Regardless of whether your business has been operating overseas for a while, or you’re just about to make your first international expansion, you're probably aware of the complexities of global payroll.
This article will provide solutions to some of the most common challenges associated with global payroll.
After reading, you'll have knowledge of some of the challenges your business may face when operating internationally, as well as information on how such challenges can be reduced, avoided, or even outsourced.
Eight Global Payroll Challenges And How To Overcome Them
Global payroll is complex, and carries its own set of challenges. Some of these are common across all payroll systems - whether domestic or international - while others are limited to global payroll.
First up -
Ensure compliance wherever you operate
Getting your head around UK employment and tax law and building compliant processes is complex enough. Now imagine doing the same for every jurisdiction where your business is present.
Ensuring ongoing compliance means staying up to speed with developments in employment and tax law in each jurisdiction where you operate, as well as the implications of any bilateral or international agreements between or affecting your offices, domestic or abroad.
Partnering with an international payroll specialist is a guaranteed way to overcome the headaches of continued legal compliance. Such companies make it their business to stay at the very forefront of all relevant developments, and to incorporate these into the service they deliver to their clients.
Getting everyone paid on time and in full
The further your employees are spread around the globe, the more complicated the process of organising and making payment becomes. Not only do you need to make sure your operations are compliant with all relevant tax and employment law, as outlined above; you also need to make sure your systems and data are up to the task.
There’s a trade-off between how streamlined your payroll management systems are, and how well they’ll mesh with the requirements at each local level where you operate. As your area of operation expands, it becomes more of a challenge to balance the simplicity of your systems with the evolving complexity of your business operations.
Again, partnering with a specialist global payroll services provider is one way to address this problem. Their expertise and experience provide a sophisticated toolkit that can be deployed to optimise your global payroll system, instead of building such a system from the ground up.
In real terms, this equates to all your employees getting paid on time, in full, every time.
Building accurate reporting processes
With cross-border operations, your reporting needs to be solid. You need to be able to ensure and prove that employees are paid correctly and on time regardless of their jurisdiction. You also need to be able to track and compare performance metrics within and between regions to ensure business efficiency.
For a company making the transition from national to international operations, there's the question of whether to unify payroll into one cross-company system, or whether to manage separate systems in each jurisdiction.
This question applies to companies who have been trading internationally for a while, too, although the majority of these will have switched to a unified system already. Attempting to manage and integrate disparate systems adds complexity to an already-complex web.
Then, once your system is in place, you need to ensure that quick and high-quality reporting is possible. After all, an effective system needs to be able to demonstrate its worth, and to let you monitor and measure all the relevant metrics.
Solving challenges of implementing reporting systems and deciding what to report is another area where partnering with global payroll management specialists is a boon to your organisation. By leveraging their existing understanding of global payroll systems, and of the KPIs past and current clients monitor, they can help you to build a reporting process that fits the needs of your organisation.
Including reporting KPIs in initial discussions is a good idea, as it ensures alignment on these key issues early in the process.
Ensuring compliance with data regulations
As well as tax and employment legislation, there are data security laws to adhere to. This legislation varies between regions, too, meaning that you need to ensure compliance throughout the chain, both for storage of data within, and transfer of data between regions.
This is true whether you manage payroll through one system or several, and is one of the roadblocks on the path to real-time global payroll reporting.
As with tax and employment compliance, global payroll management companies keep at the forefront of the legal landscape, ensuring their work - and by extension, your business activities - is compliant with all relevant data legislation.
Keeping everything up to date
When you take into account the varying employment, tax, and data legislation you must abide by, along with all the data you need to keep track of for each member of staff, there’s a lot to keep track of.
Keeping your payroll system - along with the systems and data it connects with - up to date is a big task. Doing this while remaining agile, and without disrupting payments, reporting, or other areas of the process, is an even bigger task.
This is just another example of a headache that can be outsourced to an external global payroll management company. Their work relies on systems that can be quickly updated as and when changes occur in the legal landscape. Instead of throwing tons of internal resources at systems management and development, why not let outside specialists take care of things?
As we alluded to just now, there are costs associated with building, implementing, updating, and maintaining internal payroll management systems. This is true of any organisation, wherever they operate; however, things become increasingly complex as your business crosses more borders.
You’ve probably noticed a theme by now. This challenge, along with the others we’ve covered, can be alleviated by partnering with a global payroll management specialist. Although outsourcing carries a cost that would be absent if you kept things in-house, it also removes the need for various internal investments.
This trade-off is one of the key factors to evaluate when deciding whether to outsource. Do the benefits outweigh the cost? Or vice versa?
The same trade-off is true with internal resources as it is with money. Does outsourcing free up enough internal resources - or remove enough need to hire new resources - to make the costs worthwhile?
With a complex system like global payroll, though, there are factors to consider when calculating resources that may not be immediately apparent.
For example, do you run a backup systems server in case your primary server goes wrong? And if so, is this at an external location, in case it’s physical damage rather than digital that disrupts your first server?
Whatever your answer, there are implications in terms of resource allocation. Each answer generates a string of further questions, and this is only one of many global payroll considerations to keep in mind.
Here, again, there are clear benefits of outsourcing. To achieve success, a global payroll company must have considered and adequate answers to these questions, and they must have the relevant systems in place accordingly.
Building consensus internally
Whether you're transitioning from national to international operation, or updating existing payroll systems, or even transitioning from disparate local payroll systems to one overarching international one, you're likely to face some degree of internal resistance.
Inertia and reluctance to change are present in any organisation. In theory, these attitudes control against risk by tempering potential change, especially on a large scale.
In some situations, though, such resistance can hold an organisation back and limit its future success. If you're encountering resistance from further up the chain of command, then communicating the potential benefit is one way to counteract this.
When partnering with an international payroll company, they will have demonstrable case studies of how transitioning from national to international, or from disparate local systems to an overarching international one, delivered massive benefits to previous clients. There will be KPIs attached to their claims, too, which should go some way toward reducing resistance internally, and building consensus for making such changes in your organisation.
Global payroll is complex. And the more widely distributed your company’s operations, the greater the complexity.
With international growth and operation, you’re faced with challenges that just aren’t present for smaller organisations. You’re also faced with a choice: Do you address and solve these challenges in-house, at potentially great human and financial cost? Or do you consider partnering with an outside agency of experts, who can bring their experience, systems, and insight to the table?
The aim of this guide was to illustrate the sorts of challenges you may be facing - or may shortly face - and demonstrate how partnering with a global payroll company could help resolve them.
We’ve written elsewhere about the key benefits of using a payroll services provider, too, if you’d like to read more on this topic.