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The International Payroll Challenges of Brexit

As the deadline inches closer, the implications of Brexit are still not yet fully known. This can create a lot of uncertainty for businesses – particularly for businesses attempting to implement their international payroll.

A large number of companies outside of the EU that have come to the UK to access the single market may face consequences if the UK loses even some of its access to the single market. To prepare for the possibility of this, some companies are looking to move to other countries within the EU, which means their international payroll providers will need to transfer staff from the UK to elsewhere.

This can be a straightforward task, especially for those who already have entities elsewhere in the EU. These companies should simply be able to transfer employees from their existing payroll in the UK to another payroll that already exists in the EU, or any other countries it operates in.

But if companiesare required to transfer employees to EU countries where they have had no prior connection, this is more difficult.They will need to set up new legal entities and deal with any legal and tax compliance issues that may then arise.

Every country within the EU has different procedures for creating legal entities, and also hastheir own corporate income tax regime. This means that international payroll companies and their managers will need to work on finding solutions for these requirements for each individual country.

Brexit may also have consequences for companies based in the UK with employees from other EU countries. Judging by prime minister Theresa May’s recent comments, it’s likelythat non-UK employees who are EU nationals will need to apply for work visas and permits to continue working in the UK. The rules will get much tougher for any EU nationals working in the UK in future.

This could mean that employees are required to sponsor foreign nationals, which would create significant costs, and cause a barrier to entry for lower paid employees. This could have an impact on global payroll managers, and may require investing in training for staff to ensure they know how to comply with procedures for sponsoring overseas nationals in the UK.

Regardless of its Brexit position, the UK is bound by the GDPR. When the UK leaves the EU, it will be required to introduce its own data privacy legislation, meaning that companies who store data about EU citizens and operations in the UK will be required to review their data protection arrangements.

Also, the EU’s laws on data protection were tightened significantly under this year’s introduction of the GDPR legislation, which will increase the rights of individuals – this will affect any company that holds global payroll data in the UK concerning EU nationals. And there are still some grey areas and uncertainties surrounding the GDPR.

As well as this, global organisations who store data round the world will find that the protection provided by the GDPR travels with the personal data, wherever it goes. This requires diligence to ensure the right arrangements are in place to protect data leaving the EU.

For advice on global payroll management before and after Brexit, many companies would benefit from the advice and support of experts, such as Galvin International, who will help you through every step of the process.

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