What is Global Payroll Implementation?
Global Payroll Implementation refers to streamlining payments to your international employees using a robust system where every step of the payroll process is automated. A major component of this process is adhering to each country’s local labor codes and tax regulations.
How to implement a Global Payroll system?
Implementing a Global Payroll system is a long process that requires constant back and forth and a lot of attention to detail. It is also a very cost-heavy project; therefore, budgeting and financial planning are among the key steps in this process. The major steps involved in a payroll implementation project are:
Setting up a local entity
This is the first step to building a global workforce, and it is the most expensive one. To legally hire employees in a foreign country, you must have a local entity present there. This entity can be set up in any form, the most common being a PVT. LTD. company.
These separate legal entities, or foreign subsidiaries must be legally and fiscally distinct from the parent company. This allows you to benefit from local tax rebates, grants, and other benefits of that country. Having a separate legal entity also protects the parent company from any risks at the subsidiary level. Learn more about setting up foreign entities here.
Build local partnerships
Entering a foreign market requires a lot of research and groundwork. Understanding market trends, norms, common practices, etc., can get challenging for most businesses. However, having trustworthy local partners can help you sail through these hurdles. These local partners can help you stay updated on the local labor codes and tax regulations and guide you to the perfect payroll softwares. Not all global payroll softwares may be suitable for every country, a local partner can help you understand your requirements and provide effective solutions.
Local partners will also help you understand the salary trends and market rates for specific roles, which a foreign employer may not completely understand. These partners will also help you generate the right documents and contracts that you will need during onboarding and payroll processing. They will help you understand the local culture and guide you in providing the right benefits such as insurance, leaves, and bonuses.
Understand the local norms
A local partner can successfully bring all the required information to your table, but understanding the nuances and making informed decisions as an employer is your duty. Before hiring in a country, you must ask the following questions.
- What are the official working hours?
- What are the mandatory and non-mandatory benefits offered?
- Which documents are required for a successful onboarding?
- What are the different components of a payslip?
- What deductions must be withheld by the employer?
These questions are a good starting point to understanding the details of employment in a specific country. However, having clear and quantified answers to each of these questions is essential for hiring and paying your international employees. A local partner can help you with most of your questions; however, ensuring 100% compliance is your responsibility.
Collate the right documents
Once you understand the requirements and prerequisites of hiring in a foreign country, you must collate the necessary documents for signing an employment contract. These documents will vary for each country. Some of the common documents required while hiring are
- National Identification
- Work Visa/Work Permit or a local equivalent document
- Bank Account details
- Tax Identification Number
- Social Security Number
After you have selected a candidate and legally onboarded them, you must work on implementing a seamless payroll system. Hiring employees internationally is only a small part of the job; paying them compliantly and timely is the major part. Processing international payroll manually is not the best approach, as it involves a lot of details that require constant attention.
It is best to automate your international payroll using an HRIS (Human Resources Information System). A strong system will ensure timely payments and will stay compliant. However, updating the information when the laws and tax regulations change will still be your responsibility. An HRIS will also help you manage your employees by tracking their leaves, expenditures, and benefits.
Once you have understood the steps involved in Global Payroll implementation, you must ensure that your teams are ready to take on the tasks that come along with it.
What does your team need for Global Payroll Implementation?
Implementing and processing global payroll is definitely a team effort. No one person can single-handedly manage the entire process. Therefore, training your team on the following is necessary for successfully implementing global payroll.
Communication and collaboration
Global payroll implementation is a process that involves multiple people, possibly in different locations. It is a process that needs efficient communication and collaboration right from the top-level HR executives to accounting teams. Having regular meetings, discussing challenges, and coming up with effective solutions are crucial for a seamless process. All the people involved in global payroll must stay aligned with deadlines and goals and collectively work to meet them.
We know that global payroll consists of a lot of small details which must be constantly monitored. These details are bound to change whenever a country updates its labor codes and tax regulations. Staying updated with these changes and implementing them as soon as possible is the key to ensuring legal compliance. To ensure that your team is ready to take on any challenges, employers must provide the right training and support and work on streamlining the process.
Now that you know how what your team needs for global payroll implementation, you must understand the common mistakes businesses make while paying their international employees.
Common Global Payroll implementation mistakes and how to avoid them
People, businesses, or both, are bound to make some mistakes when trying something they’ve never done before. Here are some common mistakes businesses make when setting up a global payroll system.
Not planning enough
Global payroll is an intricate task, and it requires a lot of planning and mapping. Before implementing a global payroll system, an employer must have a detailed roadmap of how the process will work and who will be involved. Setting goals and timelines for each step is one of the best ways to ensure nothing is missed. Ensure your team is well trained on the process, and each member is aware of their responsibilities.
Inaccuracy in data
Data is the backbone of any digital project, and it is the same for a global payroll system. You must ensure that your systems are fed with the right data before you process payments to your global teams. Data fields such as employee name, title, role, compensation, bank account details, country, etc. are crucial for any global payroll team. However, the most important piece of data for a global payroll project is the deductions. Ensuring that you have made the right deductions in your employee’s salary is the first step to maintaining legal compliance.
Integrating your global payroll with an automated system is the best way of handling payroll. However, every software has a different UI and follows a different algorithm. As an employer, you simply cannot rely on a basic dashboard to keep an eye on the process. You must configure the system and align it with your requirements. Ensure that the details you need to monitor are constantly displayed on your screen, and you don’t need to go deep into the system to fetch crucial data. All of this must be discussed and settled before choosing your HRIS partner.
Not running tests
Running tests and finding gaps across the payroll process is the best way to identify inconsistencies in your system. Many times, companies fail to run sufficient tests, and it results in errors and delays. Testing will help you identify missing data, clarify the turnaround time and help you understand how you can make the process more efficient. Understanding the working of your payroll system is crucial for times when you need to revamp data, include new flyers, or introduce a new feature. Testing must never be a one-time event. Even after it is live, it should be tested regularly to gauge the system’s capabilities and enhance them.
Yes, global payroll may seem overwhelming at first, but it also brings along some significant advantages to your business.
Advantages of Global Payroll implementation
A successful global payroll implementation can open doors to a lot of new opportunities for your business. Some major advantages of global payroll implementation are:
Hiring international employees directly translates to new opportunities for your business. It may be expanding into a new market, or it may be launching a new product, or it may be both. Having resources in foreign countries helps you capture different markets and grow your business exponentially. This also gives you the opportunity to attract world-class experts from each domain into your business and expand your horizons with different perspectives and experiences. For example, an American business may not necessarily know what it takes to expand in a large market like Australia. Building a local team will help you understand the details and the steps you need to take to expand your business into Australia, or any other country.
Diversification in teams
Onboarding international employees will help your company build diverse teams that work around the world. Integrating different people from various cultures and backgrounds will result in a strong morale boost and create a positive company culture. Hiring globally will help you stay strong even during talent crunches in your country.
Hiring in a developing country can be much more cost-friendly than hiring in a developed country like the USA or UK. Look for countries where your currency is substantially stronger than the local currency. This will result in lower expenditures on salaries as the employees will receive their payments in their local currency.
Having global teams means that your employees will work in multiple time zones. This essentially means that your business will be running 24 hours a day which will increase overall productivity and help you reach targets faster.
While there are many more advantages of global payroll implementation and building global teams, there are also some disadvantages to it.
Disadvantages of Global Payroll implementation
Some disadvantages of setting up a global payroll system are:
Hiring in another country means that you will need to set up a local entity. This can be very expensive and cost you hundreds of thousands of dollars in one go. The more countries you look to hire in, the more entities you will need to create. This can easily result in you spending millions of dollars on global hiring.
Keeping up with the laws
The labor laws and tax regulations are different for each country and are updated almost every year. Keeping up with these laws and staying compliant can get very challenging for your HR, Legal, and Accounting teams. A minor error in compliance can result in heavy fines and legal fees.
The disadvantages of global payroll implementation and the mistakes you might make in doing so can easily and effectively be avoided by working with a Global Payroll Service, or an Employer of Record.
Benefits of working with a Global Payroll service provider
Global payroll service providers take most of the responsibilities off your shoulders and help you hire international employees. The key benefits of partnering with a global payroll service provider are:
Working with an Employer of Record completely eliminates the need to set up a local entity in each country you wish to hire from. This instantly helps you save a significant amount of money.
Partnering with an EOR means that your employees don’t need to constantly monitor the payroll process and work around the clock. This can help your HR team focus more on building strategies & policies and hiring more employees.
Employer of Record services have a strong network in multiple countries that help them stay updated on the labor laws and tax regulations. Most of these services have dedicated legal teams that ensure that all employees are paid while staying compliant with all the required laws. Moreover, since the EOR is the official employer, you are not legally responsible for any compliance-related issues or complexities.
Once you have decided to work with a global payroll service provider, choosing the right service is the next important step.
How to choose the right Global Payroll partner?
Before choosing a global payroll partner, you must consider the following points:
- Industry review and feedback: Check for reviews and feedback for a service provider, specifically in your industry. Conduct your own research on the basis of the reviews you get from other businesses.
- Evaluate the range of services offered: Different global payroll service providers offer different services. Evaluate your requirements and understand the specific features and services that you will need to expand your business overseas. Check if your potential payroll partner can assist you with all your needs.
- Evaluate their compliance strategy: Compliance is one of the key aspects of global hiring. While most global payroll service providers ensure compliance, you must carefully study and evaluate their strategies for dealing with compliance issues.
Go Global with Multiplier
Multiplier is a SaaS platform that specializes in Global Payroll and Employer of Record services with entities in over 150 countries.
We give you end-to-end support right from onboarding to offboarding. Multiplier will generate a compliant employment contract for you in no time and onboard your employee before you know it.
Partner with us, get unlimited access to our resources, and enable yourself to hire in any country you choose. Our easy-to-read and user-friendly dashboard brings all the vital information about your international employees right to your fingertips. You can track payments and leaves for every employee in a few simple clicks and manage your employees effectively.
Multiplier also enables you to stand out from the crowd and choose benefits for your employees, such as joining bonuses, insurance, and employee stock options (ESPOs).
Our extensive legal team will always ensure that all the payments and contracts are aligned with the local laws and regulations.
Book a demo and experience Multiplier now!