Human Capital Management Systems (HCM) make it easier for global HR leaders to manage their workforce. When you head up the Human Resources department of a global business, you want to have access to all your employees’ information in a single, streamlined platform. That’s where HCM systems come into play, offering you and your company an easy method for viewing and interpreting your employees’ data.
As HCM systems grow in depth and complexity, they integrate more functions. We’ve compiled the most common considerations for payroll integration in your HCM system.
Global payroll integration into HCM systems can be haphazard at best. Because every country has different laws regulating labor and reporting, each country needs its own specific payroll reporting and payment scheme.
For example, Indian income tax laws provide for multiple allowances in an employee’s compensation scheme. When your system needs to report different tax considerations for items like housing allowance, medical reimbursement, or a travel allowance, your standard North American system just won’t work.
In addition, in South America and Africa, most countries have 13th-month laws, which require an employer to pay one month’s extra salary each year. Many other countries also have 13th or even 14th-month pay requirements, including many in Europe.
These various, and changing, requirements make it difficult for an HCM system to provide a single, standard report for HR executives. If your HCM generates payroll reports that have different sets of data or different formats from country to country, it becomes less useful. You won’t be able to understand your global employment system as a whole or to compare countries with each other, undermining the usefulness of your HCM system.
If you have difficulty with this, you’re not alone. Integration across multiple platforms is one of the highest reported problems for HR leaders. The second biggest HR pain is integration between multiple tools and platforms.
In addition to different regulations, payroll integration can become a challenge in countries where the local financial infrastructure is not at the same level as western countries. For example, Iraq can be so unstable that payroll literally requires moving physical cash from place-to-place to pay employees. Additionally, Iraqi accounting standards are different from those of the rest of the world. They use Iraqi Uniform Accounting System which differs from International Accounting Standards.
In Sub-Saharan Africa, less than a quarter of the population has access to a bank account. Most western employers would simply assume that an employee has access to a place to deposit a paycheck, whether it be a paper check or an electronic deposit. In some places, mobile payments, like M-PESA, have begun supplanting standard banking systems. In 2013, 40% of Kenya’s GDP passed through M-PESA. These technological and financial infrastructure differences offer challenges for payroll integration into global HCM.
There is, however, a simple solution: use a consolidated global payroll system. Whether you are working with differences of infrastructure or regulation, a single payroll system can find ways to deliver your payroll to the right place in the right way. Then, it’s the payroll provider’s job to format payroll information so you can use, analyze and understand how payroll affects the rest of your human resource processes.
If you have any questions for us on payroll around the globe, please feel free to contact our team. We are here to help!
**This article is for informational purposes only. It is not intended to constitute legal advice.