Did you know that payroll makes up over 70% of an organisation's expenses?
It is a complex function that includes calculating and allocating an employee's earnings while managing bonuses, social taxes, commissions, benefits, and other expenses.
Payroll, however, is more than just making sure that employees get their paychecks on time. It’s also about ensuring that tax authorities receive their dues and making sure records are created and stored efficiently.
That’s precisely why meeting these demands on a global scale is a complicated, costly administrative process. Moreover, if you fail to meet these requirements, you can find yourself violating international compliance law unintentionally.
The good news is that payroll does not have to be a complex or costly process.
Here’s what you can do.
Payroll across multiple countries can be 3X more complex than local payroll processes because payments have to be made in different currencies, while cheques have to be processed in different languages.
Moreover, each country has its own labour laws and tax codes that you must follow. Developing a payroll process that meets these specific requirements is challenging for most firms; while this is complicated enough, understanding how the law applies to individual employees is another challenge altogether.
Different benefits apply to employees based on factors like family status, age, and salary structure. For example, the Czech Republic grants 28 weeks of paid maternal leave while Spain only allows 16 weeks.
As a company, you need to account for these differences across your global payroll management.
In addition to paying employees, local tax authorities need to be paid and employee tax rates vary based on the country in question. For example, France has the highest employee tax burden, which is about 35%-40 %.
Most of these laws are also changing, and if you’re not up to date on everything that’s happening, you may find yourself violating compliance laws even inadvertently.
To process all this information, you need to collect a lot of data, which, in turn, presents its own set of challenges.
To meet the demands of global payroll processes, you need to create a payroll management system that helps you meet regulatory demands without consuming a lot of time and resources.
Here are a few suggestions on making your payroll work for you.
Maintaining payroll for multiple countries requires extensive documentation, which, again, takes up plenty of time and resources. With the right automation platform, however, you can eliminate many of the steps inherent to processing your payroll, simplifying the process.
Moreover, you will have an easier time managing your employees as well.
Automated solutions can also optimise human resource management across your workforce; in addition to distributing payments on time, you can perform the following HR functions more efficiently too:
Onboarding new employees
Managing paid-time-off more easily
Expediting the reimbursement process for certain employees
The right platform can help you turn payroll into a more agile process, reducing the time taken and resources required, all while meeting compliance requirements on a global scale.
Automated platforms, alone, will not get you the benefits you are looking for if your payroll processes are inefficient or ineffective.
That’s why it’s worth taking a look at your payroll processes and identifying if they complement your business.
The wholly-owned model is where you open an office in the locale and handle the entire payroll operation in-house. The wholly-owned model does have its benefits: For one, you can keep this process internal.
In our experience, however, it rarely leads to the productivity and transparency organisations are looking for. Differences in language, culture and, in some cases, a lack of experience in running multiple offices, can hinder the process.
By contrast, the aggregate payment model might seem counterintuitive at first but generates several benefits in the long run.
With the aggregate payment model, businesses work with local organisations called in-country providers (ICPs) to process the payroll for their workforce. The aggregate payment model is flexible and cost-effective because you are tapping into the expertise of established ICPs who understand local labour laws, and most importantly,understand what you need from them.
Paying employees is a significant expense for most organisations. That’s why it makes sense to track spending with real-time technology via powerful Business Intelligence platforms.
Most organisations often use manual methods or outdated tech to track payroll spending; this process, however, leaves much to be desired.
Accounting for different labour laws, currencies, and pay rates means maintaining different data sources, making payroll a challenging prospect. Real-time technology can help you work around this challenge. It allows you to track spending on employees closely, which supports decision-making on cost-cutting or expanding your operations.
Real-time reporting also allows you to track spending across your global workforce more effectively. Not only will you have access to the latest data, but you can also consolidate your payroll process into a single source, streamlining the entire process.
Despite the different laws, offices, and employees you have to manage, creating a simple and effective global payroll system is entirely within your reach. Today, it’s merely a question of adopting the right processes and making smart, prudent investments to eliminate the complexity of your payroll procedures.
If you are looking to optimise and streamline global payroll, get in touch with Rivermate to get started!