Pay and Benefits

Any number of factors can lead a business to expand internationally. As an organisation grows, it can also expect the complexity of standard operational processes to grow.  Payroll is no exception. When processing multiple payrolls, paying employees on time, adhering to the required local regulations and observing the appropriate cultural differences, languages and currencies leaves much room for error and disconnect, ultimately pinning international payroll as an overwhelming task. Fortunately, once carefully considered, the process can be streamlined and can meet these challenges.

 

The laws that regulate HR and payroll procedures vary from country to country, just as their governing entities do. Compliance obligations, pay frequency, deductions and declarations, pay and work rules, tax requirements, among other requirements, not only differ by country, but by regional jurisdictions as well. For example, in Italy, taxes must be paid at the country, regional and local levels and need to be submitted by the deadlines as established by the law. If a company maintains a small number of employees in Italy, it must still comply with those regulations. Varying data privacy laws further complicate issues.

Payroll is not only affected by local laws, but also by regional languages, currencies and time zones. A company based in the UK cannot serve its Chinese employees with payslips written in English or pay them in British pounds; those employees must be paid on time, and their local currencies and languages must be honoured in the process. The same applies for the range of cultural differences that exist. Employees are accustomed to varying payment methods. For example, while employees in both countries expect direct deposit, those in the UK receive paper verification, whereas employees in India receive electronic or online verification. In Russia, Mexico and Brazil, payslips are customary. Cultural differences cover past pay procedures and require understanding as well – German labour unions maintain great influence over the payroll process,
for instance.

 

Operational logistics that span many locations, cultures, currencies, languages and laws can add levels of complication, but fortunately can be addressed and streamlined. Current technologies leave businesses with a number of options and methodologies.

Few companies attempt to manage global payroll in-house. This method is not considered the most reliable as it requires a staff of both IT and payroll experts who understand the complexities associated with all the company’s locations. It can be expensive and difficult to source the right staff, therefore it is not a viable method for most. When implemented, in-house methods often lead to unsuccessful management, decreased visibility and increased risk for error. Businesses that choose this solution often invest too much in the process, while their employees suffer a greater administrative workload.

More commonly attempted is the local solution, where payroll is managed with different vendors in each country. While this method helps address concerns surrounding local cultures, languages, currencies and regulations, it proves to be costly and difficult to manage. Local employees are taxed with managing the individual vendors. As payroll systems are maintained with each country, organisation-wide updates are time-consuming and cumbersome, and information generated in the payroll process is just as disparate as the systems on which it resides. Organisational leaders must then wait for data to be aggregated or they are left to make decisions based on a partial view of the company’s payroll information.

Some companies turn to full-scale Enterprise Resource Planning (ERP) solutions to manage payroll globally. This method tends to be expensive due to licensing costs, requires heavy monitoring and lacks the ability to scale down. While implementing a costly ERP solution for a US location that encompasses 500 employees may seem reasonable, implementing that same system for an office in Sri Lanka that houses just five employees does not. With that, country coverage is sometimes limited, forcing companies to resort to local vendors once again. Often expanding companies rely on an incumbent ERP system for tracking HR data that may not be integrated with the payroll system. Ultimately payroll is again left to be managed locally and this creates delays in accessing data, which makes it more challenging to compile for in-depth business intelligence.

 

While in the past it has been difficult and expensive to implement a solution that works for all locations of a multinational business, Software as a Service (SaaS) has emerged to meet that need. A SaaS platform is customisable and scales both up and down, therefore it is a truly global solution that enables companies to affordably accommodate the payroll needs of each location, regardless of employee size. With this subscription-based solution, companies can cut costs, paying only for the services their employees need and will use. This method also tends to be more financially manageable due to economies of scale and its “pay as you go” structure.  

A SaaS-based payroll application can accommodate multiple languages, currencies, regulations, laws and regional differences at the same time. It can manage by exception and allows multiple tax calculations to be performed within the system simultaneously. Each time updates are made, they’re made across the entire system in real-time. So, if a legislation change is made in any one jurisdiction, that change will be available to users across that board instantly. Organisations will also benefit from this approach because data is centralised and easily, though securely, accessed by the necessary professionals at any time. Reports can be aggregated and in the hands of decision-makers more quickly and regardless of time zone. With a predictable standard of service, companies can rest assured they meet compliance regulations as well.

Working with a technology-based platform standardises the process for all employees and eliminates the need to rely on multiple vendors in different countries. The end result is reliable service delivery and reduced administrative responsibilities for internal staff. By moving to a centralised, outsourced process and taking a global approach to payroll, organisations can overcome the hurdles and risks associated, reduce the complexity of managing an accurate payroll process, enforce compliance and improve operational efficiencies. 

 

Migrating to a consolidated global payroll platform can reduce costs, increase payroll visibility, automate reporting, facilitate compliance and improve financial control, but it can also be intimidating for some. While the benefits of adopting a unified global payroll solution are clear to global HR staff, companies sometimes face opposition at a local level. Employees comfortable with the established processes are afraid to learn something new – especially if they deem their process successful – and feel a sense of loyalty to their current vendors.

Easing the process requires clear and fluid communication, and selecting the right technology and vendors, as well as taking a best practice approach to change management. To ensure success, consider the following.

Don’t settle; select the right technology and partner. When considering the many unified global options, seek the technology and vendor that best suits the organisation’s needs.  Take into account the technology’s scalability and the vendor’s standard implementation method. Don’t be afraid to ask for demonstrations of the product platform as well. Consider what already works well; survey current vendors for their offerings and ask new vendors if existing systems can be integrated with, rather than migrated to, their system.

Recognise that change is difficult. While an average project might take up to a year to complete, an effective staged migration plan is structured but allows for some flexibility. From cultural differences to the laws and regulations that govern a country’s payroll process, every country has its idiosyncrasies. For that, it is important to recognise those differences can create complexity and to recognise the need to accommodate for them during the transition.  

Encourage communication across all levels of the organisation. Again, the human factor may lend a layer of complexity to change management, but clear and constant communication can alleviate the feelings of unrest that come with change. Win company-wide support from the bottom up with those managers and payroll professionals who will use the new system regularly. Employees are more likely to invest in the success of the new system if they understand how both they and the company will benefit.

Consider a phased approach. As it will be more difficult to implement the new technology in some countries than others, prioritise the process and gain a global champion by beginning the evolution with an easy country. Continue the transition with the plan that proves of greatest value to the business – either by region, pain point, or to accommodate mergers and acquisitions.

Empower a qualified project manager and support staff. A skilled and experienced project manager is a crucial component for successful implementation. Carefully select someone with a proven track record of planning, executing and finalising projects from start to completion. Be sure your manager is technically competent, fosters teamwork and is committed for the life of the project.

Reward those involved with the transition. Regular positive reinforcement can go a long way when implementing a project company-wide. Reward those involved for their accomplishments, such as getting payroll processed properly and on time. Praise and recognition are often incentive enough to encourage positive behaviour and enthusiastic involvement.

 

Taking a centralised, global approach can simplify payroll process as a business expands internationally. While some internal resistance to change can be anticipated, a SaaS solution meets the challenges presented by international payroll and ensures consistency of service everywhere a company’s employees operate. Organisational leaders can remain confident that all country and jurisdiction rules and regulations are adhered to while making better, data-driven decisions with the heightened visibility and accurate real-time reporting they gain. A single vendor and a unified, though scalable, solution means greater intelligence and simplicity in the always complex payroll world.