As a business expands, payroll administration can be an afterthought. Employers know they have to figure out how to pay their employees, file taxes, and report the correct numbers to the right agencies, but many do not approach it from a strategic perspective, which might entail spending time navigating the complexities of a global HRIS system. When a company is small and located in only one nation, ad hoc solutions may not be a problem. However, as a company expands into multiple international markets, payroll administration and compliance becomes more important and carries more financial and legal risk.
The Sierra-Cedar 2016-2017 HR Systems survey reports that companies use between one and 100 different vendors for their payroll administration within a single organization. Multiple vendors mean multiple processes, multiple report formats, and varying data. With too many vendors it’s impossible to get an accurate overall picture of your international payroll strategy and implementation. It opens your company to compliance risks and hides payroll system inefficiencies.
What Do You Need in International Payroll Administration?
The requirements for international payroll administration might seem simple. A payroll service must:
- Track hours worked and pay workers on time
- Provide accurate reports to the employer
- File and report taxes to the appropriate agencies
- Stay in compliance with labor regulations for each country
Government regulations make these tasks more complex. For example, Cook County, Illinois passed a new series of labor laws regarding minimum wage and sick leave. The ordinance allows individual municipalities to opt out. Cities that border each other can follow different minimum wage and sick leave rules. If a business resides in a city with the old minimum wage laws and sends the worker to a city with the new law, the hours worked in the second city must be paid at the higher minimum wage.
In France, every citizen gets 30 days of leave. Employees who voluntarily work more than 35 hours per week can accrue up to 22 extra days of leave. A payroll administrator meticulously tracks the number of hours worked each week to determine how many days of leave the company owes each worker.
Best Practices for Implementing an International Payroll Administration
It takes more than finding a good firm to handle your international payroll administration. Companies should look for the right solution to fit their particular needs. When looking for the right partner, keep some of these best practices in mind.
1. Unified Processes and Reporting
Since every country has different laws and cultures, one might think that each country should have its own reporting. This might be acceptable for a small business located in only a few countries, but it becomes grossly inefficient when working in several international markets.
Look for a payroll administration company that has a single process for payroll no matter where you are paying your employees. Efficiency frees up employee time and saves money. A single report format and unified overall reporting allows your company to get an overview of the whole payroll system. With a unified information structure, you can more easily see areas of improvement.
2. Data Security
Hackers target companies for a variety of reasons, from entertainment to making a profit off someone’s personal information. They can steal your employee’s information and gain access to your company’s proprietary information. Data security is an important piece for payroll administration.
Lexology reports that many businesses don’t use any extra security, in fact:
- 61% of global payroll professionals use inherently insecure methods of email to communicate across borders
- Only 38% apply password protection
- 23% have no additional security procedures when sending their data internationally
It’s every company’s responsibility to keep their employee’s data secure.
Additionally, many countries have strong data protection legislation, especially companies in the EU. Your payroll administration needs to understand and appropriate data security to keep your employees happy and mitigate legal risk.
3. Include Payroll Administrators in Your Global Strategy
Because payroll laws can be so complex, they affect how businesses function in each country. When a law changes to add more worker protection, your company may see higher expenses. A payroll officer can help strategic planners understand the complexities that other executives might miss.
Effective payroll data and analysis can help your company make good decisions.
- It enables you to analyze facts rather than intuition and make decisions based on them
- It helps measure performance, risk, efficiency, and effectiveness
- It can compress business cycles and automate processes.
Including a global payroll administration while creating your company’s strategy can help use your payroll data to improve your business processes. Contact us to learn more about your options for international payroll administration.