Is the payroll processing in your multi-nationally represented company processed at a local level? Are you missing the standards that make cross-border payroll monitoring impossible for you?
Now is your time to look for alternatives so that your payroll processes are not only compliant but also efficient in the future. In this FAQ on global payroll management, we answer the most important questions about this topic.
What is global payroll management?
Global payroll management is a form of global payroll processing that makes it possible to standardise the entire payroll process across multiple countries, to centralise and yet be flexible to adapt to local regulations. Global payroll management is important for organisations that employ people in several countries. A growing number of organisations are embracing the hybrid path, allowing employees to work remotely, depending on how they define their flexibility. When remote work becomes more feasible, the talent pool widens, and organisations are now recruiting out of state and even out of country to secure the knowledge and skills they need to succeed.
Due to the many country-specific requirements for payroll processing, it is recommended that international organisations use a unified global payroll solution. For example, remuneration, data collection, processing, and reporting can be globally standardised and reliably evaluated. The overview obtained in this way, for example transnational personnel costs, is essential for business decisions.
How is global different from local payroll?
If you work or run a multi-national organisation, you would know how different the criteria for legally compliant wage and payroll are across borders. Every new country is effectively a new local payroll, with its own unique minimum wage, tax laws, labour unions, and data protection. Exchange rates and language barriers don’t make things any easier.
Local payroll processing takes local requirements into account. However, in order to have a centralised overview of all data, global payroll management is the more economical solution. Instead of having to bring together a large number of local reports yourself, you benefit from automated reporting, central evaluations and standardised processes that ensure correctness, consistency and transparency across countries.
What is a global payroll solution?
A global payroll solution is a system that handles all of the management of global payroll, including taxes, benefits and more, all from a single platform.
Instead of maintaining your own payroll system in each country, you can leverage a unified and user-friendly one globally, which also takes into account the country-specific legislations and requirements for the payroll processing. Ideally, a global payroll solution can be seamlessly integrated with your core HR system.
What is global payroll outsourcing?
With global payroll outsourcing, an external partner takes on tasks related to your payroll processing in different countries. You can choose to either outsource the entire process or just parts of it. The partner ensures that the payroll is processed correctly, consistently, and transparently in your global business. This way, you can reduce compliance risks, save costs, and gain time to focus on your core business.
What are reasons to consider global payroll outsourcing?
1. Saves time & cost:
By outsourcing your global payroll processes to a payroll provider, you no longer need additional staff for the maintenance of payroll data or the monitoring of the legal & local regulations. The provider takes on all these tasks and has the expertise to digitise and automate the end-to-end payroll process. These measures can ensure compliance with local law and minimises the susceptibility to errors that can result in high fines.
2. Improved data security and transparency:
Data acquisition and data management are challenges of digital transformation. With
global payroll management, you manage to transfer all necessary processes to a single platform. The standardisation of the global payroll takes place across national borders and allows rapid and transparent overview of all relevant key figures and cost factors. Errors in the payslips become visible just as quickly as discrepancies or attempted fraud. In this way, you gain data security and transparency and can react to changes or risks quickly and with legal certainty.
3. Global reporting:
As a multi-national company, we know how difficult it is to get an overview of all important data and key figures. For instance, your administration is in Germany, the production takes place in Shenzen, the support is in Poland, and suppliers and logistics are spread all over the world.
Reliable global reporting is therefore one of the most common reasons for management teams to opt for global payroll outsourcing. This way you have the local data from Shenzen or Warsaw at a glance while factoring in tax regulations, currency variations, without language hurdles, across borders, in real time and, if necessary, also in the home office or when travelling.
4. Accuracy and employee satisfaction:
In addition to the cost savings, the accuracy of your global payroll is a major factor for outsourcing payroll. Mistakes in payroll can have a direct impact on the overall corporate and brand image of an organisation. Outsourcing ensures that your payroll is correct, even if there are ad-hoc adjustments or staff shortages in internal payroll teams. Working together with your payroll service provider ensures that accurate payslips are distributed to all workers globally. This strengthens your branding as well as employee satisfaction.
Are there any disadvantages to outsourcing payroll?
The following fears are often raised in connection with the outsourcing of global payroll:
- Loss of control
- Data security threats
- Incompetence of the service provider
These are all real concerns that can cause great damage to an organisation, and therefore should be taken seriously. On the other hand, internationally successful organisations certainly have sufficient management expertise to calculate the risks and integrate new processes appropriately.
It is therefore important to hire a global payroll outsourcing service provider that you trust completely and whose capacity and experience match your business requirements.
What payroll functions can be outsourced?
Payroll can be outsourced in whole or in parts, e.g.
- Entering the master data
- Preparatory and follow-up tasks in payroll processing
- Benefit management
- Handling of insurance and tax laws
- Processing of travel expenses and other reimbursements
- Monitoring and compliance with legal deadlines and reporting obligations
- Preparation of audits and compliance reports
Local or global outsourcing: Which is better for your payroll process?
For global organisations, the outsourcing of payroll processes to local service providers might seem to be the best option. Especially in the start-up phase, in which organisations are still looking for their place in the world market, this may be helpful since the service provider is familiar with the local laws and regulations.
In the long run, however, local outsourcing does not solve the underlying problems because there is still a need to centrally record and evaluate all data and processes. Without a digital solution that overcomes geographical, language and technical barriers, this is hardly possible.
Global payroll management therefore offers a better solution, as it helps you evade:
- The lack of control and consistency in the global environment, especially in regards to adhering to your compliance strategy.
- Inconsistent data formats and language barriers when merging data from different countries.
- Lack of or erroneous communication between providers at the local level, resulting in data loss, miscalculations, data duplication, or increased costs and wasted resources.
- Lack of transparency, flexibility and insight into international processes and data from different functions of the company.
- Problems with the compatibility of data acquisition and analysis methods.
So, what can initially relieve the burden – outsourcing to service providers locally – can eventually, in the long-term, be distressing. A good solution is cross-country and cross-team outsourcing to one global payroll partner.
When does global payroll outsourcing make sense?
If you are planning to expand your business or open international markets via Mergers and Acquisitions (M&A), you should be informed in advance about the possibilities of global payroll outsourcing. But even if you are already active in other countries, it can make sense to change over the long term. Because with every additional location that you open, the scope of regulations that you have to deal with and take into account increases. And with that, unfortunately, also the error susceptibility of your global payroll.
Basically, the question of when global payroll outsourcing makes sense can also be the time when you want to have your global payroll realised in a fast, efficient, flexible, and error-free process.
How to outsource payroll?
Once the decision to outsource payroll has been made, you determine what you hope to achieve in detail and the stages in which implementation should take place. The process can then be roughly divided into 3 phases:
1. Defining scope, type, and time frame:
In the run-up, it is important to specify your motives and requirements. It makes sense to formulate answers to the important questions:
- Where do you need the service?
- How should the payroll service support you?
- What advantages do you expect from outsourcing?
- What must the service provider be able to do and guarantee accordingly?
- What are the costs and how/when are they amortised?
- How long can the entire process take?
2. Determination of the budget:
Global payroll outsourcing has benefits other than just cost saving. However, it also shouldn’t lead to an increase in global payroll expenses. Therefore, before making any investment, it is best to get an overview of all f costs incurred for internal payroll. In addition to the costs, also include the possible savings so that you get a comprehensive overview of the budget available.
3. Research and selection
Once you have defined your requirements and budget, it is time to select a suitable global payroll outsourcing provider. Get different offers and check which of your requirements are covered. These include in particular:
- The country coverage
- Examining the entire catalog of possible services
- The expertise of the team
- The manner of implementation and execution
- The experience and success rate of the provider
- The cost and transparency of the offer
- The question of whether the offer also covers a future expansion of your company
After careful consideration and evaluation of all the offers, you should then send in a Request for Proposal (RFP) so that you can identify the best providers and make your decision on an informed basis.