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 international payroll processes right can lead to unhappy and unpaid international employees. It also risks non-compliance, which can lead to heavy penalties damaging the company’s reputation. Companies whether SMBs or enterprise companies face a number of challenges in managing an international 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. On the other side, managing an international payroll from local offices can keep payroll siloed and lead to poor financial forecasting and organization decision making
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. A company with a number of global offices must keep up to date on local payroll and employment law changes or risk being found in default with local laws
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 payroll 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
Payment processing rules and costs vary markedly 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 international payroll functions, can often prove demanding and inefficient.
Benefits of Unifying Your International Payroll
Managing an international payroll from one single provider has many benefits.
- Streamlined payroll: advanced cloud technology coupled with knowledge of local regulations can streamline the entire international payroll process, implementing uniformed payroll management and reporting across whatever country your company employs in.
- Local compliance: a unified international payroll solution will keep your company up to date with all local laws and regulations, reducing risk exposure. Using a global payroll solution that employs an aggregator model ensures that your payroll will be processed by local experts (in-country partners) who are experts in that country’s tax and employment laws
- Standardized data: An international payroll system that unifies data can then standardize that data to one format, language and currency
- Transparency: an international 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.
- Analytical insights: a global payroll service that unifies your payroll data across the countries you operate in can provide the HR and Payroll analytics 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 international payroll solution that removes ineffective and error prone processes using email and spreadsheets can ensure 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.
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.
International employees need to be paid accurately and on-time all the time.
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