Managing international payroll in any of the EMEA countries is no walk in the park. Just like Clint Eastwood’s character Blondie experienced in the epic Spaghetti Western The Good, the Bad, and the Ugly, it can sometimes feel like a hunt for buried gold when uncovering the best ways to manage EMEA payroll. The good news for international organizations is there are methods and available partnerships to help companies navigate payroll overseas without it feeling like you are in a free-for-all western saga.
To help you understand the nuances of this vast region and provide the best guidance to your organization, we put together all you need to know about EMEA payroll with a tip of the cap to one of our favorite Westerns.
For those who don’t know, EMEA is an acronym used to refer to Europe, the Middle East, and Africa. Many EMEA countries benefit from valuable resources, ease of access and relatively thriving economies, making them major hubs for international business.
Organizations that choose to enter these markets need to prepare for the complications surrounding payroll. Each region has its own positives and negatives, which are important to
Organizations that choose to enter these markets need to prepare for the complications surrounding payroll. Each region has its own positives and negatives, which are important to understand prior to investing in operations.
Europe’s primarily Western-influenced countries make it somewhat easier to manage payroll from abroad. For example, if an organization is based in the United States, they may have an easier time navigating HR responsibilities from their headquarters if their foreign operation is in Ireland. This is a result of fewer language barriers and familiar cultural norms. Also, many of the European governments are advanced in their use of technology; it can be easier to pay taxes and file compliance documents online.
Don’t let the familiarity fool you. There are plenty of compliance requirements to manage in Europe. Standards tend to vary from country to country and are particularly complicated in some countries like France and Belgium.
Some European governments make accommodations for foreign-based employers, which also makes managing payroll a bit easier. Countries like France and Estonia offer a payroll law compliance option, which allows foreign employers with no in-country entity to make payroll-only registrations with tax and social security agencies so they can issue a legal local payroll.
In countries like Estonia and Russia, there is lots of red tape and it’s hard to move money to and from international accounts. Russia, for example, all payments to employees must be made in rubles, with no exception for foreign nationals. Transferring currencies can be a difficult process for international businesses without a trusted resource. Also, Russian employers must administer mandatory withholdings for items such as insurance contributions, pensions, and income tax, while adhering to a strict Labor Code that puts extra reporting burdens on the employer.
In the Gulf Cooperation Council (GCC) countries (The United Arab Emirates (UAE), Bahrain, Saudi Arabia, Oman, Qatar, Kuwait, Yemen), payroll is much easier for international employers because there are no income tax requirements.
Given the somewhat recent push to do business in the Middle East, thanks to the rise in economic power of areas like Dubai, many international payroll providers lack valuable experience in the region. This can impair your ability to stand up payrolls in a timely fashion. For example, several countries in this region utilize the Wage Protection System (WPS) to ensure worker’s rights and monitor employer activities. This system requires proper authorizations and a little extra time to set up. Organizations can ensure a smooth EMEA payroll process by relying on a consolidated global payroll solution that has expertise in the Middle East. We strongly recommend a proper vetting for specific country experience before settling on a payroll partner.
In war-torn countries like Iraq and Kurdistan, payroll management is very difficult given the non-standard regulations that employers are expected to follow. First and foremost, employers may literally need to move cash hand-to-hand to make payroll payments. Second, in Iraq, for example, the Iraqi Unified Accounting Rules do not match International Accounting Standards, which makes it very difficult for global employers to navigate income tax requirements and reporting regulations.
Similar to the tax relief in the GCC countries, there are some countries in Africa that have very minimal regulations when it comes to payroll.
Despite lessened requirements in some African countries, the employment landscape can be difficult to manage in the region. Especially if an organization is managing multiple international locations. As a result, it’s crucial that the international organization selects an international payroll provider with specific experience and knowledge of the organization’s target markets. Finding established payroll providers who know their way around each country’s requirements is key. Providers can help manage compliance, collect all-important “taxes paid” receipts, and perform foreign exchanges for the more exotic currencies employed in the region.
Doing business over a long period of time can be especially challenging in Africa given the government instability in many countries. Regulatory requirements can change often, with little notice, and the penalties for non-compliance can be severe, even causing you to cease operations if employees and taxes are not paid properly. Other significant difficulties you may encounter are a lack of infrastructure, unstable inflation, and poorly run bureaucracies.
If your organization is trying to navigate EMEA payroll, consider teaming up with a consolidated global payroll solution like Celergo to reduce common complexities, confusion, and risks associated with global payroll processing. We simplify the process for global businesses by managing all aspects of payroll through market-leading technology, relevant experience, and deep expertise. Contact us today to learn how we can help you!
**This article is for informational purposes only. It is not intended to constitute legal advice.