Your people are really what makes your organisation work, you need them. But of course, people come to work to get paid, so it’s important to have your payroll solutions down – especially when operating globally.
Welcome to our global payroll hub, the place where you can find out anything you might need to know about getting started with global payroll, how to manage your payroll, and which global payroll solution is right for your business!
Let’s start with, what actually is global payroll?
Global payroll is a bit of a catch-all term for any payroll process which is used to pay employees internationally. Global payroll covers everything involved in payroll such as calculating wages, deducting tax, making employee payroll payments and adhering to local laws and regulations across the globe.
There are a range of different global payroll solutions for your business to consider such as outsourcing, EOR, payroll software, and many more. So, it’s really important that you understand exactly what global payroll is and how it works before you jump right into it. So, moving on, let’s cover what you need to know.
What challenges and risks will you face with global payroll?
Payroll is challenging at the best of times, but having to manage it globally comes with a whole host of new responsibilities and risks you need to consider.
Challenges:
Lets take a look at some of the challenges you might face:
- Every country has its own set of payroll rules, process and legislation you’ll need to learn.
- Things regularly change in each country, and you’ll need to be aware of rate changes, legislation updates and any thing which might affect your employees.
- Technology can be a challenge, if the technology and systems you choose don’t integrate or work for all the countries you expand into, you might face complications in paying employees and reporting.
- You need to make sure that all employees data is kept safe, and that you’re following any data protection laws in each country you operate.
- You might need to set up a legal entity in each new country you expand to, which can come with challenges such as local customs, language barriers, local economy and much more.
So, how do you actually overcome global payroll challenges? Try things like standardising your processes, keeping up to date with local regulations and partnering with local providers to ensure that your employees have a smooth payroll and consistent experience with your company.
Risks
You know the challenges you might face – but what are the actual risks your business will be facing when expanding globally?
- Taxes: Getting the tax right in each country you employee people in is a massive job. Different countries have different requirements, and you’ll need to learn them if you’re keeping your payroll in-house. And being non-compliant can result in huge fines, government audits, legal actions and damage to your reputation.
- Insufficient payroll records: Each country you’re operating in will require you to have specific records for your employees – and they’re all going to be different! Meaning if you’re only holding records which are advised in your country you could be non-compliant.
- Fraud: Payroll fraud is when an organisation’s payroll system is used and abused for the financial benefit of another. You need to be watching out for this as you can be especially vulnerable if you’re using multiple providers and systems and not keeping track of everything efficiently.
- Mistakes paying employees: We all make mistakes, but paying your people is not something you want to get wrong. But operating in multiple countries with multiple processes can make it easy to get things wrong.
- Security: There is so much security you need on your payroll processes, and therefore so many things which can be a risk!
Each risk on this list can lead to huge vulnerability and chance of negative consequences. You need to look at the best ways to manage your international payroll risks, and ensure you are keeping up with all important measures you put in place.
Key considerations for global payroll compliance
As a payroller, one thing that is often drilled into you is the importance of compliance. With global payroll you must be compliant with all legislations in each country your employees are based in—which is hard if you operate in more than one or two countries. Some of the global compliance tasks you need to take on are:
- Tax and social security requirements
- Statutory employee benefits
- Data privacy and security
- Currency and exchange rate management
- Payroll filing and reporting
- Employment laws and regulations
But how do you do this? What are the global payroll compliance considerations do you need to take? It might sound as simple as ‘keep up with local labour laws’ but it’s not! You need to look at your employee classification, registration requirements, statutory benefits, data, security, tax and so much more!
Managing global payroll payments
You now know what global payroll is, you’re aware of the risks, and you’ve got the compliance down, but one thing we haven’t covered yet is the complexity which is managing your global payroll payments.
Payroll itself is complicated to manage, there’s lots of steps to take, lots of data to handle and of course systems to get your head around, adding a global component to this just makes it even more complicated. There are quite a few different challenges you need to be aware of when managing your cross border payments.
- Language barriers
- Compliance
- System integrations
- Banking systems
- Currency exchange rates
- Time zones
Looking at these challenges is vital when considering how you’re going to run your global payroll and which solution you’re going to choose. The approach you take will impact how much you spend, and if you’re able to keep your global payroll costs as minimal as possible. We’ve created some questions to ask a potential provider which will help you choose the right approach to managing your global payroll.
- What do they do to keep their data secure?
- How easy is the process to onboard a new employee?
- Will the product scale with your business – as you grow or shrink?
- Do they have people internally who speak both my native language and the language of the country I’m hiring in to make communication easier?
- Will this global payroll solution still work for me in a year or two if I expand further?
- How do I stay up to date with legislative changes, can they help with this, or do I need to do it alone?
- Is their solution cloud-based for easier set up and updates?
- How well can it handle supplemental payments, part-time working and flexible working?
- Can the online payroll software be seamlessly integrated with whatever HR solutions you need?
- What are the costs involved – and are there any hidden fees?
- How do they process employment payments, and keep on top of any exchange rates?
Gross pay vs net pay
Gross pay vs next pay is a common question, and one you really need to know the difference between when it comes to global payroll. To put it simply, gross pay is total salary divided by the number of pay periods, and next pay is the amount of money an employee takes home each month after deductions.
Each country your employees are based in will have their own set of deductions which need to be taken from the employee’s salary before it is paid out to them. So as a payroller you need to look at what deductions can be made, and how much net pay you need to be processing to your employees.
Global payroll best practices
Knowing what the best practices are when it comes to global payroll can be the make or break of your payroll processing each month. These are the top 5 best practices we recommend:
- Standardise your international payroll processes. If you have people all around the world, you need to ensure they’re all getting the same experience. Look at an approach which allows you keep everything consistent, whilst still adhering to any local legislations.
- Consolidate your payrolls. Find a solution which works for all your global payrolls. This allows for less mistakes, less complications, and just a much simpler process each month.
- Integrate your systems. If you’re using separate HR systems, applicant tracking systems and payroll systems then find a way to integrate them. This just means that every product has coordinated data.
- Develop a clear strategy for global payroll. You probably already have a global strategy, but does it include your payroll? You need to have a set of standardised procedures to keep everything clear and consistent.
- Work with a payroll partner. If it’s getting too unmanageable on your own, look for a payroll partner who takes the burden of processing your payroll each month.
If you’re managing your global payroll to these best practices, it should be running smoothly! But it’s also important to take a look at your global payroll costs, for many global businesses 60% of their operating costs are spent on payroll. This means you really need to pay attention to what is actually affecting your global payroll costs:
- Employee compensations, taxes, social security and benefits are some of the biggest costs of payroll. You need to know how much this all adds up to, and these can vary based on local labour market conditions, minimum wage laws, collective bargaining agreements and employee skill levels.
- Complying with local legislation can be costly! You need to take into consideration any local minimums for employees, aswell as overtime regulations, payroll reporting and tax withholding rules.
- Exhange rates are something that as a global business you’re going to need to contend with. Each month your costs might be different depending on the global economy.
- Cost of living and inflation. If you’re looking to attracted top talent in some of the more expensive places to live, then you’re going to have to pay these people more!
- Other costs to consider are all the admin costs of setting up a new employee, and any fees you might need to pay for monthly payroll!
Choosing the right global payroll partner
It’s finally time to look at which type of global payroll solution is best for your business. We’ve covered all the challenges, risks, complications, the good, the bad, and the ugly of each payroll option and it’s down to the final hurdle – which one is right for you?
Your global payroll solutions options are:
- Global payroll provider: This is a company who offers a payroll processing in a range of countries around the world. This works like any normal outsourced payroll solution where you provide the company with all the relevant data and they simply process the payroll for you.
- Employer of record (EOR): They hire your talent for you, do all the admin and HR tasks and process your monthly payroll for that employee. This option is a great quick fix when you need to hire someone asap, but it might not be the best long– term solution.
- Local payroll provider: This option is fantastic when you need specialist advice about the country you’re employing someone in – they’re based there, – so they know it! This option can be a little bit complicated to manage if you’re employing in multiple countries, and you’ll potentially have language barriers to content with.
- Global payroll solution: A company like us! The way this works is you have a single point of contact who you deal with for all things payroll (and even if you want HR) related and we then communicate with local payroll providers. You get the best of a global payroll provider where you just provide the details but the knowledge which comes from a local provider without the hassle of language barriers and managing multiple contacts. There are a lot of reasons why you should consider this option as the best payroll solution for your business.
- In house payroll: You can do your global payroll yourself! If you have the capacity, the knowledge and the resources to do so. All you need is a payroll software which works in the countries you’re employing people in, and you can do it all yourself. However, with this option you’ll find there is a lot of legislation updates, payroll processing changes, and country data you’ll need to keep on top of for each country you’re employing someone in.
So now how do you choose? We’ve got a checklist you need to consider when choosing the right payroll provider:
- Knowledge of local and regional compliance and legislations
- Experience in the territories you’re operating in
- How simple is the payroll processing
- Does the software integrate with other products you use?
- Data security
- Can the solution grow with your business?
- What is the customer service like?
Let’s get started on your global payroll journey today!
We understand that this can be an overwhelming decision so it’s vital you take time to consider your options, look at what your business needs in the long term, what your budget is, and most importantly what is going to make your and your employees payroll process simple.
You’re finally ready to take on the challenge that is global payroll. This is pretty much everything you’ll need to know, but, if you still have questions or think you’d like to speak to us about the solution we offer then please get in touch and our team will be happy to help chat to you about your options and give some advice!