You’re growing despite everything going on in the world. You’re adapting your
business strategies, and you’re moving into new, international markets.
First of all, congratulations!
Second of all, it’s time to get things right with your payroll and compliance
management (or you won’t be celebrating for long).
So, what is payroll compliance?
Payroll compliance means following all federal, state and local regulations
that govern how employees are paid.
And there are plenty of rules when it comes to paying employees. Payroll laws
and regulations not only change from one jurisdiction to another—they are also
fluid and prone to changing with politics or societal influence.
As your business expands into new markets around the globe, you’ll continue to
add more chefs to the kitchen. Multinational companies spend big on payroll
compliance because missing a step can be costly—both in terms of the company’s
bottom line and reputation with talent.
On the other hand, staying on top of payroll and compliance management keeps
the business out of trouble while keeping employees happy (everyone enjoys
getting their paycheck on time).
4 tips for global payroll and compliance management
There are a lot of variables to consider when it comes to keeping your
business above board re: payroll. But don’t worry, we have tips for navigating
the most common payroll compliance pitfalls.
1. Be diligent about recordkeeping
Complete and accurate employee records are the first step to payroll
compliance. Things change all the time. Your employees will move to new homes,
get raises, get married and divorced, and much more. Your company should
already be in the habit of updating these records, but it never hurts to tidy
up.
Your records are your first line of defense in preventing errors and surviving
audits.
2. Get a firm grasp on local payroll regulations
To follow the rules, you first have to know the rules. Not just a general
understanding—you really need to know the local regulations and culture inside
and out, or you are bound to make mistakes.
The biggest hurdle of managing payroll and compliance is keeping it all
straight across all your countries. The differences between locales really
start to add up quickly when it comes to:
- Currencies
- Pay schedules
- Benefits (like healthcare and holiday pay)
- Tax compliance laws
- Statutory compensation laws
You get the idea.
Let’s say your U.S.-based manufacturing company has recently expanded into the
French market and now employs 125 people in France. You’ve
also set up a 60-employee support center in India.
Local payroll expertise is a must-have for each of these new countries where
you’re conducting business.
You need a payroll management resource, for example, that understands how to
calculate your contributions to France’s social insurance system based on
business type, size and location (unless you want the Ministry of Labor on
your heels). And you’ll bump up against compliance issues in India if you
don’t pay employees their mandatory 13th month pay
on schedule.
Plus, getting familiar isn’t a one-and-done deal—rules change all the time,
and you need to stay on top of the local and national regulations where you do
business.
Hiring in-house within each local office (a decentralized payroll model
)
is a common way to stay on top of local payroll regulations. But it may not be
the most efficient way to run your payroll, which brings us to our next tip.
3. Improve payroll efficiency with a centralized payroll model
Efficiency in the overall payroll process is another big challenge of payroll
and compliance management. Reinventing the process for every country and every
office? Ugh—unless you like reconciling each geography’s payroll spreadsheets
all day, it’s just not sustainable.
(Living in spreadsheet land also makes global visibility across your payroll
nearly impossible.)
The local, decentralized model is common as businesses begin to grow globally
because it seems like the easy route. The reality is that up to 85% of
multinational companies feel
there is a need for improvement in their payroll processes. A lot of that
discontent comes from the inefficiency of having multiple offices that don’t
work together within the same company.
Generally, large multinational companies enjoy the efficiency of a
centralized payroll process.
Centralized payroll puts all your payroll activities under one umbrella. You get the local expertise you need to stay compliant. Plus, you get to do away with the different processes, platforms and providers across your different countries in favor of a streamlined, centralized
approach (see you later, spreadsheets!).
Streamlining the payroll process and limiting the friction between humans and
spreadsheets also reduces your risk of payroll errors.
4. Minimize payroll errors with double validation of payroll data
Speaking of payroll errors, even the savviest payroll experts are still human,
and humans make mistakes.
Maybe something is entered in the wrong currency. Or a date is entered in the
wrong format. Or Frank doesn’t send in the timesheet data on time. Regardless
of the error, things can break, people can get paid late, and then you’re out
of compliance.
And even when you break the law by accident, you’ve still broken the law
(enter hefty fines).
You can minimize the risk of payroll errors by outsourcing payroll
processing to a reputable firm that performs double validation of your payroll
data.
You can rest a little easier knowing that your outsourced payroll partner will
even track timesheets down from Frank when he doesn’t send them in on time.
The takeaway on compliance management
While managing global payroll compliance is complex, it doesn’t have to be the
thing that trips you up as you’re trying to grow.
You just need to make a commitment to building your payroll system based on
good principles like diligent recordkeeping practices, local expertise,
centralized processes and payroll error prevention.
Or you can outsource to a payroll partner that’s been there, done that.
Learn more about how Payroll 360 can help you tackle payroll and compliance management in more than 150 countries.
Schedule a free consultation
Meet with one of our payroll experts to discuss your current business challenges and how our solutions can help.