Outsourced Global Payroll or In-house? Evaluating the Best Fit for Your HR Function

Outsourced Global Payroll or In-house Evaluating the Best Fit for Your HR Function

Finding critical talent to the management of employment rules, regulations, and of course the piles of paperwork… HR teams have a long list of responsibilities as they help their companies grow.  As organizations go global, HR’s duty to build and sustain a new global workforce brings on a whole new set of choices. This can put even the most seasoned HR leaders outside their comfort zone. One of those critical choices is deciding how to execute payroll in many countries – and whether to use an outsourced global payroll provider or manage it in-house. HR leaders should understand all their options to ensure they choose the most effective solution – one that helps retain and empower their international employees.

One early choice to make; is payroll best managed in-house by a dedicated team member or members – or outsourced to a third party? The considerations for small and mid-size employers are different from those of larger companies. Whatever the size or whichever scenario the team chooses, the focus should always be attention on the four main objectives of payroll; accuracy, compliance, timeliness, and reliability.

Managing International Payroll In-house

First, let’s look at what’s required. To execute payroll compliantly, organizations need to navigate the complicated and unfamiliar legal landscape when paying their team members. Companies must account for all the following components of payroll management:

• Calculating gross-to-net payments
• Income tax withholding and reporting
• Disbursement of funds to employees
• Managing contributions
• Withholdings and filing
• National health insurance
• Pension payments

With so many variables to calculate and track, it’s clear that managing payroll internally is a large responsibility for any HR department to take on.

Add the fact that most countries make changes to their employment, taxation and other payroll-related regulations throughout the year. You quickly begin to realize, payroll is not for the faint of heart.

If you do attempt in-house processing, you will need to consider procuring a payroll system that performs gross-to-net calculations. You should not attempt to calculate nor manage this vital function on spreadsheets; they’re just too insecure and too prone to errors. Unfortunately, there are very few payroll systems that cover more than a one or two countries. The few multi-country systems that do exist for purchase are still in their infancy. Most don’t come with any kind of guarantee that they’ll calculate your payroll compliantly or provide timely compliance updates for each country. It’s more likely that you will have to procure a different system for each country you are running. This can get complicated and costly. Even if you achieve a state of constantly compliant calculations, you will still need a reliable way to make timely tax payments and to do all the required statutory filings for each country.

Larger companies with more resources may have greater capability to accomplish all of this internally. Small to midsize companies typically are better off working with an established payroll provider to ensure they’re meeting compliance requirements and keeping employees happy.

In general, an HR department should never feel stretched-too-thin because of payroll. Effective HR teams focus first on supporting the company’s strategic goals, yet payroll tends to be rather tactical. If you don’t have the proper resources to add the responsibility of payroll management into the mix, strongly consider your options for outsourcing.

Outsourced Global Payroll Services Can Benefit HR

As companies grow globally, HR leaders need to continuously retarget their focus from one country to another, finding local talent or moving existing talent into new opportunities. They must do all this while balancing other business needs.  With so much to do, the obvious question that arises is whether the effort of managing each country’s payroll internally could be best spent elsewhere.  Many HR leaders find the answer to this question is partnering with international, multi-country payroll management company.  These service providers – often called payroll aggregators or consolidators have the capability to process payroll in dozens of countries, with specialized expertise in their markets to help you get started and to maintain compliance.

Most multi-country payroll services employ a digital platform to manage the payroll workflow in each country and to communicate and collaborate with the HR department.

The provider’s system will likely provide a robust reporting capability, as well. Sometimes these systems serve as a document repository, where both HR and provider can upload and retain key documents. These may include payroll approvals, tax receipts, and copies of statutory filings. Most multi-country payroll providers augment their online process management capabilities with expert teams with experience specific to each country of operation. This combination of online platform and service personnel effectively eliminates the need for your organization to acquire costly systems and payroll-dedicated staff.

If your company decides to use a third-party for payroll management, your existing team still plays a vital role in the payroll process, retaining the responsibility for submitting accurate and timely changes (i.e. salary increases, bonuses, vacation time, starters, leavers, etc.) to the payroll service provider by the start of each cycle. Your team can also help your organization adapt to the new payroll solution. They will help the provider, as well, by identifying any nuances that may exist in your international operations.

In summary, the choice between outsourced global payroll or in-house should not be made taken lightly.

When choosing in-house, the systems, dedicated staff, and a plan to maintain compliance in the face of ever-changing rules are the main considerations. Outsourcing can be an attractive alternative and international payroll management providers can work seamlessly with HR to ensure payroll is executed on-time, accurately and compliantly, obviating the need to accumulate technology, staff, and expertise in-house. Most providers complement their digital offerings with a service layer focused on the often-overlooked nuances of multi-country payroll, which include maintaining compliant calculations, but also:

• Overcoming language barriers with local providers and authorities
Executing foreign currency exchange and funding payroll across borders
• Auditing payroll changes and results to ensure accuracy
• Executing statutory filings in each jurisdiction

Companies that partner with a reputable outsourced global payroll service provider can rely on virtually guaranteed compliance and streamlined services. Outsourcing payroll to a third-party partner increases the time your team has to focus on more important challenges, such as recruiting top talent and building a high-performing company culture.

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When it comes to outsourced global payroll, it shouldn’t be hard to find an effective solution. Rely on the simplest, most complete solution in the market. Celergo’s consolidated payroll service helps ensure that every part of your global payroll process is under control, on-time, and accurate. Contact us today to learn more!

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