Global businesses have a lot of choices to make during the expansion process, such as determining the best international payroll solutions for their organization. Whether a company wants to manage payroll in-house or outsource to a third-party, there should always be a strong focus on accuracy, compliance, and reliability.
In each country, there are different requirements for withholdings and labor laws. In this post, we’ll help you understand the available options to help your business make the best decision.
If an organization has the resources and the expertise in-house, they may consider managing international payroll without a third-party or partner. They also may choose to use an assisting software that is either supported by a third party (SaaS), hosted and maintained internally, or some variation of the two.
How a company approaches this problem can vary widely depending on company size and available team bandwidth. For instance, according to this report by Deloitte for companies greater than 100,000 employees, more than 50% have payroll reporting to shared services. On the other hand, almost 70% of companies smaller than 1,000 employees have payroll reporting to HR. If your organization has centralized or regional shared services centers already established, your team may have the bandwidth to take on one or more new countries. If your organization is on the smaller end of the spectrum and payroll is a function of HR, then there is a high likelihood your team is already stretched.
• Who is the in-country expert going to be? They need to understand ever-changing compliance, the local language, and filing requirements.
•Who is the owner of the particular country or the entire global payroll? Ideally, they are the same as the in-country expert, but it could be different. This person needs to closely watch the accuracy and timeliness as well as the compliance element to ensure all is in order.
•How will we process payroll? The selection of a fully capable, compliant and scalable payroll system that meets your organization’s needs is crucial to success. The costs and effort involved to acquire, configure, maintain and grow the system should be taken into account.
•What is there to gain financially and from a time perspective? Make sure you are clear on what the gain is by managing internally and weigh that against the time commitment. Many companies who are doing their first international payroll will just assume they can take it on but, it’s typically the time commitment that leads to serious problems.
•Are all leaders of the company aligned with the strategy? Leadership alignment is key to long-term follow through on something as difficult as international payroll administration. If there is not unanimous support, then do not move forward.
It’s critical for organizations to consider the risks involved with managing payroll in-house before taking the plunge. If you have a large, experienced team and the resources to back the plan, then there may be a win in this option.
We mentioned that managing compliance of international payroll is complicated. One way to ensure accuracy is using an in-country partner for international payroll. Managing payroll means applying the knowledge of each country’s unique labor law, requirements to ensure compliance.
• Calculating gross-to-net payments
• Income tax withholding and reporting
• Disbursement of funds to employees
• Withholdings and filing
• National health insurance
• Pension payments
In addition to managing proper withholdings, an in-country partner can offer expertise in each country’s wage and hour labor laws, overtime payments, required bonuses and in determining wage statement requirements.
Finally, in-country partners can help manage exchange rates in your existing or new country. Employees must be paid in the local currency as payment from a home-country payroll. One serious issue that can arise from currency conversion; it can result in unintentionally higher or lower pay for employees if not managed correctly.
While in-country partners help ensure accuracy and compliance, they can be hard to control and represent a potential point of failure if not selected and managed carefully. You’ll need to develop trusted relationships, which may be difficult to manage depending on location, language, and lack of enforceability. Also, the more countries you operate on, the more trusted partners you will need to find and maintain.
For companies looking for a streamlined approach to international payroll, they should consider a consolidated global payroll solution. This option includes both a technology layer – to increase efficiency in payroll as well as reporting – and a service layer focused on the often overlooked nuances of multi-country payroll:
• Local compliance
• Language translation
• Treasury management / foreign currency exchange
• Multiple currency reporting
• Scalability for country expansion
• Fully managed, well-organized systems that manage the complexities of international payroll compliance
• Innovative technologies that offer convenient, workflow-driven software to make managing payroll simple
• Service backed by a team with international experience and expertise
International payroll solutions managed in a true, consolidated fashion should actually guarantee compliance. The consolidated model of international payroll offers the best balance of time savings, accuracy, and turn-key scalability for companies of all sizes.
To manage international payroll effectively, rely on the simplest, most complete solution in the market. Celergo’s consolidated payroll solution helps ensure that every part of your global payroll process is under control, on-time, and accurate.
**This article is for informational purposes only. It is not intended to constitute legal advice.