Georgia is strategically located, affordable, and supports businesses through various incentives, making it a compelling destination for expansion. Located in the Caucasus region, which is between Western Asia and Eastern Europe, Georgia is a major trade and transport hub. The country offers local and international companies low tax rates and policies to ease business.

In terms of the economy, Georgia has experienced consistent GDP growth with a substantial rise in its GNI per capita. Global businesses establish their workforces in Georgia to benefit from recent reforms aimed at foreign investment. The country’s GDP was ranked 79th in the world in 2023 for its major economic growth and innovation. 

While business expansion is simplified through reforms, policies, and free trade agreements with the EU and China, you must comply with the Georgian Labor Code to legally operate and hire a workforce. This includes local payroll laws that can be challenging for foreign businesses to understand and implement. Unfortunately, payroll non-compliance is met with fines and legal repercussions. 

To maintain payroll compliance when hiring a workforce, it is best to use outsourced payroll services in Georgia. The professional payroll provider will manage employee wages, tax withholding, reporting, and social security contributions. 

In this guide, learn just how a professional payroll provider can support your expansion efforts, along with the benefits of outsourced payroll and choosing the right payroll agency in Georgia.

What is Payroll Outsourcing in Georgia?

When a professional third-party provider manages payroll on behalf of your business, it is referred to as payroll outsourcing. The third-party service provider is responsible for paying your employees’ wages on time, withholding tax, administering employee benefits, and payroll compliance. They have established payroll systems that comply with Georgian labor law, helping you save time and costs on infrastructure and maintaining daily, weekly, and monthly payroll.

How Payroll Outsourcing in Georgia Works?

The payroll system in Georgia can be complex to understand. Fortunately, outsourcing your payroll can help you overcome payroll obstacles in support of your business’s expansion.

Needs Assessment

A payroll firm in Georgia performs a needs assessment to identify payroll issues and areas for improvement. The evaluation is based on the number of employees, employment contracts, and collective agreements.

The Georgia service provider will discuss your business goals, how to streamline certain processes, and where outsourcing can make the largest impact. Once the needs assessment is completed, the professional agency will present a service agreement detailing the costs.

Data Collection

The Georgian payroll service will add your employees to their existing payroll system as per local labor laws. Employee details, such as full names and banking information, are required to register the workforce for tax and social security benefits. The payroll company must assure clients of secure practices and advanced software to protect confidential information from data breaches.

Processing Payroll

Handing payroll processing to a reliable third-party will ease your administrative burden, reduce in-house costs, and ensure compliance with Georgia’s labor laws. The payroll provider will request updated employee information, such as employee attendance and overtime hours worked, to calculate deductions.

In the country of Georgia, payroll is processed by paying employees by direct deposit. In addition to accurate calculations, all workers are paid their wages on time.

Managing Taxes and Social Security

The payroll firm in Georgia is experienced in managing local taxes and pensions for employees. The payroll experts will calculate and deduct employee taxes from their gross wages. They will perform tax reporting and guarantee compliance with Georgia’s tax laws.

The Georgian social security system works differently from other countries as it consists of employer pension contributions. There are no social security contributions in the country of Georgia.

Making Payments and Reporting

The Georgian outsourced payroll firm ensures that employees are paid the correct wages based on their employment contracts. Once overtime and other benefits have been processed, the employee’s wage is paid by direct deposit.

The Georgia payroll provider will issue a summarized report to manage employee information, such as compensation and taxes. As per Georgia’s payroll laws, a payslip will be issued for every pay period detailing taxes, social security, and net pay.

Georgia Labor Law and Payroll Compliance

The following Georgia labor laws must be adhered to when operating a business and hiring a workforce in the European country:

Minimum Wage and Overtime

Georgia does not have an updated minimum national wage. The minimum wage was last established in 1999 at a pay rate of 20 Georgian Lari (GEL), or $7.50, per month. Employers are aware of these exceptionally low rates and offer employees an average or living wage of 1858 GEL per month.

The outsourced payroll provider will ensure that you are aware of Georgia’s living wage rates and can offer employees competitive wages and perks. The Georgian workweek is 40 hours over five days, or eight hours of work per day.

Hours worked outside of the standard workweek are considered overtime and are usually compensated at a rate determined through collective bargaining agreements. Overtime is limited to two hours per day, but overtime rates are not mandated by law.

Taxes

Employers and employees must abide by Georgia’s tax laws or face penalties for non-compliance. The country has six flat tax rates, including corporate profit tax, VAT, personal income tax, property tax, and import tax. The flat rate for income tax is 20%. An outsourced payroll provider will deduct the 20% tax from employee salaries and pay it to the Georgia tax authority.

Social Security

In Georgia, employers contribute 2% to a pension scheme for eligible employees. There is no mandatory social security system for workers. Employees can also contribute to the old-age pension. If stipulated in the employment contract, the payroll provider will deduct the monthly pension contributions from an employee’s salary.

What are the Benefits of Payroll Outsourcing in Georgia?

From streamlining your business’s payroll to saving on costs, discover the many benefits of payroll outsourcing in Georgia:

  • Specialization: When you outsource payroll in Georgia, you receive the services of a professional team specialized in tax withholding, calculating wages, and benefits administration. The service provider is experienced in Georgia’s labor laws and will maintain compliance whether processing payments or performing tax remittances. 
  • Legal Compliance: The absence of social security and employer-employee taxes in Georgia can be confusing. However, failing to deduct personal income tax from employee wages will result in penalties, such as fines and possible imprisonment. Working with your trusted payroll agency will maintain the highest standards of legal compliance. 
  • Reduced Costs: By outsourcing payroll in Georgia, you save on the expenses of setting up a full-time and in-house payroll team. The service provider already has their own infrastructure and provides companies with efficiency, allowing you to focus on core business activities. 
  • Employee Satisfaction: When employees are paid on time and their tax and pension needs are taken care of, it instills a sense of confidence. Hiring the services of a payroll provider in Georgia can strengthen employee satisfaction and retention rates.

What are the Downsides of Payroll Outsourcing in Georgia?

Before outsourcing to a Georgian payroll agency, consider the possible limitations of handing payroll to a third-party service provider:

  • Reduced Control: While outsourcing payroll provides efficiency and accuracy, it reduces your control over your employees’ wages, benefits, and taxes. With resources dedicated to a payroll partner, it prevents you from establishing a specialized in-house team. 
  • Data Security Issues: When confidential information is transferred to a third party, it increases the risk of potential data breaches, fraud, and leaked information. The full names, addresses, identification numbers, and banking details shared by employees can be compromised by an external service provider. 
  • Variable Service Quality: Not all outsourced payroll agencies provide the same quality of services. It is up to you to compare providers through research and reviews to avoid hiring a firm that will make costly errors or risk non-compliance.

How to Choose a Payroll Outsourcing Provider in Georgia

The following steps for choosing a payroll provider in Georgia can help you partner with a reputable agency:

Experience

A new payroll service provider may not have the experience and skills needed to process wages, taxes, and benefits as per Georgia’s labor law. The payroll agency must have dedicated support and be willing to provide references.

Security

To prevent possible fraud and data breaches, every payroll firm must have updated software and infrastructure to secure sensitive information. The provider must align with Georgia’s GDPR to maintain privacy rights and the proper collection and storage of confidential data.

Reputation

To assess a payroll provider’s reputation, look at updated reviews and previous client testimonials. Perform an online search to assess overall service ratings and look for complaints lodged against the company.

Price

Outsourced payroll costs depend on the frequency of the payroll, the service package, and the size of your workforce. The monthly fees are determined by your business’s complexity; for example, paying international employees will incur higher costs.

How Much Does Payroll Outsourcing Cost in Georgia?

Most payroll outsourcing providers in Georgia charge flat monthly rates per employee or offer custom pricing based on the complexity of services and company size. In Georgia, basic payroll services typically cost between $2 and $50 per employee each month.

Lower-cost plans may only include salary calculations and basic tax filings, while higher-end options often cover extras like automated reporting, benefits administration, and year-end declarations. Be sure to review the scope of services offered, as some providers charge additional fees for compliance consulting, expat payroll, or off-cycle payments.

Payroll Outsourcing Alternative: Employer of Record

For businesses expanding their workforce in Georgia without a legal entity, an Employer of Record, or EOR, is recommended. The EOR in Georgia serves as your employees’ legal employer and provides services, such as HR administration, benefits deductions, tax withholding, and payroll compliance. The EOR firm assists many small to medium-sized businesses with outsourced payroll services without the need to register a company.

Payroll Outsourcing for Success in Georgia

Foreign companies expanding in Georgia can benefit from the country’s economic growth and business-friendly environment. However, successfully establishing your business and building a motivated workforce relies on effective payroll management.

By outsourcing your payroll in Georgia, you’ll receive dedicated support, compliance with local labor laws, and peace of mind that your employees are paid on time. To maintain compliance and a satisfied workforce, entrust your payroll solutions to Remote People.

The payroll provider specializes in custom solutions, from tax withholding and reporting to processing wages and employee benefits. Contact Remote People today for trusted payroll in Georgia.