Growth is good—and crossing borders to take advantage of economic opportunity
and great talent has its perks.
But everything comes at a cost, and the challenges of global payroll can start
to pile up ( e.g. staying on top of costs, compliance, and processes across
a global organization).
Each global payroll challenge is multiplied by the number of countries you
serve. So, while growth is good, we’ll keep our relationship status with
payroll at ‘it’s complicated’ for the time being.
Here’s a look at the top global payroll challenges sparking the debate on how
to manage paying your employees.
1. Cost management
Do you know how much you’re spending on global payroll? It’s easy to get sold
on the idea of spending money on technology now to save money down the road.
But does it really pan out?
Less than one-third of global companies can say for sure.
Data transparency across a global organization remains a top priority for
senior managers in multinational companies, but a Deloitte survey of more than 1,200 executives revealed it’s
getting more complicated to keep track.
The cost of paying your global employees
includes direct
costs like wages, taxes, and labor spent on payroll activities. But it also
includes indirect costs that you might be missing—like technology and vendor
services.
2. Compliance
If the financials make your head spin, that’s just the tip of the iceberg.
Maintaining compliance on a global scale can feel impossible when the rules
are different everywhere you go (and always seem to be changing).
And we’re not just talking about who foots the bill for healthcare.
Every country has its own laws and regulations—and local jurisdictions within
each country often have their own laws and regulations. Sometimes, there are
even conflicting laws at the local/state level and the federal level.
Which laws apply to which employees? Keeping it straight can be a
challenge—and that doesn’t even touch the subject of legislative changes that
occur with political cycles.
One of the biggest global payroll challenges is staying in compliance with:
- Taxes
- Retirement contributions
- Vacation/leave requirements
- Hiring and employment verification
- Termination practices
- Employee classification
- Healthcare requirements
- And all the associated deadlines for paperwork and payments!
3. Maintaining control across a global organization
Costs aren’t the only thing that can get out of control with global payroll.
Global growth drives a need for specialized expertise, and many global
companies turn to local outsourced payroll services for that expertise.
It’s good in theory, but the decentralized approach isn’t the right choice for
every company. If you have dozens of different vendors in different countries
using different technologies and different processes, you’re bound to have too
many cooks in the kitchen.
Reinventing the wheel whenever you need to pay employees in a new country
causes inefficiencies like duplicated work, lack of data, and higher costs.
Still, global companies struggle with creating global processes and
policies that balance global needs with local requirements.
4. Payroll accuracy
Payroll accuracy is a big deal for any company, big or small, local or global.
Mistakes can be costly—and not just because they usually come with fines
tacked on to the original dollar amount.
Payroll mistakes hurt employee morale, which in turn hurts your productivity.
They also hurt your reputation. And they drive payroll labor costs up as your
staff spends time researching and correcting these errors.
In addition to keeping track of different employees with different hours and
wages, global payroll challenges are intensified by factors like:
- Different currencies
- Language and cultural barriers
- Time zones
- Foreign bank accounts
Clean data is important and using data controls and automation to prevent
keying errors is becoming more common. But technology can only take you so
far—you also need human expertise and diligence.
5. Maintaining confidentiality and data security
Digital transformation has been a double-edged sword for global payroll.
On one hand, it’s providing a way to connect payroll and human resources,
making it easier to get accurate data to run payroll. Global companies are
taking advantage of these integrations to create centralized processes and
address many of the global payroll challenges on this list.
But on the other hand, it brings with it more responsibility, tighter
regulations, and bigger problems for compliance.
For example, The General Data Protection Regulation (GDPR)
took effect in Europe in 2018. It was meant to
standardize data privacy laws across the European Union. It was
necessary—payroll departments handle sensitive employee information like bank
account numbers and social security IDs.
But GDPR is also super restrictive.
An increase in technology and integration with outside vendors means more
exposure. With regulations like GDPR on the books, global employers have yet
another set of rules to follow. And in this case, it’s so complex that the
guide to understanding the regulation and how it applies to global businesses
is a lengthy read.
GDPR covers standard data security issues like encrypting data before
transmitting or storing it, as well as using credentialed access with access
based on job role. These best practices should already be in place across your
global payroll strategy.
But did you know it also includes:
- Enhanced security for protected data like gender, ethnicity, union affiliation, and biometric data including fingerprints used for timekeeping systems
- Mandatory reporting of all data breaches with big fines
- Payroll process design requirements
- Procedures for data deletion and payroll records maintenance
- And a lot more
And that’s just for the European Union —other countries have their own
varying regulations in place that apply to payroll data security.
The bottom line on global payroll challenges
Across the board, taxes—and specifically calculating withholdings—is one of
the biggest challenges for global payroll teams. Almost half (49%) of
multinational companies report this as their top global
payroll challenge.
But it’s not the only thing global payroll professionals are struggling with.
Staying on top of how much money you’re spending on payroll to ensuring
compliance with a never-ending list of rules and regulations can make it feel
like payroll is the business. It’s easy to forget that global payroll
challenges are just one piece of a bigger puzzle in managing global growth.
The good news is that it’s a problem that attracts a lot of thought from
leaders. Innovations in global payroll technology are making it easier to find
a balance between standardization and customization.
A centralized payroll process
can help your business overcome these global payroll challenges. But it’s not a one-size-fits-all solution. It takes strategy, resources,
technology, and the right data to manage international payroll and all the constant
changes.
Schedule a free consultation
Meet with one of our payroll experts to discuss your current business challenges and how our solutions can help.