As companies expand to different countries, they are faced with the tricky prospect of paying their people there. This includes dealing with the complexities of local laws and regulations and complying with them. Top payroll challenges for global companies include determination of tax withholding obligations, reporting of taxable compensation to local agencies, and year-end processing procedures.
Addressing these challenges requires investing in the right technology and expertise in those countries. Companies also need to offer employees in all countries a positive pay experience.
Challenges with a fragmented approach to global payroll
As companies expand, they typically address each country’s payroll individually. Over time, this approach results in a fragmented payroll landscape with multiple technologies, external vendors, and internal teams delivering widely varied services in different countries.
With little standardization, efficiency suffers, and costs start creeping up. Leadership struggles to understand, compare, and improve key metrics. Deteriorating visibility into payroll operations heightens the risk of non-compliance with external regulatory requirements and internal policies. Employee experience, especially in countries with small employee populations, takes a hit.
The value of a holistic approach to global payroll
That is when the holistic approach of global payroll or multi-country payroll becomes attractive. A global payroll operation enables companies to standardize and centralize common payroll processes at the global level while providing flexibility to manage country-specific requirements at the local level.
Learn more about global payroll management
Typically, robust global payroll offers companies the following benefits:
- Improved efficiency and cost control: Global payroll generally helps companies move away from expensive customizations, consolidate interfaces and vendors, and leverage economies of scale, therefore resulting in lower overall costs.
Companies can further control costs by exploring outsourcing. If a company chooses to run payroll in any country in-house, they must have the expertise and technology to manage the entire process themselves, which can translate to a notable investment even for countries with relatively low employee populations. A global payroll service provider can potentially deliver this service at a lower cost. The appeal of such services is reflected in the fact that multi-country payroll is growing at nearly two times the rate of the overall payroll market.
- Lower risk: Global payroll typically lessens companies’ reliance on hard-to-understand customized processes at the country level. Its centralized governance constructs can help to reduce the risk of fraud and errors such as ghost employees or excess payments.
For instance, a unified global payroll platform can help companies conduct global audits that help administrators identify and resolve issues proactively. At the same time, it can also be flexible enough to accommodate local languages and currencies and help to comply with local/regional regulations such as GDPR.
- Better reporting: A global payroll platform can provide companies consolidated reporting that reveals insights at local and regional as well as global levels. With the unified platform acting as the single source of truth, reporting becomes easier and more seamless. Leaders can track and compare key metrics such as payroll accuracy and timeliness, either globally or by country/region, to inform key decisions on payroll operations, workforce composition etc.
- Enhanced employee experience: A unified global payroll platform makes it easier for innovations on self-service, mobility, helpdesk support etc. to reach employees in all countries. It helps offer employees consistent service standards across the world while also providing them a localized user interface that reflects local norms in terms of time, currency, language etc.
For more on how companies can go about adopting holistic global payroll, download A holistic approach to HCM