As your business grows and/or evolves globally, utilizing international payroll services will be a topic of discussion that is evermore present. There are many reasons why international businesses leverage an outsourced payroll provider (learn ‘when it is right for you’ here) and there are various solution options in the space (take a look at this blog we did on options). The focus of this article is to aid you in developing a strategic approach to whatever solution is being evaluated.
We took a look at client success stories in our past, pain points of our prospects, and the latest research to compile a list of core tenets for evaluation of any new or existing international payroll solution.
If your business is running domestic payroll and one other country, you already have a pretty simple core design. Most companies can manage one international payroll with only minor headaches, but these problems increase exponentially with every country added. We’ve talked about context switching before in this past post, so take a look there for more detail. The general idea is you lose up to 40% efficiency for every new task or system you take on simultaneously. That’s why the more countries you are in, the more important it is to keep it simple.
Finding an individual in-country partner (ICP) for your one international payroll is a simple way to solve for that one country. As you expand into more countries, as most companies tend to do, you will add another ICP, then another and another. Pretty soon you have multiple partners. The challenge is that each provider has its own system already established that you are buying into, not the other way around. So, you will find yourself trying to manage multiple systems and business processes across multiple time zones – not simple!
Luckily, you have two options that enable you to streamline your payroll function back to a simple solution, with control:
• Maintain international payrolls internally through Regional Service Centers. — This is a great solution for bigger companies who have bigger payrolls. It requires big scale because it entails an investment in expert people and country-specific payroll systems for them to work on. Conversely, this is not a viable option for smaller enterprises with smaller international populations (aka “tail countries”), due to the overhead involved.
• Find a Consolidated Global Payroll Manager. — Consolidated global payroll managers, like Celergo, can handle all of your international locations. This enables you to narrow your operational focus to two payroll workstreams: domestic (presumably your headquarters country) and global (all other countries).
If you had to problem-solve a payroll error, how easy would it be to see the high-level numbers as a whole? How easy is it to drill into the specific problem? Better yet, do you know what your total active headcount is? How much are you spending on payroll in a particular country by department?
Questions like these come from the executive team all the time. You should be able to get to the answers easily and efficiently through your chosen solution. Consider, too, that the regulatory bodies in each country of operation will also pose questions from time to time. They can be harder to answer to than your internal execs. So it is a worthwhile exercise to imagine yourself having to go through an audit with the solution under consideration. You will gain greater clarity on the visibility of the information and ease of access that the solution offers.
Every international payroll solution should address the need for visibility to key data both internally and from external bodies. A good solution will make you feel as if the information is at your fingertips.
Piggy-backing on the previous point, compliance in international payroll services should be carefully considered in your evaluation. Where does the compliance burden fall? In Celergo’s solution, we actually guarantee compliance in every country we operate in. If you are not using a consolidated global payroll manager like Celergo, then much of compliance comes down to a few things:
• Are your information sources trusted?
• Do you have compliance calendars for every country you operate in?
• Are there payroll calendars for every country you operate in? Can you ensure on-time net payments to employees and honoring of the correct holidays?
• Do you have a local expert who can speak the official language and translate regulatory changes?
If you are not 100% sure you can answer these questions affirmatively for the solution under consideration, then you have a compliance risk. You will need to explore further. Remember, payroll compliance issues are not only financially burdensome, they can also become a vortex that soaks up your time. Your executives’ time is also at risk when you are working with the local regulatory bureaucracies to repair them.
If utilizing international payroll services or evaluation of your current global payroll eco-system is in your future, keep these points in mind. If you have any questions on how a consolidated payroll solution can help you excel in all of these areas please contact us. We are here to answer any questions you have.
**This article is for informational purposes only. It is not intended to constitute legal advice.