Just the thought of managing regulatory compliance under multiple governments
can have some HR pros quakin’ in their boots. Keeping up with the varying laws
and regulations governing payroll and operations is difficult, to say the
least.
Outsourcing payroll to an experienced global provider is gaining a lot of
popularity with multinational companies, as well as companies looking to
expand globally.
Here’s why—along what to consider when outsourcing payroll for your
international business.
Why global companies outsource payroll
You have probably heard “cost savings” pushed as a generic reason to outsource
global payroll. It's true—it can save you money. But there are many more benefits to outsourcing that make it an
attractive option, such as:
- Less risk
- Information security
- Compliance
- Best-of-breed technology
- Less in-house training
There is no room for error in the payroll department, so unless your company
already has the necessary global talent in place to manage the complexity of
paying employees in different countries, and in different currencies and time
zones, outsourcing is almost a requirement for risk mitigation.
And, while we are talking about risk, the recent influx of remote workers
has tested the limitsof data security and technology for many companies.
These trends will continue with projections favoring one-third of the workforce
to remain remote after the pandemic and up to two-thirds to transition to remote by 2027.
Which companies handled the transition to remote work in 2020 the best? The
ones that already outsourced major functions like payroll. They had the data
security and technology capabilities in place to support a remote workforce
while everyone else was scrambling to catch up.
But people don't always turn to payroll outsourcing just to avoid risk.
Offloading payroll also gives you the opportunity to focus on tasks you might
enjoy more or consider more strategic—like attracting new talent, planning
workforce expansion or heading up learning and development initiatives.
How does outsourcing payroll work?
Outsourcing your payroll function means working with a third party to get your
employees around the world paid. A centralized global payroll provider
takes care of the day-to-day tasks, but they still rely on your company to provide
the data they need—like timekeeping and tax withholding elections.
What to consider when outsourcing payroll
With big benefits come big responsibilities. The pressure’s on for you to get
outsourced payroll right the first go-around.
When it comes to working with a third party, the success or failure of the
partnership is all about finding the right fit . Some payroll companies
may have a long track record of proven success in the countries that you need,
but if they can't offer integration with your current technology, walk away.
Fast.
What things should you look at when choosing a multi-country payroll provider?
1. Scope of service
Before you sign on the dotted line, make sure you fully digest the provider's
service description. Does it cover everything that you need right now? Will it
cover potential growth in the future? Will you need service add-ons, and how
much will those additional services cost?
One of the perks of outsourcing your payroll to a global payroll provider is
to control costs. If you end up with a bunch of different contracts and
different invoices, you might be letting your cost savings seep down the
drain.
2. Countries served
More is not better if the countries your payroll serves are not your
countries. Start by comparing your plans for growth to what the providers are
offering. Narrow the list of options down to providers that are already
successfully handling payroll in the countries where you do business
—and where you'd like to do business down the road.
3. Standardization in payroll processes and data
You'll also want to make sure your outsourcing company can standardize
payroll processes in all the countries in
your global footprint.
Global payroll is already complex. You'll thank yourself later for looking for
payroll outsourcing companies that offer simple, straightforward processes that are
standardized across the board. Think of it like a blueprint that is copied
over and over. Instead of re-inventing the process for each country or each
company, the provider should already have a process that works and can be
adapted to fit different needs.
Without standardization, you’re losing out on controlling costs and increasing
the risk of errors in your payroll system and confusion about which data
sets represent the company’s “source of truth.” If your provider reinvents the process for each of your 30
countries, you are paying for a lot more development than production. It is
more efficient to work with a template procedure and plug in variables for
each country as you set them up.
4. Local expertise for airtight compliance
Lots of people consider payroll outsourcing companies to fill knowledge or
experience gaps when it comes to complying with local regulations (rightfully
so—global compliance can be a bear). Spend some time confirming that your
provider has the expertise you need.
It is a lot of work to invest in maintaining legislative awareness in
dozens—if not hundreds—of different countries. These costs will be built into
the services they provide. When making apples-to-apples comparisons between
different providers, make sure that you understand how each company works. Big
differences in price tag might mean big differences in the level of service and local expertise that go into your payroll
solution.
5. HRIS or HCM integration
Make sure you have a clear understanding of how well your existing software
will integrate with your payroll provider’s technology. How much will you have
to invest in technology infrastructure to make a partnership work?
For example, if your company already has a Human Capital Management system
(HCM) or Human Resources Information System (HRIS)
,
it’s imperative that a payroll outsourcing partner not only can work within
your system, but also become an extension of it.
You'll want to evaluate payroll outsourcing companies against their ability to
integrate with whatever HR technology you have in place.
6. Reporting and information security
Centralizing global payroll can provide a (very valuable) single source of
workforce spend data to drive informed decision-making. Make sure the payroll
outsourcing company you choose supports global pay data reporting —so you (and your
executives) don't have to wade through numerous sources or reporting formats
to find what you need.
But when it comes to storing and accessing the sensitive data that payroll
handles, you can't be too careful.
From employees’ social security numbers and bank account information to
salaries and home addresses, you've got some mission-critical stuff to secure.
In 2018, GDPR regulations
added standardization to security protocols by regulating how this information
is stored. A good provider should be compliant with GDPR and able to eliminate
the risks inherent to data security in your payroll system.
7. Flexibility for growth
No business wants to be stagnant. Your company is growing today, sparking an
interest in outsourcing your payroll. And you’ll hopefully continue to grow
into new opportunities.
How will your payroll provider grow with you?
Some companies offer human resource solutions in addition to payroll
and allow you to scale up or down as your needs change. Choose a provider with room to
grow and you’ll avoid the headache of starting over with a new provider every
time your business expands into new territories.
8. Defined performance metrics
Just as with any in-house project, you need to understand the goals and
metrics you'll use to measure success for your payroll outsourcing. Key
stakeholders in your company should agree on these metrics, along with your
payroll partner. Ask for a communication plan so you know if and how often you
will receive performance reports—and what kind of changes to expect if goals
are not met.
Multi-country payroll is complex with dozens of opportunities to go in the
wrong direction, making your company vulnerable to reputation-damaging risks.
While evaluating and onboarding payroll outsourcing companies means some work
upfront, don’t think of it as just another complication. With the right partner, it's an
investment in the HR function—and the business’ strategic direction.
Ready to learn more? Speak with a global payroll expert to learn how
outsourcing payroll can benefit your multinational business.
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