 2-6 months per location.

This approach requires significant investment. The table below will give you an idea of the speculative costs you’d have to pay. You may not have to pay them all, so look at our country-specific international hiring guide for a more detailed and accurate cost estimate. 

Process	Coverage	Amount
Setting up an entity	Name application fee Registration fee for business establishment Corporate secretarial firm service fees Setup of accounting system Corporate bank account opening Business license application Legal consultation costs	$10,000-$50,000
Annual maintenance costs	Registered office address rental Nominee directorship services Company secretary services Book-keeping services Annual software subscriptions Local representation costs Office maintenance	$20,000-$40,000
Compliance costs	Employee work permit applications Payroll processing Regulatory reporting Audit fees Tax compliance services	$15,000-$25,000

_{Approximate Costs Involved in Setting Up an Entity}

You’ll need to navigate legal registration with local authorities, establish country-specific banking relationships, register for tax purposes, and create compliant employment contracts for each jurisdiction.

Global payroll providers

Many companies turn to specialized global payroll providers as an alternative. These services handle core payroll processing, calculate taxes according to local requirements, distribute payments, and provide standard reporting capabilities.

This approach requires integrating your HR systems, time-tracking solutions, expense management tools, and benefits administration platforms. While more efficient than establishing entities, global payroll providers typically offer limited compliance support and essential features with minimal customization options and often require managing separate systems for each country.

HR managers find this approach reduces some complexity but still requires significant oversight. You’ll still need expertise in international employment law and compliance, as these providers focus primarily on the transactional aspects of payroll rather than comprehensive employment solutions.

Employer of Record (EOR) solution

The EOR model represents a comprehensive alternative that eliminates the need for entity establishment while providing full employment services. Companies like Tarmack serve as the legal employer in each country while you maintain the day-to-day management of your team members.

This approach delivers full employment compliance, complete benefits administration tailored to each country, comprehensive tax management, and compliant contract generation. Rather than building expertise for each country, you leverage the EOR’s established knowledge and infrastructure.

Tarmack’s platform brings additional advantages through its unified dashboard for managing operations across all countries:

• The system includes built-in multi-currency support that optimizes exchange rates
• Automated compliance monitoring that alerts you to regulatory changes
• Real-time global reporting that provides immediate visibility into your international workforce

Rather than managing multiple vendors, systems, and compliance requirements, you gain a single partner responsible for the entire employment infrastructure. All this while maintaining control over your team’s daily work.

Essential Technology Considerations for Global Payroll

When evaluating solutions, look beyond basic functionality to ensure the system can scale with your international growth.

Compliance requirements

Managing global recruitment means navigating a complex web of local labor laws, work permits, and employment regulations. Each country maintains distinct compliance requirements that impact how you identify, evaluate, and hire talent.

You must consider country-specific interview protocols, pre-employment verification standards, and documentation requirements. What’s standard practice in one region may violate privacy laws in another.

Schedule a consultation or email us to understand how Tarmack’s expertise can guide you through these compliance challenges.

Legal expertise

So you’ve identified global talent. You’ve evaluated candidates. You’ve made selection decisions. What about the ever-changing employment laws? Navigating different jurisdictions is overwhelming, at the least, with you also running the risk of serious legal consequences.

This is where specialized global recruitment knowledge becomes essential. You need access to constantly updated legal expertise across multiple countries to ensure your hiring practices remain compliant. Employment contracts must reflect local requirements while maintaining consistency with your organizational standards.

Tarmack addresses these requirements through a comprehensive legal framework designed specifically for international employment. Our global legal team ensures your recruitment processes comply with local regulations while protecting your organization from potential liabilities.

HR considerations

The human element of global recruitment requires special attention to cultural differences, communication practices, and candidate expectations. You must develop processes that respect local customs while maintaining your company’s core values and standards.

Your approach must balance global consistency with local relevance — standardizing assessment criteria while adapting to regional expectations about the hiring process. Effective candidate communication across time zones and language barriers is essential for an excellent candidate experience.

Managing Global Compliance Effectively

Global employment compliance creates significant financial and operational risks for businesses with international teams. HR and finance leaders face multiplying challenges with each new market they enter.

Regulatory requirements

Each country presents different labor laws and tax regulations. 

For example, France requires employment contracts with specific language and mandatory clauses. Termination there typically involves extensive documentation and notice periods that differ significantly from US standards. Brazilian employers manage up to 16 different tax obligations for each employee. A complicated task to execute from a distance. 

Data protection standards present another critical compliance area. With regulations like GDPR in Europe, PIPL in China, and LGPD in Brazil, your payroll systems must maintain appropriate security measures, processing protocols, and data storage practices specific to each jurisdiction. Violations can result in penalties reaching into the millions of dollars.

Further, banking regulations impact how you move money across borders and pay employees. Here’s how that can be a problem: 

• Many countries restrict currency movement or require specific documentation for international transfers. Indian banks need recipients to declare any international income and classify it. 
• Local banking relationships often require physical presence and extensive documentation, which is taxing for your international employees. 
• Reporting requirements to government authorities vary by country and frequently change. 
• From annual tax filings to monthly Social Security reports, each jurisdiction mandates different submission formats, deadlines, and supporting documentation. Missing these requirements can trigger penalties, interest charges, and increased audit risk for both you and your employee. 

Enterprise compliance transformation

A fragmented approach can result in frequent compliance issues and significant penalties. Through proactive monitoring and standardized procedures, Tarmack’s compliance solution can reduce compliance incidents.

You also gain annual audit and consulting cost savings by replacing multiple local providers with Tarmack’s comprehensive platform. 

For HR leaders, this transformation means shifting from constant compliance firefighting to strategic workforce planning. 

Instead of managing multiple consultants and rectifying compliance failures, you can now focus on talent development and operational improvements while Tarmack’s platform handles your global compliance requirements.

Estimated Costs	Traditional approach	Tarmack solution
Entity setup	$10,000-$50,000 per country	$0 (no entity setup needed)
Annual maintenance	$20,000-$40,000 per country	Included in monthly fee
Technology systems	$5,000-$15,000 monthly	Included in monthly fee
Administrative staffing	$60,000-$100,000 annually	Significantly reduced
Total annual cost for one country	Up to $195,000	Starts at $99/employee for full EOR services and $15/employee per payroll cycle
Total annual cost for two countries	Up to $390,000
Total annual cost for three countries	Upto $585,000

_{Comparison of Traditional Approach vs. Employer of Record}

The Tarmack solution eliminates these traditional cost centers through a fundamentally different approach. 

You will avoid entity setup expenses entirely, as Tarmack serves as the legal employer in each country. Our unified platform pricing starts at just $99 per employee per month for full Employer of Record services, including all maintenance and compliance management.

For organizations needing only payroll services, Tarmack offers processing starting at $15 per employee per payroll across more than 150 countries. This includes full regulatory compliance, multiple frequency options, digitized employer and employee accounts, and comprehensive management tools.

Reduced administrative burden

Beyond direct cost savings, you’ll eliminate the need for specialized staff in each country, simplify your vendor management, and reduce the executive time spent on compliance issues. These operational efficiencies translate to both immediate cost savings and long-term strategic advantages.

Our employee cost calculator provides personalized financial analysis based on your specific expansion plans. Here’s how it works:

• You enter your target countries, employee count, and current approach. 
• You will receive detailed information on the monthly salary you have to pay along with the statutory fees involved. 
• You can also click on “Download PDF” for more detailed information. 

As you evaluate your global employment options, consider both traditional approaches’ explicit costs and hidden expenses. Use Tarmack to anticipate compliance costs and administrative overhead while providing the flexibility to scale your international team efficiently.

Growth bottlenecks

Scaling internationally requires strategic foresight to ensure your recruitment infrastructure grows with your business. Consider these essential planning elements:

1. Scalability assessment

Your scaling strategy must look beyond simple headcount increases:

• Geographic expansion: Map where new employees will be located, accounting for regional talent markets and local hiring practices
• Specialized requirements: Anticipate unique needs by region, including compliance requirements, skill availability, and cultural expectations

2. System capacity planning

Your recruitment technology must remain resilient as you grow:

• Processing complexity: Prepare for increased volume in candidate screening, interview coordination, and onboarding
• Performance testing: Ensure your solution handles 2-3x your current volume without degradation

3. Feature roadmap alignment

Your recruitment platform should evolve with your organization:

• Initial needs: Basic ATS functionality, standard compliance tools
• Advanced requirements: Global talent mobility, cross-border transfers, integration with performance management

Ready to Transform Your Global Employment Approach?

Explore Tarmack’s EOR solution to discover how you can eliminate entity management, reduce compliance risks, and streamline operations across your international workforce. Our team of experts will help you design an implementation plan tailored to your specific needs and growth objectives.

The future of work is global, and organizations with efficient international employment capabilities gain significant competitive advantages. Download our global hiring playbook to learn more about optimizing your approach and preparing for successful global growth.Schedule a Tarmack demo today and see how we can support your growth trajectory.