Globalizing Your Payroll: What Does That Mean?

What image comes to mind when you think about global payroll? Perhaps you think about a payroll team processing payroll for multiple countries, making data entries, and running audits just like a domestic payroll team. What's missing is the countless decisions and hard work that go into globalizing payroll.

If you have never processed a global payroll and want to broaden your scope to include more than your primary processing country, you must first step out of your “business as usual” mindset. Globalizing payroll will provide new challenges and open the door to a plethora of decisions. Making poor decisions can lead to years of inefficiencies and potential compliance issues. There are a few initial points to consider when taking your payroll global.

Ensuring Global Payroll Compliance

Each country has specific rules, regulations, and statutory requirements. If you are expanding by only one or two countries, you may feel confident that you can learn the compliance points from websites on government taxes, payroll organizations, and employment rules. The problem is that you are basing your searches on your current payroll compliance understanding.

While most countries have social security or something similar, many countries have far more statutory requirements than just a socialized pension or insurance. Partnering with an agency that specializes in setting up local business and tax entities for companies expanding globally is highly recommended.

Payroll service providers typically will not guide companies through the statutory requirements they will need to have in place beyond the main withholding tax, pension, and social insurance. There are often other requirements that branch into health and welfare or workers’ coverage (workers’ compensation insurance) that a service provider may not call out. While many payroll services provide compliance guarantees and country-specific training, don’t rely completely on one source for your guidance. This requires due diligence on your part to ensure compliance in those countries.

Even if payroll service providers offer guarantees, your organization is still responsible for understanding and following all regulations and compliance requirements. The first challenge you will encounter while globalizing your payroll is how to get accurate information on what is needed to be compliant with local regulations.

Global Payroll Integration

The smaller your payroll team is, the more important streamlined, efficient processes become when integrating new countries into your systems.

An evaluation of your current payroll (payroll/HR) system is necessary to determine if your system can manage employee data from around the world, if your current system can process payroll in these countries, and if a third-party payroll service is required. Your current payroll provider/ service may also have training or demonstrations on how their product handles globalization. Something as basic as not accommodating foreign addresses can be a hinderance.

From there, you’ll need to understand how taxes, benefits, retirement, and other payroll components will be reported, reconciled, and remitted. If you have at least a year of planning before adding additional countries to your payroll processing, then you should have time to scope and implement a new payroll/HR system. If you’re adding countries based on a recent acquisition and have three months or less to begin processing payroll, you’ll need to find a payroll service provider that can be added to your current processes and implemented quickly. If you must choose a new payroll system or service, this decision is the one that will set you up for success or frustration for years to come. In most cases, you will still need a third party to file and remit taxes and other statutory payments.

There is currently no one-stop shop for global payroll. The second challenge of globalizing payroll is determining what enhancements to existing systems and/or new systems or services are needed to process payroll, tax, and statutory benefits.

Staffing for Global Expansion

Remember to include the perspective of the employees you are adding to your company. Employees joining your organization are affected most by HR and payroll. If you step through the onboarding process, offboarding process, and mandatory information necessary for HR and payroll to process a compliant employee lifecycle, it will help you to define areas that need automation, additional resources, or potential breaks in compliance.

Based on your findings on integration opportunities, you may also be looking at adding additional long-term staff or temporary staff to get through implementation of the planned global expansion.

Your long-term staffing needs should focus on bringing skills and experience with payroll compliance for the new countries you will add to your business. Doing this will strengthen the entire team with cross-training and learning opportunities. If budget constraints prevent adding additional staff, a request for country-specific training courses, project bonuses, or additional PTO to recognize the extra work and knowledge put forth required for going global could be incorporated.

A realistic evaluation of scalability will need to factor into your decision on staffing requirements. Perhaps additional staffing will be required in departments other than just the payroll department? How automated/streamlined is the payroll system? What is the volume and level of manual work needed to process a payroll? As often is the case, if no interfaces are available, will you need assistance with building custom reports to pull data in a loadable format to the new system/service? Perhaps additional IT resources will be needed? How will settlement, tax, and statutory remittances be processed? Are in-country bank accounts set up, active, and funded at least 30 days before your first payments are scheduled? Can the Treasury manage intercountry fund transfers? After considering these few points, the importance of having a dedicated project team comprised of representatives from many departments becomes clear.

The globalization project team is the backbone of a successful company globalization project. Remember, it’s not just payroll that is going global. Ultimately, key components needed at the business level affect the payroll implementation more than you think.

Payroll is connected to every employee and the compliance, processes, and tools used by the business affect every employee. From entity formations, tax accounts, treasury payment services, expense reimbursements, benefits, insurances, pensions, certificates of employment, and statutory and non-statutory policies and processes, these all affect payroll and the employee experience. The third challenge of globalizing payroll is building a project team and understanding and negotiating for the resources and training required for a successful globalization.

Plotting the Course of Globalized Payroll

The decisions made for these three challenge components will set the course for your successful globalization. Leverage networking within The Payroll Community to get referrals and other advice, which can be a great time saver.

Use the lessons learned from those who have traveled the globalization path before you. Resources such as your local PayrollOrg chapter or global resources with Payroll. org can provide information for choosing new systems or services and training opportunities. Use your contacts on LinkedIn or another payroll professional network to connect with someone doing payroll for the country(s) you are looking to expand into. Your current payroll provider/service may also have country-specific information training. If you decide to add or change payroll systems or services, you must leverage these trainings from your current provider as soon as possible, as these are often free while you are a client, but you may lose access once you roll off their product.

Often, we become so consumed by trying to solve the problem that we forget to reach out and look for guidance from our peers. Sometimes, having an unpleasant experience in the past where your questions went unanswered or even ignored, or you received guidance that negatively impacted your reputation that now makes you hesitant to rely on advice from someone else. To avoid these bad experiences, ensure you are reaching out to trusted organizations and individuals. Be specific, clear, and concise with your information, direct on your expectations, and give a deadline for when you need a response. Think about phasing in your request as if it were a mini-request for proposal (RFP).

Working in a silo will cost you time and energy and leave a gap in information and point of view necessary when making complex decisions. The fourth challenge of globalizing payroll is to get to work! Engage, interact, and learn.

The Final Challenge

Now that the stage has been set for what is needed to start the globalization process, you probably just have more questions. And, of course, when you factor in that payroll is usually near the end of the notification list, you have little time to evaluate, design, and execute your globalization plan. So, why not get ahead of the game?

Take time each month to envision your globalization plan. Take opportunities to have product demonstrations, review system comparison information, take project management courses, or learn new country payroll rules. Attending global payroll conferences, such as Payroll Congress; building your network of global payroll “superheroes”; and signing up for PayrollOrg’s global payroll webinars are great ways to stay abreast of relevant issues and innovative technologies. The time you spend now could set you up for success when you get the email, “We are hiring our first employee in France next week. What does payroll need?