Last updated: 15 September 2026
You need international payroll when another country expects you to withhold tax or pay social security on someone's pay. Five events usually start that duty: your first hire abroad, an employee relocating, a tax-residence point, a permanent establishment, and contractors who are really employees. Short trips often do not start it. A UK employee sent to work in the EU for a while can stay on UK National Insurance for up to 2 years with a certificate of coverage, per HMRC guidance on GOV.UK.
This page covers the events that start a payroll duty abroad, the setup each kind of company usually needs, and what payroll on its own leaves out. For what payroll itself is, see our global payroll glossary entry.
When do you need international payroll?
You need it from the first payday on which another country expects tax or social security on the pay. The duty follows the work, not the bank account.
Three questions settle most cases. Where does the person actually do the work? Where are they resident for tax? Does your company have a taxable presence in that country? If any answer points abroad, check the local rules before the first payday. A late start can mean back taxes, interest and penalties.
Five triggers that start payroll obligations abroad
Each of these events can start a payroll duty in another country. One person can trigger more than one.
1. Your first hire abroad. A person who lives and works in another country is normally taxed there. That country expects an employer to run local payroll, withhold tax and pay social security.
2. An employee relocating. When someone moves abroad for good, their tax residence usually moves too. Home payroll normally stops and host payroll starts. Our guide to moving an employee abroad covers the steps.
3. A tax-residence point. Each country sets its own tests for when a person becomes resident for tax. Once someone passes that point, the country can tax their pay and may expect the employer to withhold it.
4. A permanent establishment. A permanent establishment (PE) is a taxable presence abroad. The OECD Model Tax Convention describes it as "a fixed place of business through which the business of an enterprise is wholly or partly carried on". Someone who signs deals for you there can create one without an office. Read more in our permanent establishment glossary entry.
5. Contractors who are really employees. If a contractor works like an employee, the local tax authority can treat them as one. You then owe the payroll taxes you did not deduct.
Business trips need a closer look. Under Article 15 of the OECD model, pay for work done abroad stays taxable only at home when three conditions all hold. The stay must not pass 183 days in any twelve months, the employer must not be resident in the host country, and a PE there must not bear the pay. Miss any one and the host country can tax that pay. Real treaties can differ from the model, so check the one between your two countries.
Which companies need international payroll: six situations
Any company paying people who work in a country where it has tax or social security duties needs international payroll. The right setup depends on two things: whether you have an entity in the country, and how long the person will stay.
A permanent move and a short project in the same country can need different answers. For short postings, home payroll often carries on. A certificate of coverage, or a Portable Document A1 inside the EU (see Your Europe), keeps the person in their home social security system.
| Situation | What it triggers | Usual setup |
|---|---|---|
| First employee in a country, no entity | Local tax and social security from the first payday | Employer of record |
| Employee moving abroad for good | Home payroll usually stops, host payroll starts | EOR, or register as a local employer |
| Short trips or temporary postings | Home payroll often continues | Home payroll and a certificate of coverage |
| Your own entities in several countries | A local payroll in each entity | A global payroll provider |
| Contractors becoming employees | Payroll taxes once they count as employees | Move them onto employment |
| Staff placed at a client abroad | Possible host payroll, and PE risk for you | Employer of record |
Social security and tax are separate questions. Your Europe notes that there are no EU-wide rules on which country can tax pay during a posting. Where the host country taxes the pay but the person stays on home payroll, a shadow payroll reports it there. Which row fits depends on your people's plans and the country. Talk to an Expert at Teamed to work through yours.
International payroll, an employer of record or your own entity
Use international payroll when you already have an entity, an employer of record (EOR) when you do not, and your own entity when a country becomes a lasting base. The difference is who the legal employer is, and so who answers to the local authorities. With a payroll provider, you are the employer, so you need a registered entity in each country. With an EOR, the EOR is the legal employer and you need nothing local.
No single headcount tells you when to set up your own entity. The point shifts with each country's setup and running costs, how long you plan to stay, and what your people will do there. For the numbers in a specific country, use our crossover calculator. For a side-by-side view, see EOR vs global payroll.
What payroll alone doesn't cover
Payroll pays people correctly, but it does not make you a lawful employer. A payroll provider runs the numbers on your instructions, and the legal risk stays with you.
Several duties sit outside payroll. You need a contract that meets local law, with its mandatory benefits and leave. You need to follow local notice and termination rules and check the right to work. You also carry PE risk from what people do for you. If you already run entities in every country you hire in, with local HR and legal advice in place, a payroll-only provider may be all you need.
Not sure which of this applies to you? Teamed's HR and legal experts can help you work out where your payroll duties start and which setup fits. Talk to an Expert.