What is a global payroll system?
Growth is always good for business. It usually starts with national expansion to various locations within the country. The next logical step is to extend the company footprint even further to international locations. Global expansion gives the organisation access to a much larger customer base and – provided the product offering is good – ultimately increased revenue.
But global expansion does not come not without its challenges. An international presence means more employees, all of whom expect to be paid accurately and on time, every time. This calls for a global payroll system and that’s where it becomes complicated.
Simply put, payroll processing can be defined as the process of paying the employees who work for a company. A global payroll system, therefore, manages the salaries and benefits of employees across multiple countries.
Managing a local payroll is in itself is a laborious and time-consuming task. Studies show that small business owners spend as much as 21 days of work time in a year processing their payroll. So when the company’s footprint extends across international borders, the complexity of the payroll process escalates significantly.
What are the challenges of global payroll?
Expanding your company’s presence to different countries also means having to consider different languages, time zones and cultures, all of which impact the organisation’s global payroll in one way or another and can become a minefield to navigate if not managed correctly.
Compliance
The Global Payroll Management Institute cites compliance as the number one payroll challenge facing companies operating globally.
Not only does each country have its own tax rates and regulations – which change frequently – but compliance calendars differ from country to country and each one must be meticulously observed to ensure that no deadlines for making tax payments or filing reports are missed. Should this happen the organisation could incur hefty penalties or the responsible employees could even face prison time.
Tax filing and reporting must also be done in the local language of each country, and it goes without saying that processing payroll across different time zones can become a communication headache all its own.
Compensation
When it comes to employee salaries, these must be calculated in different currencies, and what one country views as employees, another considers as independent contractors. Employment matters such as minimum wage and maximum weekly working hours also vary by country, and sometimes by employee, depending on the employee’s qualifications and the job they are hired to do.
Then there are employee benefits such as leave to factor in, as well as deductions and contributions for medical aid and pension funds, and/or bonuses, all of which vary from country to country.
Additionally, each country’s cultural practices for employee benefits must be taken into consideration. In some countries, for example, it’s standard practice to provide transport and food vouchers to employees, while some countries regard a work-from-home allowance as taxable income, but others don’t.
Not getting all of these aspects right puts companies at risk of legal action, which could damage their reputation and stability. This could negatively affect employee productivity and morale and ultimately lead to a high staff turnover.
Security
Employee data is sensitive and must be protected from data breaches.
It’s not enough to only comply with data security regulations in the country where your company is headquartered. Running a global payroll requires compliance with the data protection regulations in each country in which you operate. For example, the European Union (EU) is governed by the General Data Protection Regulation (GDPR), which requires businesses to protect the personal data and privacy of EU citizens for transactions that occur within EU member states. Other countries have their own legislation in place for protecting payroll data.
How does a global payroll system work?
Having a reliable, integrated payroll system that can manage payroll for globally located employees from a single platform is critical for international companies.
Cloud technology plays a pivotal role in global payroll systems, enabling international companies to work with one solution or service provider that takes care of the entire organisation’s payroll needs.
Because all data is stored in the cloud, payroll teams in each country of operation are able to access one master set of data, at any time and from any internet-connected device. Maintaining the data in a single system provides each country’s team with a comprehensive, fingertip view of the organisation’s payroll.
Human resource and payroll teams are able to work even smarter when the global payroll system is integrated with a sophisticated human resources information system.
To find out more about the benefits of cloud-based HR and payroll, click here.
What are the benefits of a global payroll system?
A global payroll system isn’t an optional extra for multinational companies, it’s an absolute necessity.
An effective global payroll system enables your organisation to:
- Quickly and easily expand to new international markets;
- Hire new staff worldwide;
- Reduce the risks associated with non-compliance of local legislation and regulations;
- Enhance data accuracy, reliability and accessibility;
- Ensure data security;
- Keep accurate track of global processes within the organisation;
- Ensure employees get paid accurately and on time, wherever in the world they are located;
- Create a positive company experience for all employees, in each country of operation;
- Enhance employee retention.
If you are considering expanding your operations globally, or already have a presence in multiple countries and are looking for an efficient global payroll system that encompasses all aspects of the human resources and payroll function, contact CRS. We’ll have you up and running in no time.
