Four Payroll Challenges Facing Global Businesses
May 7, 2018
Global payroll management simplifies a very complex process
Over the last three decades, trade has become increasingly international. In the search for new streams of revenue, more companies seek to expand their global footprint. In the past, only large Fortune 500 companies were multi-national businesses. Today, many small and mid-sized businesses operate across borders.
Becoming a global business presents both opportunities and challenges. Finding the best way to issue accurate, timely payroll across different languages, currencies, and legal jurisdictions is one of the first challenges that needs to be addressed.
Four unique challenges facing organizations with global payroll
- Global business but local payroll. Payroll is regulated by the governing entities of each locality in which a business employs people. So while your business goals may be global, your payroll remains decidedly local. Your payroll process will need to accommodate local minimum wage laws, local reporting requirements, local taxes, local currency, and local language. It can be very difficult to build one overarching process for global payroll.
It’s also challenging for payroll professionals in another country to fully understand the nuances of payroll administration in a foreign nation. For example, uncertainties surrounding Brexit are followed much more closely by payroll professionals in the U.K. than the U.S.
- Compliance complexity. Each nation (as well as many regions, states, and municipalities) have their own regulations governing payroll compliance. They require different types of information to be submitted, in different formats, and at different deadlines. Compliance penalties have been rising over the past few years and have become a significant business threat.
The 2017 Global Payroll Complexity Index identified countries and regions presenting the top payroll process and compliance threats. European countries require the greatest amount of data for government compliance, and in the overall ranking of payroll complexity, 7 of the 10 most complex nations are located in Europe. Companies in Africa deal with less payroll complexity, but 86% of African companies pay employees in four or more countries. Asia has the lowest payroll complexity in the world. Brazil and the U.S. have greater payroll complexity than other nations in the Americas.
- Data privacy laws. Payroll databases are treasure troves for hackers and cyber criminals because they contain so much personal information. Most countries are tightening protections over personal sensitive information, and some of the new laws will leave employers exposed to massive penalties in the event of a breach. For example, the EU established the General Data Protection Regulation to increase data security and protect citizens. GPDR enforcement begins May 25, 2018 and impacts any company that processes the data of EU citizens.
- Technology and integration. Supporting payroll in many localities will often mean trying to tie together many different local payroll software solutions with a global HCM system that allows the company to view labor force statistics and costs holistically. Integration between technology systems can be challenging enough, but becomes even trickier when payroll solutions use different currencies and languages and require different compliance reporting.
Payroll should be addressed from the start of any expansion
As more businesses explore opportunities abroad, they have learned to include payroll in their earliest conversations about moving into new countries. According to the EY 2017 Global Payroll Survey, 55% of businesses plan to expand into additional global markets. Further, “84% of organizations report that payroll is included in initial conversations from the planning process to the implementation phase.” Just four years ago, only 38% of companies considered their global payroll management needs during early expansion planning.
Global payroll management delivers consistency across countries
According to the 2017 Global Payroll Survey by EY, 78% of companies feel it is either very important or important to “achieve global payroll delivery through a single vendor.” A global payroll provider helps create the right process for a global approach to payroll. They can work with outsourced local providers in individual countries while ensuring that their business clients benefit from a single, consistent interface and global analytics.
Potential benefits of global payroll management include:
- Improved compliance and fewer noncompliance penalties
- Integrated global payroll data and analytics
- Employee satisfaction with payroll processes
- Reduced total payroll costs
To help your business move more quickly into new countries and new markets, Asure provides support for integrated Global Payroll Management with our global Human Capital Management solutions.