International growth typically fuels the need for an understanding of new labor laws, payroll requirements, and endless compliance changes. As a result, companies may seek the help of overseas partners such as an outsourced payroll provider. Given the vast number of solutions available to you, which are specifically detailed in our previous post, you may need assistance sorting through the ways in which to determine the top payroll companies.
In this post, we’ll focus on ways to approach global payroll providers by taking a look at client success stories, common pain points, and the latest research. If you are considering joining the nearly 90% of multinational companies by implementing international payroll services or even evaluating your current solution, we have some insight for you.
Managing payroll in-house is relatively simple when you have operations in your home country and one foreign market. Problems typically start to arise when you begin entering multiple countries.
This idea stems back to multitasking. According to reports, the more tasks you take on at one time, the less effective you become. In fact, it’s reported that you can lose up to 40% efficiency for every new task or system you take on simultaneously. Relate this back to business, specifically entering multiple countries, and it just makes sense why you’ll want to keep payroll management as simple as possible.
If you’re currently using an in-country partner (ICP) for your international payroll, it is a simple way to solve payroll management for one country. As you expand into more countries, using an ICP becomes less effective because you’ll end up having to manage multiple systems and business processes across multiple time zones. This can cause headaches for your team and lead to inefficiencies in payroll processes.
There are a couple of effective options for companies with operations in multiple countries, which include regional or shared service centers and a consolidated global payroll manager. Regional or shared service centers are a great solution for bigger companies with bigger payrolls.
For small to midsize organizations looking for less overhead, a consolidated global payroll manager, like Celergo, can handle all international locations, allowing you to narrow your operational focus to two payroll work streams: domestic (presumably your headquarters country) and global (all other countries).
Compliance should be a top consideration for all organizations when choosing an international payroll service. It’s important to choose a consolidated payroll provider that can guarantee compliance in every country it operates in, like Celergo.
When choosing from the top payroll companies, you should keep compliance management top of mind. When vetting providers, here are a few important questions to ask:
• Where do you source your information regarding labor requirements?
• Do you have compliance calendars for every country you operate in?
• Can you ensure on-time net payments to employees, honoring the correct holidays?
• Do you have payroll calendars for each country you operate in?
• Do you have a local expert who can speak the official language and translate regulatory changes to you and your employees?
Any faltering on the above questions could put your company at risk. Compliance mismanagement goes well beyond financial burdens. Errors in this field can take up a lot of time from internal teams and executives. Plus, they typically require a presence in-country to take care of resolutions in labor courts — a situation your entire team will want to avoid.
When choosing an international payroll provider, you need to consider the visibility and ease of access to vital information such as high-level numbers, active headcount, and spend per country. Executives and regulating bodies expect quick answers to questions regarding employees and payroll. If your provider isn’t providing easy access to this high-level information, it can cause major headaches for your team.
Top payroll companies 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 easily accessible when you need it.
When running international operations, organizations must pay overseas team members in their local currency. For example, if a company has an operation in China, they must pay their employees in Yuan Renminbi. Managing this is difficult for in-house teams because the fluctuation in currency exchange rates is vast and complicated.
A global payroll provider with a track record of success in multiple foreign markets can provide preferred rates and manage the exchange properly. Treasury management is a valuable service that takes this burden off of your organization. When a third party handles all currency exchange matters as a service, your company will receive an invoice in your local currency, which makes paying on-time and record more manageable.
When selecting from the top payroll companies, check to see if they offer the volume-negotiating power to lock in a favorable exchange rate prior to payday. This can help eliminate any post-transaction foreign exchange reconciliation, simplify the general ledger reporting, and reduce the burden on corporate finance systems.
If utilizing international payroll services or evaluation of your current global payroll process is on deck for the new year, keep these points in mind. Also, please contact us to learn more about how a consolidated payroll solution can help you excel in all of these areas.
**This article is for informational purposes only. It is not intended to constitute legal advice.