Small business payroll software allows businesses without the resources of corporate giants to run payroll for team members in multiple locations. While many businesses may operate entirely locally, the rise of remote work now allows companies of all sizes to work with team members in multiple locations, including other countries. Whether a small business needs to run payroll for just a few team members or for an entire team distributed across international borders, payroll software needs to be able to adapt to that company’s needs.

Payroll software for a small business might include just the basics, like making payments to team members on time and in the correct amounts. For international teams, payroll software also ensures team members are paid in the correct currencies and, when applicable, through approved banks. More robust payroll software services might include additional services, like benefits administration and employee stock option plans.

In most cases, small businesses cannot run their own payroll in-house for global teams. To pay team members in other countries legally, small businesses have three options: open an entity in each country where employees live, work with an employer of record, or hire workers as contractors.

While some businesses choose to hire all workers as contractors, doing so can create tricky problems related to compliance. Misclassifying international contractors is a serious issue that could cost a small business thousands of dollars, not to mention time spent arguing in distant courts. Hiring international contractors can be a great move, but only when dealing with legitimate contractors and when using an international contractor management service.

Small businesses sometimes choose to open one or two entities in countries where they have lots of employees and a strong foundation for business. However, few small businesses choose to open entities everywhere they hire, as doing so can be costly and take months to complete.

Working with an employer of record is the fastest and easiest way for small businesses to run payroll for global teams. An EOR allows a small business to hire employees legally in other countries. Small businesses can depend on an EOR to manage global payroll and taxes, administer local benefits everywhere employees live, and handle issues of compliance.

Small businesses outsource HR services because doing so is usually more cost effective than bringing every HR function in house. The resources required to run payroll; manage benefits; withhold taxes; make required payroll deductions; run employee stock option plans; and stay compliant with evolving regulations is simply too much for a small business to handle. Even most enterprise organizations outsource their HR services to providers who specialize in these areas.

For small businesses hiring internationally, the challenges of HR management only increase. Remote’s guide to international payroll processing outlines several of the challenges small businesses face while providing helpful tips on how to navigate these obstacles.

Outsourcing payroll saves small businesses money while ensuring they provide a great experience for their employees. Even in large organizations, issues with payroll and benefits management are common with in-house tools. For small businesses, where every employee plays a critical role in the company’s success, mismanagement of payroll can quickly lead to a rocky employee-employer relationship. 

Outsourcing payroll allows small businesses to save time on administrative processes while eliminating or greatly reducing payroll errors. Employees require on-time, accurate, and consistent payroll as a basic condition of any working relationship. For a small business with limited resources, meeting the standard of 100% error-free payroll with an in-house tool or solution is difficult. With an outsourced payroll solution, however, even the smallest operations can enjoy world-class reliability in payroll.

Startups operate with different expectations and with different challenges than small businesses. Periods of growth for startups can be sudden and unpredictable, with quick pivots and changes. Small businesses experience periods of growth as well, but for more established businesses, these changes tend to be less chaotic.

Both startups and small businesses need reliability and flexibility in their chosen payroll services. Small businesses often do not have the same investor backing as startups, which means their costs typically must be made up through the sales of their products and services, as opposed to cash from investors. Because of this, small businesses must be especially cautious to avoid payroll vendors with hidden fees or other unpredictable expenses. It’s important for small businesses to ask the right questions about payroll at the start of any new relationship with a payroll services provider.

Small business payroll service costs can vary depending on where employees live, what the total company payroll costs are, and which benefits the business chooses to offer. In general, however, small businesses do not need to pay high prices for simple payroll services, especially for local teams.

Small businesses with remote teams across multiple countries do spend more on payroll, but those payroll costs also cover things like benefits administration, foreign tax withholding, and compliance with local employment regulations. When the difference is getting the right person for an open role or continuing to search for a local hire, onboarding an employee in another country can lead to significant cost savings over time. For more information on costs for small business payroll in multiple countries, see Remote’s pricing page.

While employers of record, or EORs, used to be services reserved for larger enterprises with lots of money, that is no longer the case. The rise in remote work has lowered EOR prices across the board, allowing small businesses to access international talent without paying high fees or salary percentages.

Any small business looking to use an EOR to onboard international talent should ask the following questions of any potential EOR services provider:

• Is this an owned-entity EOR in every country, or does this EOR outsource its services to third parties in certain countries?
• What kind of protections does the EOR provide for intellectual property and invention rights?
• How securely does the EOR handle your employees’ sensitive personal information?
• If you offer an employee stock purchase plan, can the EOR manage that plan for you, including tax withholding?
• Do you need multiple platforms for contractors and employees?
• Are there any hidden fees that change from one country to another?
• Does the EOR have special discounts for startups or social purpose organizations?