International Payroll (Initial Setup and Ongoing)
International payroll can be difficult or even unmanageable without the right partner. Handing complex regional legislation and coordinating various locations and multiple languages requires expertise. Luckily, your business can overcome international payroll risks and complexity.
Here are a few of the challenges your company may face, factors to consider and how to best setup international payroll for ongoing success.
Implement Efficient Tiered Strategy
Multinationals want to enjoy economies of scale and one of the most favored methods is through standardized and centralized international payroll. Instead of disparate regional payroll systems your business can focus on a single system, yielding significant cost savings.
A new payroll territory must operate efficiently and cost-effectively, meet compliance and support regional supplier relationships. Typically, this involves a tiered regional strategy with the initial focus on a single location with an in-country expert. Immediate results keep stakeholders on board as they can see a positive ROI and enjoy extensive reporting features.
A systematic process also requires a smaller team to iron out any disruptive factors. Metrics can be established for each locality, but reviewed centrally. Stakeholders can easily measure accuracy, cost, timeliness, customer satisfaction and the origin of errors to improve operations in each new location.
Balance Local & Global Payroll
Organizations need to achieve a healthy balance between an optimized global system and a flexible local payroll. A lean global payroll system that can’t adapt at a local level won’t meet legislative, cultural or company needs. Conversely, a system that caters to all local idiosyncrasies won’t provide the cost savings a global system should provide.
As a result, an experienced global payroll provider offers the convenience of a fully-functional system for centralized core payroll processes. They tailor global payroll workflows to align and integrate with your organization’s existing systems and solutions. Then they add the local country layer as an integral part of the system.
Ensure Legal Compliance
Most companies don’t have the resources to handle international compliance in-house, never mind from afar. Complex tax and labor laws change often and quickly and vary greatly between regions. Meeting compliance includes monitoring laws continually, plus payroll needs a thorough understanding of reporting needs and deadlines.
Don’t underestimate the complexity of international payroll compliance. Variations in taxes, employment contract requirements, minimum wages, annual leave, paid sick leave, social services and health and pension contribution are just a few of the considerations. The region, industry and relationship between your country and the expansion territory can all affect payroll.
As an example, tax rates vary greatly from country to country. Your business may also be affected by a tax treaty with a foreign country. The U.S. currently has over seventy tax treaties with foreign nations.
Under U.S. treaties, residents earning income in a foreign country may be eligible for a reduced rate. In some cases they may be exempt from U.S. income taxes on certain forms of income. However, these reduced rates and exemptions vary among countries, income source and the residency status of the worker. Reporting requirements also vary.
Non-compliance is always a huge risk for any company, especially when entering a new market. It can stop or slow expansion efforts in a new territory, tarnish your company’s reputation, add to your financial burden and seriously impact profits.
Fortunately, an experienced global outsourcing provider has regional representatives to ensure compliance in the jurisdiction. They’re expertise minimizes your non-compliance risk.
Access Valuable Real-Time Reporting
Clearly, payroll complexity increases when a company adds a new location. However, with a single system in place, organizations can access valuable data easily instead of dealing with disparate regional systems and multiple parties.
Benefits include improved control and less compliance and audit issues. It also simplifies data analysis and may reduce the number of people needed to manage payroll within the organization.
Businesses can affordably compare KPIs across localities, regions and countries to help them detect issues, react quickly and increase profits.
Reduce Technology & Maintenance Costs
Managing international payroll in-house can be very costly. Companies need to acquire additional hardware and software and either hire or train personnel. They also need to maintain equipment and support users on an ongoing basis. Typically, support costs tend to be the largest IT expenditure.
Outsourcing payroll to a skilled provider can significantly reduce costs at setup and eliminate ongoing support costs as well. The provider maintains equipment, updates software and debugs for optimal efficiency.
Superior Data Protection
Payroll involves personally identifiable information which demands top-level data protection. Every region has specific legal requirements. As an example, companies operating in the European market must meet the stringent requirements of the General Data Protection Regulations (GDPR).
Unfortunately, few companies have the resources or in-depth knowledge needed to properly safeguard personally identifiable information. Fortunately, a good international payroll provider ensures processes meet existing general data protect requirements to reduce company payroll risks.
They invest heavily in data protection, reduce possible data access points, and ensure strict access to sensitive data. Since they manage payroll data your business can also reduce on-site paper storage, but maintain immediate access to vital data.
Typically, when a company launches in a foreign market it’s required to register with local authorities and get a taxpayer ID to do business and hire and pay staff locally. However, many companies can’t justify the significant time and financial investment when they’re only testing the waters in a new region.
For example, a U.S. company might want to hire someone abroad who would work exclusively from home. They may also want to hire an out-of-country worker for an 18-month temporary assignment. Neither of these merits the substantial investment required for business registration.
Often times, an international payroll provider also offers an employer of record service. They become the employer, work on your behalf and there’s no need to register your company within the new territory.
Paying employees in foreign locations also involves complex payment logistics. Payroll must consider currency conversion rates, payment tracking across borders and access to overseas bank accounts.
Fortunately, a reputable international payroll provider has standardized processes, checks and balances and security measures in place to simplify payment logistics.
Let Blueback Global help you manage your global payroll complexities. A well-integrated global payroll system is vital to your international expansion success.
Tap into our network of global payroll professionals fully-capable of interpreting and decoding your payroll requirements, wherever your employees work. We’re well-positioned, highly-experienced, and can help you overcome your global payroll challenges affordably.
Contact us for a free consultation and cut through the complications of global expansion.