I have heard from U.S.-headquartered companies that their global payroll “already works” or “everyone gets paid, so what is the value to spending time and effort to simplify the process?” When I hear that a company’s global payroll “works”, they are usually operating using one of the following three models:
- Separate local payroll provider or accounting firm for each country of operation. There are no standard procedures across all countries, no standardized reporting, no real-time visibility, and in some cases language barriers.
- Single global payroll provider for all countries that has tried to consolidate data into one system, but still using many manual processes.
- A combination of #1 and #2. Tried to consolidate all international payroll with one provider, but due to limitations, the company is still using local providers for a few countries.
A comprehensive review of your global payroll can identify areas to improve, or system/vendor enhancements that are necessary to ensure compliance. Here are other considerations when managing international operations:
Reporting
Be honest – if I asked you or your team to pull an international headcount report right now for all countries that you operate in, would you be able to? Would it take 30 seconds, 5 minutes, or half of your day?
Can you pull your annual salaries in USD on-demand for all employees in all locations? Is the report (if you can get one) in a useable format like CSV, Excel, and PDF?
Aggregated payroll reporting affects your organization’s ability to use your data effectively. When a finance team has data on-demand for headcount and annual salaries in USD, it is much easier to make informed financial decisions for the organization.
Getting reports quickly on-demand is only half of the battle. If your data cannot be pulled into different formats, it will limit your organization’s efficiency. Here are some examples:
- Finance and accounting usually need data in excel format
- If there is an internal meeting, you may need this data in PDF form
- IT departments need data in CSV files for imports or uploads into other systems (accounting, HRIS, ERP system, etc.)
For example, if you are using model #1 above with local providers in each country, it is nearly impossible to get aggregated reporting on-demand for all countries in multiple file formats. More than likely, most of the data you have is being tracked on excel spreadsheets internally. You have to ask your team for those excel sheets and merge them together to get aggregated reporting. For any of you operating in the EU, you absolutely need to review your current processes. GDPR-compliant payroll processors are offering secure technology infrastructure to store this data.
If you are using model #2 and have one provider for all locations, some providers do not offer custom or standard report builders. Do you have the ability to pull your own reports, or do you have to ask your provider for reports? Some providers only offer data in one file format which makes the usability across the organization limited.
Data Security and Visibility
I mentioned it briefly above, but for any of you with employees in the EU, the changes to the General Data Protection Regulations (GDPR) is a concern for you. You must be compliant by May 2018.
From an international payroll perspective, you should be reviewing your providers to ensure that they are GDPR compliant. If you have a payroll provider that is not GDPR compliant, and data security and privacy is not at the forefront of their business, you need to change providers. There are steep penalties for non-compliance with GDPR, and whether or not your payroll processor is compliant absolutely matters.
A lot of employee data is housed in payroll, and that data is transmitted on a constant basis to your provider, and back to you. If you currently submit your payroll via e-mail on an excel spreadsheet to your accounting firm or payroll provider, you have to ask yourself if that is a secure method of sending your employees sensitive personal data and is it GDPR compliant.
Have you reviewed GDPR compliance and expectations with your current provider? Do yourself a big favor, and find out your provider’s stance on GDPR as soon as possible.
Visibility of your data
If you are unable to view your payroll data on-demand, and you are requesting your team to send excel sheets and emails with the data you need, you most likely do not have visibility into your payroll.
I have personally seen instances when companies did not have visibility on their global payroll data and bad things happened. There was the affluent controller who paid himself double his annual salary for 3 years, and there was another situation where a payroll processor created fake employees and added family member’s bank accounts to the company employee records! Although we would all like to believe that these situations don’t happen, they do. These are real examples of companies that did not have visibility into their payroll data.
Make sure you have visibility into your payroll information and a security protocol or technology infrastructure in place so that your team knows someone is viewing this information and crosschecking it for accuracy. You should always have visibility to avoid any potential security issues.
Ability of your business to “pivot” quickly
Companies often struggle to quickly set up a payroll infrastructure in new countries. If you are using the local payroll provider model, it takes time to research local providers in the countries you are expanding into, speak with them, evaluate, and get started.
How long did it take you to set up your last payroll in a new country? Did you have the resources that you needed to help navigate compliance, entity registration, employment contracts, taxes, social payments, and employee benefits?
Companies that are road mapping international growth benefit from having a team of resources or experts that create a growth plan for each country and review all aspects of compliance with you. A lot of my customers say “we don’t know what we don’t know!” That is very true. If you don’t know a certain labor law exists in a country, how can you account for that? You can’t.
Going back to the beginning – does your payroll really “work” even if your employees are getting paid? There are so many aspects of managing international payroll, it’s time to make it a priority. International Payroll should be a Q1 initiative because simplifying your processes and implementing the right technology infrastructure can have a profound impact across your entire organization.