How to manage payments and compliance as a remote company?
Whether you’re someone who is thinking about taking your company remote, or someone who is already working with a remote team, managing payments is something that is central to both the scenarios.
As your company expands, the issue of handling payments further amplifies as your team might be working from different countries and each of them would have different laws governing them. Although there are many solutions for transferring payments, payments isn’t just limited to sending payments through Paypal or Transferwise. You also have to take into consideration things like payroll management, gross and net salary calculation, depositing dues like TDS with the right authorities, handling 401k claims if your company offers that, and distributing payslips once the payment is processed. While all these may seem complicated and time consuming, it is actually fairly simple once you have due processes in place.
Before we delve deeper, let’s first answer the below questions that would set the base of how you should be managing payments for your remote team.
- Is the worker a full-time employee or a contractor?
- What is their country of residence?
- What is the base currency of that country?
- Do they have a fixed salary, or a mix of fixed and variable pay?
Once you have answered those then it would make things clearer in terms of the payment provider to use, exchange rates, time of payment, currency and other things.
There are multiple ways to manage payments and compliance when you are working as a remote company.
- Using digital payments platforms like Paypal or Transferwise
This is one of the most common methods for paying your employees. Online platforms like Paypal make payments simple but come with their own drawdowns. They charge a flat 4.4% + a fixed fee based on the country for each transaction. This may not seem much at first but if you’re sending thousands of dollars then it adds up pretty quickly. Furthermore, it is not the most efficient way to send money if you’re making recurring payments since you have to pay a fee on each transaction.
- Using local partners
Local partners act as a liaison between the parent company and the employees, and help the company put their employees on the local company’s payroll. This might seem like a convenient option at the start but is actually terrible in the long run. It adds unnecessary stress from a legal standpoint
- Setting up an offshore entity
If you’re planning to do business in a country for a long period of time, then setting up an offshore entity seems like an obvious decision.
The plus point is that it offers more stability than the other two options and is meant for the long run. The minus point is that it comes with an added hassle of managing your own taxes, filling papers with the local authorities, and handling the complete compliance by yourself.
If you’re thinking about setting up a company in a country like India, then you should know that you would need to adhere to local laws wherein you need to have a local director and have to file taxes every month. In short, there’s a lot of mundane paperwork that
- Using a third party service provider
This is the most recommended and preferred option out of all. Using a third party provider would help you get rid of all the hassles that you would otherwise face. Even if you want to have your own offshore entity, service providers like Starkflow can assist you with doing all the paperwork and handling taxes on a monthly basis. We offer an integrated solution of payments & administration where we take care of all your basic needs from payments, payroll, to complex stuff like legal and taxes.
As an extension of payments & payroll, we also provide escrow services to our clients, where we act as a mediator between the clients and the contractors and process the payment once the task is completed.
Running your payments through us would help you ensure that the payroll processing is affordable, faster, and comes with added benefit of taxation and compliance.
Reach out to us if you’d like to talk to one of our experts.