Global payroll, simply put, is the management of the entire company’s payroll function – for all international offices from one central location.
Enabled by cloud technology, global payroll is transforming how multinationals manage their business operations. Gone are the days of having to recruit multiple in-country service providers and manage multiple contracts, deadlines and reporting. Now it is possible to work with one single service provider who looks after all your company’s payroll needs.
It is important that those who are managing your centralised outsourced system also have a global overview. This requires having a mix of on-the-ground expertise, as well as a centralised system
World Finance spoke to Christine Keily, Chief Tax and Payroll Officer at Immedis, a global payroll and employment tax provider, about how paying an international workforce while simultaneously navigating varying employment laws can be an overwhelming challenge. “For employment law considerations companies have to be really careful. What works in one country may not be compliant in another one so you really have to be mindful of what you are doing.’’
A multijurisdictional challenge
This challenge of ‘keeping on top of legislation in multiple tax jurisdictions’ was the top result in a recent Immedis survey conducted among global payroll and finance professionals when asked, ‘what is your biggest global payroll challenge?’. In the results, a staggering 41 percent of participants stated this was their biggest concern, followed by 37 percent answering ‘multiple deadlines, processes, contracts and reporting’.
These challenges were followed by ‘fragmented reporting across multiple countries’ with 16 percent of respondents highlighting this problem and 6 percent pointing to ‘late payments, bank charges and FX fluctuations’ as another key concern.
Keily indicates to World Finance that she is not at all surprised by these results, stating: “For any international organisation, it is simply not possible to have enough knowledge on legislation in every location which you operate in. This is why it is important to be able to rely on the expertise and oversight that comes with a fully managed, outsourced, global payroll partner like Immedis.” Keily’s team of qualified tax experts around the world provide value at every level to ensure their clients’ businesses remain compliant with the legislation in each jurisdiction they operate in.
Centralising payroll operations in one location is also more efficient than dealing with multiple providers across multiple regions. With the advent of the EU’s General Data Protection Regulation (GDPR), centralising information in one place makes even more sense. The GDPR rules apply not only to the EU, but to companies that interact with or manage the data of someone based in the EU, or information that is transmitted into the EU. “From an international payroll perspective, companies will have to have a global view and centralised approach to the GDPR and impose the same approach which meets the GDPR criteria, no matter where they are,” Keily explained. “You don’t know at what point in time you may be subjected to GDPR rules.”
Payroll information is particularly sensitive, so ensuring that businesses are GDPR compliant in terms of finances is important. “The increasing data risks are something we keep at the forefront of our technology, and our software is built and adapted with this in mind,” said Keily. “Globalisation and the increase in a global workforce in various locations can open up risks in the transmission of data across the internet and what we hold in our computers.”
While compliance commands the majority of attention surrounding payroll issues, cost is also a significant factor. Centralising payroll has logistical benefits in terms of time, which by extension is a cost saving. Utilising the services of an expert payroll provider also reduces the chance that a mistake will be made. Fines for breaching regulations vary greatly from region to region, and in some cases, penalties will far outweigh what it would have cost to do the process correctly the first time. Of course, there is also the reputational damage, which may be impossible to quantify. “When you get into that area where you have sacrificed compliance to save on cost, you will often find those people will end up paying more to sort it out than they would have done to get it right from the start,” said Keily.
Software in the cloud
With this increase in international operations, Immedis has developed an approach designed to address new business needs. Keily explained how the company has adopted a centralised approach that uses cutting-edge technology to provide global insight into a business’ payroll: “Our innovative software gives our clients a plethora of benefits and insights including: bespoke global reporting; automation of repetitive manual tasks that historically would be prone to human error; reducing payroll cycle times; reducing the margin for errors; and the ability to visualise payroll data in a way that offers huge insights and predictive analysis to present to the board.”
While finding experts for an individual region may be easy, coordinating their efforts towards the same goal are not. With so many decisions now having to be made at a global level, Keily affirmed that centralising is the key to navigating challenges at the corporate employer level. She said: “If you are just dealing with outsourced providers in each separate location, you are dealing with the expectation that, as the employer, you have a lot of local knowledge. Whereas if you are working on a global, centralised approach, you are dealing with someone who knows your limitation as a global employer, as you cannot possibly have enough knowledge for every location you are dealing in. It’s simply not possible, and we know that, so you need to be able to rely on the expertise and oversight that comes with the centralisation.”
Tax experts on the ground
Keily added that it is important that those who are managing your centralised outsourced system also have a global overview. This requires having a mix of on-the-ground expertise, as well as a centralised system that is capable of looking at a payroll service. Even greater benefits can be felt by consolidating finance, human resources and other systems into one. “For instance, if one area of the business has sent an employee abroad and HR doesn’t even have knowledge of this, it’s going to cause huge problems,” Keily said. “Or if someone from finance comes across this and finds there are huge costs involved in the management of the compliance of this, which wasn’t budgeted for previously, then there are going to be more issues.”
Another key benefit to centralising and collating all these services is the peace of mind and security it offers to both businesses and individual employees. Keily said when employers are looking at employees in multiple locations, a centralised system gives the employee a sense of consistency. “If you’ve got the one platform and you access it and it’s the same wherever you go, there is a feeling of security and reliability. Further, there may not be the same concerns involved if there was a whole new system to try and navigate and everything was different.”
Ultimately, security is one of the major reasons why businesses expand internationally. Although the focus is normally on elements like supply chains and market reliance, this pales into insignificance if a business’ back end is not up to shape. With a centralised payroll solution, however, businesses can focus their energy on the pressing challenges of a new market, without becoming overwhelmed with compliance requirements