Businesses have made incredible strides to adapt in light of the pandemic. This includes allowing employees to work remotely when possible and entering new markets that have shown resilience and potential for growth. As global companies continue to expand, they are often met with organizational challenges. One major concern is when businesses have problems with international payroll management, such as:
- Ensuring Ongoing Global Compliance
- Streamlining Technology and Operations
- Establishing Accurate Reporting and Data Management
- Managing Multiple Vendors for Different Countries
- Avoiding Currency Exchange Errors
When businesses are managing multiple tasks to ensure the company runs smoothly, global payroll should not be a cause for concern. Executing error-free and compliant payroll can be a stable, reliable outcome for organizations that choose to work with international experts. This is especially critical when dealing with countries and governments that have a zero-tolerance approach for mistakes. If payroll management is carried out incorrectly, companies can face government audits, expensive fines, legal penalties and more, which can detract from the effectiveness of your business.
Top 5 Problems with International Payroll Management
1. Ensuring Ongoing Global Compliance
Complex government regulations are the cause of some of the biggest problems with international payroll management. Ensuring a company is compliant with payroll is not a “one-and-done” situation. As the laws and requirements governing international payroll continue to evolve across the globe, multinational businesses must ensure these changes are reflected in their payroll systems. Even if the company was set up compliantly, they still need to do what they can to ensure global compliance.
According to the Alight Global Payroll Complexity Index, France, Italy, Belgium, Germany and Spain are ranked as some of the most difficult countries to run payroll for, based on mandatory legislative, reporting, process and security regulations. As nearly half of these countries are in Europe, it’s important to know that the fine for payroll mistakes in this region is 4% of annual revenue, up to 20 million Euros. Pair that with the fact that 27% of the employee data breaches that occurred over the past two years were the result of human error, the need for ongoing compliance support becomes increasingly evident.
It’s important to remember that every country has its own economic conditions, culture, currency and statutory laws when it comes to the proper processes for employee compensation. This combined with the ever-changing policies in light of the pandemic only adds to the problems of international payroll management. This is why it’s imperative for expanding businesses to have a comprehensive understanding of global payroll systems and access to in-country expertise for employment law. An effective solution like Global Payroll 360, a platform that provides you with on-demand access to global payroll services and addresses needs for payroll setup and processing, payroll funding, global payroll compliance and more, can ensure that your business’ international payroll solution remains compliant and accurate in over 170 countries.
2. Streamlining Technology and Operations
When it comes to managing an international workforce, implementing the right technology can significantly boost efficiency. Many businesses struggle to decide whether or not to engage with an in-country payroll provider to support their unique payroll systems, or to hire a US-based partner that doesn’t always have the technological bandwidth to handle a global workforce. Without the right technology in place, companies can expect this to be one of the primary problems with international payroll management.
Fortunately, there are technology providers that offer viable solutions to this problem. Platforms like Mihi can streamline HR operations, while simultaneously ensuring accurate time tracking, employee data management, and analytics and reporting, with compliant regulations built directly into the system. Having technology that is designed to help simplify the global payroll process is critical for companies that hope to scale quickly or measure success in new countries.
When looking for global workforce technology, here are a few things to consider:
- How many countries does the technology serve?
- Do they have local regulations automatically built into the platform?
- Does it have a flexible framework that can customize to your business parameters?
- Do they have biometric clock capabilities for employees?
- Does it have a centralized system for easy access for both employees and managers?
- Does it keep company data secure?
- Can you generate reports from the platform?
3. Establishing Accurate Reporting and Data Management
We understand how challenging it can be for HR teams with international workforces to store and report data. Ensuring you have an accurate and reliable process for data reporting can help eliminate one of the most common problems with international payroll management. As we mentioned earlier, when teams are required to manually process payroll data across fragmented systems, the results will be vulnerable to human error. This increases the likelihood of the data being incomplete or out-of-date before it’s ready for proper analysis.
A simplified, comprehensive global payroll solution keeps your data centralized and accurate while maintaining in-country compliance. This level of payroll transparency provides companies peace of mind when it comes to adhering to laws and regulations across multiple jurisdictions. Leveraging global expertise will empower businesses to have an effective international payroll management system with real-time reporting to both employees and employers. Reducing the manual tasks for payroll and HR teams means less opportunities for human error to negatively impact the process.
4. Managing Multiple Vendors for Different Countries
Another complication many companies face with international payroll management is the burden of managing different payroll providers for each country of operation. When it comes to running accurate and timely payroll for international employees, companies need to ensure they have a provider with in-depth knowledge of local regulations. For instance, some countries may require employees be paid weekly, while others may have monthly payment requirements. Regardless of the circumstances, here are a few benefits of centralizing and consolidating payroll vendors:
- Save time by eliminating the need to communicate and coordinate with multiple vendors in different countries
- Reduce stress for employees because they won’t have to worry about the administrative burden of fulfilling payroll in different time zones and countries
- Improve the quality of payroll through accountability measures with a centralized payroll provider
- Reduce overall costs as you avoid hidden vendor fees and surprise charges
Not only are there financial consequences for mismanaged payroll, but it can also impact employee retention and morale. Managing various payroll providers and hoping everything runs smoothly is simply not realistic in the today’s business environment. Consolidating under a single provider ensures international payroll management will never be an issue.
Global Payroll Partner Checklist
- Expertise with various global payroll software
- Multilingual and professional payroll experts
- Combination of in-house payroll managers and in-country partners
- Support available in 170+ countries
- Greater control over data and costs
- Auditable processes for SOX compliance and internal risk management
- Visibility into all statutory guidelines, tax requirements, filing schedules and statuses
5. Avoiding Currency Exchange Errors
Businesses are often required to pay international employees in their local currency. If a company has operations in the European Union, for example, they must pay their employees in Euros instead of U.S. dollars. Although this may seem like common sense, the fluctuation with currency exchange rates can be challenging for payroll teams.
Leveraging a global payroll provider with a long history of success in foreign markets can lift this burden from an organization. As the payroll provider manages the currency exchanges, the company can expect payroll to run accurately and records to be kept effectively. While some countries allow businesses to move money from one country to another to fund payroll, countries like China, Brazil and Russia do not. Working with a provider that understands these obstacles will ensure that international payroll management is successful.
How Global Upside Helps Companies Overcome Problems with International Payroll Management
In most cases, companies are required to have a legal entity within the country of operation in order to run payroll. However, setting up a legal entity can be costly and time consuming. Working with a Professional Employer Organization (PEO) allows businesses to expand to new markets without the need to establish a legal entity. This means faster hiring, smoother operations, and affordable services.
In addition, a PEO provider assumes much of the compliance risk, offloading such concerns from the expanding company. Instead, companies can rely on Global Upside to successfully navigate the complexities of global payroll by offering the following solutions:
- Payroll funding
- Payroll compliance
- Global business support
- Expatriate payroll
- Ongoing compliance
Businesses that use a PEO will onboard employees faster with compliant employment contracts and reliable payroll systems. Outside of payroll support, organizations also get access to global health insurance benefits, HR support, global HCM technology, and access to 170+ countries.