September 30, 2021
You’re growing despite everything going on in the world. You’re adapting yourbusiness strategies, and you’re moving into new, international markets.
First of all, congratulations!
Second of all, it’s time to get things right with your payroll and compliancemanagement (or you won’t be celebrating for long).
Payroll compliance means following all federal, state and local regulationsthat govern how employees are paid.
And there are plenty of rules when it comes to paying employees. Payroll lawsand regulations not only change from one jurisdiction to another—they are alsofluid and prone to changing with politics or societal influence.
As your business expands into new markets around the globe, you’ll continue toadd more chefs to the kitchen. Multinational companies spend big on payrollcompliance because missing a step can be costly—both in terms of the company’sbottom line and reputation with talent.
On the other hand, staying on top of payroll and compliance management keepsthe business out of trouble while keeping employees happy (everyone enjoysgetting their paycheck on time).
There are a lot of variables to consider when it comes to keeping yourbusiness above board re: payroll. But don’t worry, we have tips for navigatingthe most common payroll compliance pitfalls.
Complete and accurate employee records are the first step to payrollcompliance. Things change all the time. Your employees will move to new homes,get raises, get married and divorced, and much more. Your company shouldalready be in the habit of updating these records, but it never hurts to tidyup.
Your records are your first line of defense in preventing errors and survivingaudits.
To follow the rules, you first have to know the rules. Not just a generalunderstanding—you really need to know the local regulations and culture insideand out, or you are bound to make mistakes.
The biggest hurdle of managing payroll and compliance is keeping it allstraight across all your countries. The differences between locales reallystart to add up quickly when it comes to:
You get the idea.
Let’s say your U.S.-based manufacturing company has recently expanded into theFrench market and now employs 125 people in France. You’vealso set up a 60-employee support center in India.
Local payroll expertise is a must-have for each of these new countries whereyou’re conducting business.
You need a payroll management resource, for example, that understands how tocalculate your contributions to France’s social insurance system based onbusiness type, size and location (unless you want the Ministry of Labor onyour heels). And you’ll bump up against compliance issues in India if youdon’t pay employees their mandatory 13th month payon schedule.
Plus, getting familiar isn’t a one-and-done deal—rules change all the time,and you need to stay on top of the local and national regulations where you dobusiness.
Hiring in-house within each local office (a decentralized payroll model )is a common way to stay on top of local payroll regulations. But it may not bethe most efficient way to run your payroll, which brings us to our next tip.
Efficiency in the overall payroll process is another big challenge of payrolland compliance management. Reinventing the process for every country and everyoffice? Ugh—unless you like reconciling each geography’s payroll spreadsheetsall day, it’s just not sustainable.
(Living in spreadsheet land also makes global visibility across your payrollnearly impossible.)
The local, decentralized model is common as businesses begin to grow globallybecause it seems like the easy route. The reality is that up to 85% ofmultinational companies feelthere is a need for improvement in their payroll processes. A lot of thatdiscontent comes from the inefficiency of having multiple offices that don’twork together within the same company.
Generally, large multinational companies enjoy the efficiency of acentralized payroll process.
Centralized payroll puts all your payroll activities under one umbrella. You get the local expertise you need to stay compliant. Plus, you get to do away with the different processes, platforms and providers across your different countries in favor of a streamlined, centralizedapproach (see you later, spreadsheets!).
Streamlining the payroll process and limiting the friction between humans andspreadsheets also reduces your risk of payroll errors.
Speaking of payroll errors, even the savviest payroll experts are still human,and humans make mistakes.
Maybe something is entered in the wrong currency. Or a date is entered in thewrong format. Or Frank doesn’t send in the timesheet data on time. Regardlessof the error, things can break, people can get paid late, and then you’re outof compliance.
And even when you break the law by accident, you’ve still broken the law(enter hefty fines).
You can minimize the risk of payroll errors by outsourcing payrollprocessing to a reputable firm that performs double validation of your payrolldata.
You can rest a little easier knowing that your outsourced payroll partner willeven track timesheets down from Frank when he doesn’t send them in on time.
While managing global payroll compliance is complex, it doesn’t have to be thething that trips you up as you’re trying to grow.
You just need to make a commitment to building your payroll system based ongood principles like diligent recordkeeping practices, local expertise,centralized processes and payroll error prevention.
Or you can outsource to a payroll partner that’s been there, done that.
Learn more about how Payroll 360 can help you tackle payroll and compliance management in more than 150 countries.