Global Payroll: Paying Oil And Gas Workers Compliantly

...Tomiwa Oladipo Published July 2022

Oil and gas companies employ foreign workers for offshore projects to save costs and enhance faster project delivery.

But paying international workers can be challenging and time-consuming, especially if you have employees in several countries.

It often requires understanding country-specific wage rules, using several currencies and languages, and navigating complex tax laws.

Running an incorrect transnational payroll could lead to legal fees, fines, and compliance issues.

But how can employers pay their oil and gas workers compliantly? A global payroll provider can help circumvent all these challenges. Kindly keep reading to learn more about it.

What is Global Payroll?

Payroll is a complex process of paying your employees, which includes calculating employees' pay, tracking hours worked, managing bonuses, expenses, benefits, social taxes, and commissions, and sending accurate payments to the employee.

Likewise, global payroll follows the same pattern, repeated for each nation but with extra levels of complexity. Why? It’s because labor and tax laws vary from one country to the other.

Global payroll is managing your company's entire payroll streams across the globe from a centralized platform.

Global payroll also describes the practice of recruiting, managing, and paying international workers and contractors compliantly.

Global Payroll vs. Local Payroll

The distinction between a local and global payroll is that global payroll completes the necessary payroll operations for different countries simultaneously, making it easy to hire and pay your workforce abroad.

Using a global payroll provider helps bypass the challenges, simplify your entire payroll process and ensure you stay compliant in each international market.

It'll also let you focus on your business, workers' work culture, and overall productivity while your payroll partner deals with the details.

Advantages of Using Global Payroll Solutions providers

An effective global payroll system helps pay your oil and gas workers effortlessly in the international markets. This centralized process provides:

1. Accurate and timely payroll

Global payroll guarantees timely and compliant compensation for your employees.

2. Local expertise

Regional professionals have in-country experience and resources to support your employees, when necessary, anywhere in the world.

3. Improved productivity

A global payroll solution saves you effort and time navigating through local regulations in different countries, allowing you to focus on daily responsibilities and goals.

Global Payroll Challenges

1. Local compliance

Offshore oil and gas projects often require hiring and paying international employees. You must comply with their labor laws to prevent legal fees and fines. Some specific areas of compliance include:

Tax regulations

When hiring international workers, remember that you need to learn about their countries' federal and regional income taxes, tax deadlines, payroll tax, tax withholding regulations, etc.

Also, keep an eye out for the "ifs," "ands," and "buts" of such rules.

Employment laws

Hiring an international employee demands that you adhere to the worker’s country’s labor laws, meaning the employee is not directly bound to your company's laws.

Labor laws determine the employee’s maximum weekly working hours, minimum wage, and mandatory employee benefits, such as maternity leave, paid time off, social security, and health insurance.

Employee classification

It's easy to fall into the employee misclassification trap. A country may consider a worker a contractor while another considers them an independent contractor. A tiny detail makes a huge difference.

You need to learn about the local regulations regarding employee classification to classify your foreign employees correctly. Employee misclassification has grave consequences such as a lawsuit, financial penalties, and sometimes even jail time.

2. Data management and security

Payroll contains sensitive employee data, such as bank account information and social security numbers. Companies with remote workers store and share data online, exposing them to cyber-attacks and unauthorized use.

So, before going global, set procedures to protect and encrypt your data from unscrupulous use. You can also educate your foreign employees on cybersecurity.

Also, going global requires complying with international data regulations. For instance, handling EU employees' payroll data requires meeting the GDPR standards.

But if you outsource your global payroll to another company – a local payroll service provider or an Employer of Record (EoR) – signing a Data Processing Agreement (DPA) with them protects you from non-compliance liabilities.

3. International money transfers

Using a global payroll service provider requires making international transfers with varying transaction fees. You may also need to adopt payment methods available in each employee's country of residence.

Besides, international money transfer sometimes demands that employees provide additional documentation such as invoices or transactional statements from the employer to prove the transaction is legitimate.

How to Handle Global Payroll Services

1. Hire independent contractors

Hiring an independent oil and gas contractor is less demanding and more affordable than hiring full-time employees on the payroll. They are skilled, well-equipped, and can start work immediately, making them the perfect choice for an urgent and short-term project.

Plus, you won’t have to manage recurring payments, local employee benefits, or payroll taxes. But before hiring, make sure you study the worker classification rules of the country where the contractors live.

2. Use an employer of record (EOR)

An employer of record (EOR) is a third-party company that manages global hiring, payroll management, and compliance.

Oil and gas companies operating a global payroll must have a local presence to stay informed, maintain compliance with legislative changes, and work efficiently with the local culture.

EORs set up local entities and act as the global payroll manager and legal employer of the people you hire.

Outsourcing global payroll gives you more time to focus on core business needs. Today’s EOR landscape has two primary models:

Wholly-owned model

This model involves finding an in-country partner or vendor (ICP) to manage your employees' payroll administration in that market.

However, some local vendors are not so transparent about their payroll processes, which could lead to security risks.

Aggregate model

This model involves outsourcing all your payroll processes to a vendor (payroll aggregator) in all international markets. Usually, the payroll aggregator (EOR) has several trusted payroll partners (ICPs) globally, reducing costs and internal management.

The aggregate model is a more robust solution that allows you to meet your payroll needs at a minimal cost effortlessly. It also offers flexibility in choosing suitable ICPs.

How Does Global Payroll Work with an Employer of Record?

If you have an ongoing project in a country where you don’t own an entity, you can partner with a global Employer of Record (EOR) to help hire, train, pay, and manage your global workforce.

An EOR partner manages, recruits, pays and offers employee benefits on your behalf. The partner also mitigates risks and manages all local labor requirements and compliance, allowing you to focus on leading your global team.

Do you need skilled workers for an ongoing oil and gas project in another country? Partner with Manup to hire, pay, and manage your global workforce.

Staying Compliant with Global Payroll

Managing a global payroll is tricky, but it becomes much more manageable with an Employer of Record. Besides, it affords you more time to focus on achieving your organization's goals.

Do you have an eye out for talent? Would you like direct access to subcontractors and freelancers following your technical requirements? Finding talent for energy projects, especially offshore projects, has been challenging for decades.

For companies willing to embrace digital evolution, Manup’s independent and unique Energy Services Marketplace addresses all your concerns: flexibility of business and subcontracting processes, faster project delivery, and efficient time, cost, and resources management.

Join Manup as a Worker or Hire Pre-vetted Workers from Manup now!