21–30 of 62 posts
Transferwise Business offers an international payroll solution: https://transferwise.com/gb/business/international-payroll-v... (I don't work for Transferwise, just a huge fan of their service)
Thanks! But I don't see much about payroll there, only about transfers. Do they also do actual payrolling? I.e. dealing with taxes, employment laws, etc etc?
They freelance, you pay them what you promise and that's it.
There are other ways to hire someone, but it's a legal and paper work nightmare.
Transferwise Business offers an international payroll solution: https://transferwise.com/gb/business/international-payroll-v... (I don't work for Transferwise, just a huge fan of their service)
They just handle cross currency transfers. Very far removed from payroll.
A sole proprietorship is not a business entity. There is zero difference between a sole proprietor business and a person. I'm not sure how you got this confused, but it sounds like you need to speak to an accountant. As far as how you pay people, you just transfer them money from your bank account. All of their accounts will have SWIFT or IBAN numbers or both, and you just transfer the funds. Your accountant will tak…
Mostly because it holds for zero of the countries our current team lives in. :-) I appreciate your help though, but so far accountants have been less than helpful. The ones I talked to seem to know international employment stuff worse than I do.
You are asking "we're currently requiring our employees to commit tax fraud, how can we streamline this". In Germany (and a lot of other EU countries), there are laws governing bogus self-employment ("Scheinselbstständigkeit").
Of course you have to treat them as real contractors and not employees. This means they chose where and when to work.
One thing to be aware of is that in many European companies a person who works for you full-time is considered to be an 'employee' even if they come in through an individual service company. In particular if they have no other active 'customers'.
The more you treat people as 'employees' the more at risk you are: if you give them holidays, if you monitor their work closely etc, if they don't invoice you, etc.
The risk is that you will have to pay employment taxes and benefits and you may be fined.
Pragmatically, you are unlikely to be at risk at a low number of team members within a jurisdiction: say up to 10-15. But, at some point you will be considered to have created a permanent establishment from a tax position.
2. PE vs Limited Company
Many people talk about establishing a company in a jurisdiction and then employing people etc. There's actually a state before this where you have a 'permanent establishment' from a tax position even if you don't have a limited company in the jurisdiction. You can be considered to have employees at this point and you are responsible for payroll taxes, but don't yet incur the business taxes (e.g. corporation tax). Unfortunately, it varies by European jurisdiction how likely this is.
This state is essentially supposed to handle the idea of someone having an employment contract in one jurisdiction (say France), while living in another (say Germany). Practically, it doesn't work yet because the rest of the employment rights assume that you have a company in each jurisdiction. You can sort of hack it for an intermediate step.
3. Pragmatically expanding in Europe
How you handle this is up to you in terms of how comfortable you are with the risk profile. The elements are too long (and boring) to go into here.
In my personal opinion it makes sense to:
1. Hire team members in a limited number of jurisdictions. Basically where you believe you will eventually establish a full company: you might pick three jurisdictions you're comfortable with.
2. Handle team members as employees: this is a basic decision about how you want to handle your remote team but it has big impacts. If you treat them as 'employees' then make it clear to them that they are responsible for their employment tax, pensions, etc.
3. Risk the permanent establishment tax problem
4. When a jurisdiction gets to 10 or so people form a company. In many European countries this is around the stage where employment rights also kick in.
5. Reverse the people into the company and pay the employment taxes/benefits etc. This will cause problems because you will have to adjust pay since you will now be incurring payroll taxes and public pensions etc.
As far as I know, the only way to avoid creating a tax nexus in each country where you have "employees" (or contractors) is to make sure the contractors invoice you. The way this usually works is indeed the contractors have a sole proprietorship or legal entity from which they invoice you. If you just pay them without an invoice but as payroll then congratulations you're now on the hook for all taxes and social secur…
As you note, the other big problem is that it places you in a very uncertain situation with labour law / labour relations.
I've participated in similar setups before. Everyone was self-employed, working as a contractor, invoicing the German company. As we were all in the EU, this was pretty smooth. Why would you need to start a mailbox firm in every country with employees?
Lets say you have a German company and you have people working across Europe. For the sake of argument lets say that you have 15 people in France. Let say that all the people work for you 100% of the time, so they are effectively employees.
On the employment taxes/benefits front how are you paying the French state those 14 peoples payroll tax, and how are you paying in for their state pension? Pragmatically, you can't do this (AFAIK) without establishing a company in the jurisdiction and registering them as employees.
On the employment rights front, which jurisdictions are you following? As you have 15 people in France they are due to have a workers representative, does that fall under the French or the German system? If you have an issue with one of the team do you follow French or German employment law? Again, pragmatically each jurisdiction assumes that you fall under their employment laws and logically they'll assume you have a company in that geo.
I would have expected that anyone looking for remote international work would have things set up to make it as easy as possible for any potential employer to be able to pay them without running into local issues.