Top 5 global payroll challenges

Growth is good—and crossing borders to take advantage of economic opportunityand great talent has its perks.

But everything comes at a cost, and the challenges of global payroll can startto pile up ( e.g. staying on top of costs, compliance, and processes acrossa global organization).

Each global payroll challenge is multiplied by the number of countries youserve. So, while growth is good, we’ll keep our relationship status withpayroll at ‘it’s complicated’ for the time being.

Here’s a look at the top global payroll challenges sparking the debate on howto manage paying your employees.

1. Cost management

Do you know how much you’re spending on global payroll? It’s easy to get soldon the idea of spending money on technology now to save money down the road.But does it really pan out?

Less than one-third of global companies can say for sure.

Data transparency across a global organization remains a top priority forsenior managers in multinational companies, but a Deloitte survey of more than 1,200 executives revealed it’sgetting more complicated to keep track.

The cost of paying your global employees includes directcosts like wages, taxes, and labor spent on payroll activities. But it alsoincludes indirect costs that you might be missing—like technology and vendorservices.

2. Compliance

If the financials make your head spin, that’s just the tip of the iceberg.Maintaining compliance on a global scale can feel impossible when the rulesare different everywhere you go (and always seem to be changing).

And we’re not just talking about who foots the bill for healthcare.

Every country has its own laws and regulations—and local jurisdictions withineach country often have their own laws and regulations. Sometimes, there areeven conflicting laws at the local/state level and the federal level.

Which laws apply to which employees? Keeping it straight can be achallenge—and that doesn’t even touch the subject of legislative changes thatoccur with political cycles.

One of the biggest global payroll challenges is staying in compliance with:

• Taxes
• Retirement contributions
• Vacation/leave requirements
• Hiring and employment verification
• Termination practices
• Employee classification
• Healthcare requirements
• And all the associated deadlines for paperwork and payments!

3. Maintaining control across a global organization

Costs aren’t the only thing that can get out of control with global payroll.

Global growth drives a need for specialized expertise, and many globalcompanies turn to local outsourced payroll services for that expertise.

It’s good in theory, but the decentralized approach isn’t the right choice forevery company. If you have dozens of different vendors in different countriesusing different technologies and different processes, you’re bound to have toomany cooks in the kitchen.

Reinventing the wheel whenever you need to pay employees in a new countrycauses inefficiencies like duplicated work, lack of data, and higher costs.Still, global companies struggle with creating global processes andpolicies that balance global needs with local requirements.

4. Payroll accuracy

Payroll accuracy is a big deal for any company, big or small, local or global.Mistakes can be costly—and not just because they usually come with finestacked on to the original dollar amount.

Payroll mistakes hurt employee morale, which in turn hurts your productivity.They also hurt your reputation. And they drive payroll labor costs up as yourstaff spends time researching and correcting these errors.

In addition to keeping track of different employees with different hours andwages, global payroll challenges are intensified by factors like:

• Different currencies
• Language and cultural barriers
• Time zones
• Foreign bank accounts

Clean data is important and using data controls and automation to preventkeying errors is becoming more common. But technology can only take you sofar—you also need human expertise and diligence.

5. Maintaining confidentiality and data security

Digital transformation has been a double-edged sword for global payroll.

On one hand, it’s providing a way to connect payroll and human resources,making it easier to get accurate data to run payroll. Global companies aretaking advantage of these integrations to create centralized processes andaddress many of the global payroll challenges on this list.

But on the other hand, it brings with it more responsibility, tighterregulations, and bigger problems for compliance.

For example, The General Data Protection Regulation (GDPR) took effect in Europe in 2018. It was meant tostandardize data privacy laws across the European Union. It wasnecessary—payroll departments handle sensitive employee information like bankaccount numbers and social security IDs.

But GDPR is also super restrictive.

An increase in technology and integration with outside vendors means moreexposure. With regulations like GDPR on the books, global employers have yetanother set of rules to follow. And in this case, it’s so complex that theguide to understanding the regulation and how it applies to global businessesis a lengthy read.

GDPR covers standard data security issues like encrypting data beforetransmitting or storing it, as well as using credentialed access with accessbased on job role. These best practices should already be in place across yourglobal payroll strategy.

But did you know it also includes:

• Enhanced security for protected data like gender, ethnicity, union affiliation, and biometric data including fingerprints used for timekeeping systems
• Mandatory reporting of all data breaches with big fines
• Payroll process design requirements
• Procedures for data deletion and payroll records maintenance
• And a lot more

And that’s just for the European Union —other countries have their ownvarying regulations in place that apply to payroll data security.

The bottom line on global payroll challenges

Across the board, taxes—and specifically calculating withholdings—is one ofthe biggest challenges for global payroll teams. Almost half (49%) ofmultinational companies report this as their top globalpayroll challenge.

But it’s not the only thing global payroll professionals are struggling with.

Staying on top of how much money you’re spending on payroll to ensuringcompliance with a never-ending list of rules and regulations can make it feellike payroll is the business. It’s easy to forget that global payrollchallenges are just one piece of a bigger puzzle in managing global growth.

The good news is that it’s a problem that attracts a lot of thought fromleaders. Innovations in global payroll technology are making it easier to finda balance between standardization and customization.

Acentralized payroll processcan help your business overcome these global payroll challenges. But it’s not a one-size-fits-all solution. It takes strategy, resources,technology, and the right data to manage international payroll and all the constantchanges.