Year-start – A critical moment for companies with international employees
As businesses turn their attention to the year ahead, focus often shifts to growth strategies, budgets, and operational planning. However, for companies with employees working across borders, the start of the year is more than just a fresh beginning – it’s a crucial period that can shape the financial and operational landscape for the next twelve months.
Failing to address tax, social security, and payroll compliance at the start of the year can lead to significant financial exposure. What may seem like small administrative oversights – an expired A1 certificate, outdated payroll data, or missing applications for tax schemes – can evolve into costly back payments, penalties, and strained employee relations.
Many companies assume that if everything ran smoothly last year, the same will apply this year. Unfortunately, that’s rarely the case. Regulations shift, employee travel patterns change, and new projects create unforeseen obligations. By taking a proactive approach to year-start compliance, companies can avoid unnecessary disruptions and maintain stability throughout the year.
The hidden risks of overlooking year-start planning
Consider a company managing projects across Europe. One employee is seconded to France while remaining on Danish payroll. The assumption is that the employee will continue under Danish social security, but by mid-year, it’s discovered that French social security applies. As a result, the company faces significant unexpected social contributions in France, where rates are notably higher than in Denmark.
Meanwhile, a separate project in Denmark triggers a permanent establishment, requiring several foreign employees to be taxed locally. Payroll, however, isn’t updated, and by the time the discrepancy is discovered, the company is liable for back taxes and penalties.
In another scenario, an international specialist joins the company, but no one applies for the expat tax scheme at the time of onboarding. The oversight isn’t detected until the year-end review, by which point the employee has been taxed as a regular worker, resulting in higher-than-necessary taxes that could have been avoided with early action.
These situations underscore a common theme – the issues aren’t caused by a lack of awareness but by the absence of proactive planning at the start of the year.
Payroll as the silent risk factor
Payroll often plays an underestimated role in year-start tax and compliance issues. It’s easy to think of payroll as a purely operational function, but errors in payroll processing are frequently the root cause of compliance failures. If payroll doesn’t reflect the correct tax jurisdiction, social security status, or international arrangements, companies risk misreporting employee earnings, triggering tax liabilities in the wrong country, or failing to meet social security obligations.
Ensuring payroll accuracy isn’t just about paying employees – it’s about aligning salaries, taxes, and social contributions with the latest regulatory frameworks. This is where The Crossbord Solution comes into play. By integrating payroll, tax, and social security into a single managed solution, we eliminate the risk of disjointed processes and ensure that compliance issues are caught early – not months after they arise.
Year-start checklist for companies with international employees
At the start of the year, companies should systematically review employee tax, payroll, and social security obligations to ensure compliance and avoid unnecessary costs.
- A1 certificates – Are they up to date for all employees working abroad, and have renewal processes been initiated for expiring certificates?
- Social security coverage – Have changes in employee travel or work patterns been assessed to determine if social security obligations have shifted to another country?
- Payroll accuracy – Is payroll correctly reflecting local tax rates, social contributions, and any applicable allowances for international employees?
- Expat tax schemes – Have applications for expat tax schemes (such as the Danish inbound expat tax scheme) been submitted for eligible employees? Have salary levels for eligible individuals been reassessed to account for the 2025 salary requirement?
- Permanent establishment risk – Have new projects been reviewed for potential permanent establishment triggers and associated employee tax liabilities?
- Tax residency – Are employee work patterns and remote working arrangements reviewed to ensure compliance with residency-based tax rules?
- Double taxation risks – Have employee positions been assessed to prevent overlapping tax obligations in multiple jurisdictions?
- Onboarding of new hires – Are new international hires properly onboarded, including tax briefings and reviews of potential tax relief programs?
- Payroll synchronization – Are payroll, finance, and HR teams aligned on changes in employee status to ensure accurate reporting across departments?
- Bonus and salary adjustments – Have salary increases, bonuses, or adjustments been factored into payroll in line with local tax laws and social security rules?
Proactive year-start planning pays off
Starting the year with a clear focus on tax and social security compliance is not just about mitigating risks – it’s about creating predictability and stability for the months ahead. Employees feel more secure when they know their tax and social security obligations are in order, and companies can operate more efficiently without the threat of financial surprises.
The Crossbord Solution is designed to handle these complexities for companies operating across borders. By continuously monitoring employee tax status, managing payroll adjustments, and ensuring social security compliance, we help businesses stay ahead of potential risks.
Let us have a conversation about how we can help ensure a seamless and compliant 2025, giving your business and employees the confidence to focus on what matters most.
Get more information
* By checking GDPR Consent, you agree to let us store the information you provided in our system. You can always contact us to permanently remove your data.
