Failing to pay workers on time and in the correct amounts is a surefire way to send morale plummeting. But it happens all too often. According to a 2022 survey from the American Payroll Association, around 10% of workers don’t always get their paychecks on time.
It doesn’t matter whether it’s due to human error or rickety systems—a properly managed payroll is a cornerstone of any successful company.
But as a company grows in scale, the challenge of managing payroll grows too—particularly when it comes time for a business to hire beyond borders. Where HR previously had to deal with calculating salaries, benefits, taxes, and deductions in one jurisdiction only, going global means handling multiple, potentially vastly different systems at once.
Global payroll management doesn’t have to be the nightmare it first appears to be, provided it’s approached correctly. In this blog, we’ll walk you through the procedures and tools necessary to handle diverse tax regulations, employment laws, and compensation structures across countries and come out the other side unscathed!
Exploring the payroll management process
Before we talk about solving the fiendish puzzle of global payroll management, it’s worth first understanding exactly what the payroll management process entails. Let’s look at the step-by-step journey, which we’ve grouped into three sections: before, during, and after payroll.
1. Before Payroll
The process begins with meticulous employee data collection, encompassing work hours, attendance, bonuses, and deductions. It’s crucial to ensure accurate data collection at this stage, as even minor errors can cascade into major problems down the line.
2. During Payroll
Next comes calculations and deductions. The former involves working out gross pay, overtime, and bonuses. Then, it’s a question of withholding taxes, social contributions, and benefits, leaving the employees’ net pay. Meticulous attention to detail and cross-referencing of legal requirements is needed at this stage—or else businesses risk any number of punitive measures. Indeed, in the US, the IRS collected nearly $7bn worth of penalties from companies in 2021.
It’s all well and good calculating the pay, but now it’s time to send it. Employees can receive their wages through various methods, be it bank transfers, checks, or electronic payment platforms.
Finally, it’s time for payroll teams to get their house in order. The last stage of the process involves resolving outstanding issues, record-keeping, and documenting all payroll-related information. These records serve as an essential resource for audits and other inquiries.
The complexities of global payroll management
So far, so familiar to any payroll team. However, managing a global payroll throws multiple wrenches into the process. Indeed, as businesses expand into international hiring, they face an intricate web of regulatory gotchas poised to hinder efficient payroll management.
One of the central challenges in global payroll management stems from the sheer diversity of tax codes, labor laws, and reporting requirements across different countries. Each jurisdiction also boasts its own set of rules governing wage calculation, tax deductions, social contributions, and benefit structures. Failing to notice and adapt to those differences doesn’t just mean employee problems; it can lead to compliance violations, financial penalties, and reputational damage.
It’s unreasonable to expect any one person to hold all the payroll nuances from multiple locations in their head—which is why a technological solution is a must for global businesses, from simple spreadsheets to more fully-featured automated offerings. It’s little wonder that payroll outsourcing is projected to be a $7bn market by 2027.
Harmonizing payroll software and systems that specialize in given locations, currencies, and data formats is a challenge in itself, however—particularly when businesses must always consider the security of sensitive payroll data heading between these systems.
5 Common global payroll challenges and how to beat them
No one is saying that managing a global payroll operation is easy. Hurdles ranging from data discrepancies to technological glitches can disrupt operations and lead to financial inaccuracies. But forewarned is forearmed. In this section, we’ll examine some common challenges in global payroll management and offer strategies to overcome them (spoilers, the answer is usually technology!).
1. Data Discrepancies and Errors
Inaccurate or inconsistent data entry can result in flawed calculations and incorrect payments. Regularly auditing and validating employee information and employing automated data collection systems can significantly reduce the likelihood of errors.
Multiplier’s payroll platform provides automated pay calculations and accurate reports on the payroll status of international employees—helping to remove the risk of human error introducing discrepancies.
2. Compliance Complexities
Following a multitude of international regulations and taxation laws can be overwhelming. Tackling this challenge means investing in localized expertise or engaging global payroll service providers well-versed in local payroll peculiarities.
Multiplier’s Global Payroll offering helps businesses manage global payroll without hassle, allowing organizations to quickly onboard, manage, and pay their international employees on a single platform—with compliance guaranteed. So, talk to our experts and go global today!
3. System Integration Issues
Integrating diverse payroll systems and technologies across countries can lead to compatibility issues and data synchronization problems. Employing a unified global payroll software solution that offers multi-country capabilities can streamline this process.
For instance, with Multiplier, you gain access to a one-stop-shop for payroll processing that seamlessly integrates with a wide range of HR, accounting, and timekeeping software. That, in turn, creates a unified ecosystem that eliminates data duplication, reduces manual effort, and enhances data accuracy.
4. Security Concerns
Data security is paramount when sensitive employee information is shared across borders and stored digitally. Techniques like encryption, secure data storage, and regular vulnerability assessments are challenging for businesses to stretch to on their own—which is why a trusted global payroll solution is a solid option for safeguarding payroll data from breaches.
At Multiplier, we know this is the kind of thing that keeps people up at night, which is why we have dedicated customer support teams on hand to address queries and resolve technical issues and provide access to payroll and legal expertise from over 100 experts.
5. Late or Inaccurate Payments
Delays in payroll disbursement can demoralize employees, tarnish an organization’s image, and lead to penalties. Automated payroll systems can prevent delays and ensure consistency.
But with Multiplier, businesses gain access to much more, including the ability to preview and approve payroll data before hitting the run button, and total transparency with an end-to-end view of payroll for every employee in every country.
Frequently asked questions about global payroll management
Q. What are some best practices for managing payroll?
Staying organized is a good start. Businesses can avoid small mistakes that cascade into bigger issues by being meticulous from the start. But there’s only so much businesses can do by themselves. Leveraging a payroll partner takes the busywork out of the process, leaving you to focus on the more exciting things.
Q. How does the payroll management process work?
It’s best to think of payroll as having three stages—before, during, and after. Before is about collecting information about work hours, attendance, bonuses, and deductions. The middle stage is about calculating the correct pay and then sending it. After payroll, businesses must ensure they are on top of record-keeping.
Q. How does payroll management contribute to compliance?
A global company faces a dizzying array of rules and regulations that they must obey—or risk the consequences. Payroll comes with its own requirements, which they must closely obey to calculate the correct employee pay and set aside the right amounts for governments to collect.