Business expansion into foreign fields can present a wealth of opportunities. However, as soon as you start employing workers abroad, international payroll processing becomes an important challenge that too many businesses struggle to overcome.
Domestically, getting payroll right should be a given, but as soon as you have a need for a global payroll, be it one employee or 1,000 employees, or in one country or 10 countries, managing your international payroll processing becomes a complicated task. The complexity often results in failing processes.
In an Ernst and Young survey on international payroll, 85% of respondents said there was room for improvement in their payroll operations, yet too many companies continue with their inefficient payroll model, failing to optimize for their business expansion goals.
Challenges in International Payroll Processing
In its simplest form, failure to get payroll processes right can lead to unhappy and unpaid employees. It also risks non-compliance, which can lead to heavy penalties damaging the company’s reputation. Companies whether SMBs or enterprise face a number of challenges in managing global payroll:
Dealing with different languages, time zones and cultures: At a basic level these differences make it difficult to manage a responsive international payroll from just one office.
Adhering to different tax, employment and benefit laws in a globally compliant manner. These laws get updated regularly and your business is pressed with the complex task of having to keep up to date on all the regulation changes. Not being locally compliant can leave companies in danger of breaking the law. In the U.S for example, employer health care coverage is now mandatory, while in other countries coverage is provided for all citizens by the local government. In Brazil, employers must contribute between 26.8%-28.8% of an employee’s salary to their pension fund, whereas in Denmark it is a fixed fee of 10,000-12,000 DKK per employee per year.
Achieving maximum assurance with minimum errors: International payroll demands zero errors. Unfortunately, when this process is done manually, tasks such as consolidating several data spreadsheets and calculating the gross to net of various currencies becomes a hugely time intensive manner. International payroll processing becomes incredibly time consuming, prone to error, with no guarantee that compliance will be met 100% of the time in 100% of the locations where your company operates.
Once local taxes and benefits are accounted for, companies need to be able to assess the impact of overtime, added benefits, and other constantly fluctuating information in order to accurately calculate the total payroll cost each month in all locations. Without a solution that automates the entire payroll process, it becomes nearly impossible to accurately predict all costs, asses financial impact and plan for the next payroll cycle.
Navigating the ever-changing international banking system: Processing rules and costs vary wildly from country to country, whilst tracking payments in multiple countries and languages requires expertise and technological intelligence.
Poor financial forecasting: Managing an international payroll in various locations brings with it the pain of planning a monthly and annual workforce budget without knowing exactly how the next month will look from a budgetary perspective. This is because using different payroll management solutions in each country requires manual reconciliation at the end of each month, wasting time and increasing the risk of errors due to miscalculations.
Current Situation and Options for International Payroll
Considering the potential damage to a company’s reputation, employee trust and audit risk, international payroll processing should be high on a company’s agenda but all too often isn’t. For many companies, global workforce management is carried out in-house. ERP (enterprise resource planning) solutions are largely conducted in-house, but they can be costly and inefficient to implement in countries where an organization has just a handful of employees.
Outsourcing is another option for many international companies. Companies that cannot justify the large cost of an in-house ERP with a international payroll solution can instead outsource some, or all, of their payroll functions to local vendors. Whilst these can lower costs, having to manage and administer all the compliance, data aggregation, technology, and security requires resources too. Global workforce management can be conducted on a multiple outsource solution, but the contracted service level agreements and the aggregation needed to centralize the global payroll functions, can often prove demanding and inefficient.
Benefits of Unifying Your International Payroll
Managing global payroll from one single provider has many benefits.
- Streamline your payroll: advanced cloud technology coupled with complete knowledge of local regulations can streamline the entire international payroll process, implementing uniformed payroll management and reporting across whatever country your company employs in.
- Full local compliance: a unified international payroll solution will keep your company up to date with all local laws and regulations, reducing risk exposure.
- Transparency: an expert global payroll provider providing full transparency, will give you the ability to monitor the control and consistency of your international payroll process to ensure optimized performance throughout.
- Business intelligence insights: a global payroll service can provide the B.I reports you need to analyse real-time interactive reporting on a global scale across all stages of your payroll process. Your senior management can get a current, complete and consolidated snapshot of your international payroll data at the touch of a button.
- GDPR compliance: An international payroll provider would ensure that all GDPR regulations with regards to payroll data storage and management are met, as well as full compliance to other updated global and local regulations.
- Zero Processing Errors: An automated payroll solution that removes ineffective and error prone processes using email and spreadsheets guarantees zero payroll errors.
- HRIS integrations: The technology behind an international payroll provider offers the opportunity to integrate with other HRIS systems, such as time and attendance systems and accounting software. The integrated payroll platform provides a streamlined and flexible process which reduces manpower costs and improves efficiency at the same time.
- Happy local workforce: A benefit of using an international payroll service for all your payroll processing, is a thorough knowledge that only a local expert can deliver. Understanding the different nuances of each country can make a difference to the engagement levels of the employees.
Streamlining Made Easy
Deciding how to manage your international payroll process is not to be taken it lightly. Regardless of country or workforce size, you need an international payroll solution that guarantees compliance across borders, a centralized intelligent automated process, ease of use, and reporting insights that add value to your operation. It requires a system that offers a degree of flexibility to ensure that each local jurisdiction, with its own employment laws and regulations are complied with fully.
Using a single international payroll service provider offers a customized and streamlined solution for all your international payroll process needs, freeing your time, energy and resources to focus on moving your company forward. See how Papaya Global with its automated unified payroll offering can help you today