Payroll departments operate at the intersection of finance and HR functions. While in some organisations payroll aligns closely with HR, in others, they report directly to their heads of finance. The payroll team is responsible for accurately executing payments for one of the largest expense overheads in any organisation, namely employee salaries and wages.
Managing this overhead accurately for a single country by ensuring timely inputs from various input sources across the organisation, validating payroll tax anomalies, ensuring compliance to all local laws and proper salary disbursement might seem a daunting task. These complexities tend to grow manifold when an organisation’s geo-distribution requires managing payroll services across multiple countries. So, what are these complexities?
The United Nations Conference on Trade and Development (UNCTAD) reported that, as of 2006, there were almost 80,000 active MNCs worldwide. This number should have certainly grown significantly over the past decade as organisations increasingly found themselves expanding in search of new resources and markets. With this expansion comes the increased complexity of managing a global workforce and their salary disbursement.
Here are the complexities that an organisation is bound to face while managing global payroll.
Knowledge of country-specific rules: Seldom do two countries have similar payroll and benefits rules that define the composition of an employee’s salary. Errors in implementing these rules can adversely affect the overall payroll process and further result in gross employee dissatisfaction. While developing in-house competency is one of the routes to take, having a partner with a cross-border experience of managing global payroll will help negate this risk.
Divisional HR and payroll platforms: Ensuring 100 per cent accuracy in payroll inputs could ensure near perfect payroll outputs. While there are several other factors that contribute to overall payroll accuracy, payroll inputs play a critical role in the overall process. With HR contributing to around 90 per cent of the payroll inputs, it is highly critical that organisations streamline and automate their payroll input gathering process.
Organisations that have already invested in a global or regional HRIS will need to work towards integrating their HR platform to their payroll solution to ensure seamless flow of information as opposed to periodic updates being fed into the payroll solution.
Lack of automation for payroll processing: Even in this day and age, there are organisations that continue to compute payroll through spreadsheets, however, this is unsustainable in the long run. On the flip-side, having a payroll platform that is integrated to the organisation’s local HRIS and other ancillary HR modules like time and absence, will help automate tedious processes like payroll input gathering across all sources org-wide. An automated payroll process will help increase process efficiency and accuracy while providing significant room for sustainable growth as organisations continue their expansion journey.
Lack of a GLO-CAL approach: While an organisation could be global in nature, it is however important that their approach to addressing payroll requirements needs to be at a local level.
Local language support — because, let us face it, not every country in the world has English as its preferred language. Having pay slips, payroll- related documentation and employee support in a preferred local language will go a long way in heightening employee satisfaction and overall payroll governance.
Compliance – on the ground: Staying on top of changes in local payroll compliances is a critical part of the overall payroll process. The years 2020 and 2021 saw numerous changes in local payroll tax laws and local benefits to help support salaried employees. Payroll practitioners the world over had to stay nimble to ensure they abided by them.
Accuracy in disbursing global payments: The challenges with global payroll does not always end with payroll processing — ensuring accuracy disbursement is equally key. For global payroll disbursement, compliance to local laws is key. Having a fully automated unified solution will help payroll teams refrain from initiating multi-channel payments for each country. Payments to tax authorities, social security and other benefits providers can be made seamless.
Organisations the world over will continue to expand its geographic borders and it is, therefore, critical for payroll teams to take adequate steps to combat challenges that could arise because of cross-border payroll.
The writer is Head-Customer Success, Neeyamo