Many companies struggle with setting up pay calendars for their global operations. Typical questions they ponder include:
Here are some steps to determining the right global payroll calendar for your company:
Step 1: Pull together a list of all current payroll cycles and pay dates.
Step 2: Review all payrolls by region to see if there is alignment by pay cycle (Example: In Europe most payrolls are monthly, while in Latin American several countries are semi-monthly).
Step 3: Determine funding methodology. Are payrolls funded globally or are they funded at the local level? What is the time frame for disbursing funds (Example: In the United States, local payments are overnight, United Kingdom local payments require 2 days, and in Japan local disbursements can take up to 5 days)? Global payments may take longer as wires can range from one to two days to most European countries, but up to 10 days to reach Taiwan.
Step 4: If a region has alignment, select the pay date that is most common. In general, the most common pay dates are the 15th, 25th, and last day of the month. For semi-monthly, the most common is the 15th and the last day of the month. The 25th is generally the most common internationally as it allows the payroll to close in time to have all the data available to complete the general ledger (GL) posting by the end of the month.
Step 5: If the funding methodology is similar, start with the pay date and back into the funding date, payroll register approval date, and when changes are due. This will determine your payroll calendar for the region or globally.
Step 6: Once the pay date has been selected, look at what is required to move all payrolls to that pay date on a country by country basis. Typically, most pay dates are close, i.e the 27th, 29th, etc. so moving the pay date a few days will have a limited impact on the employees. It is important to review employment contracts prior to rationalization in the region to determine if the company is able to change the pay date without asking permission from each employee. Also, it is essential to communicate the changes several months in advance to the employees, so if they have automatic payments withdrawn from their accounts, they have time to adjust. Finally, ensure the country does not have statutory dates in which payroll must be delivered, which is the case in a handful of locations.
There are significant advantages to coordinating pay calendars either globally (if you have small populations worldwide) or regionally for efficiency purposes. By coordinating cut-off dates, funding dates, and pay dates, there are fewer chances of error as HR and Payroll professionals will not have to remember which payroll has which cut-off date. Also, HR and payroll professionals are not in the constant state of processing payroll as all payrolls fall in the same time frame. When there is only one cut-off date in the system for all payrolls, the process of sending changes to the payroll providers either as a consolidated feed for multiple countries to a global payroll provider or automating individual interfaces for each country is significantly streamlined. Again, this reduces errors and improves efficiency of data flow.
Payroll calendar synchronization is a best practice for any company utilizing a global payroll provider or managing payrolls in-house on a regional or global basis. It is the most efficient methodology for reducing errors, streamlining data flow for payroll changes, and for reporting to HR and Accounting.