How to manage payroll effectively across borders?
Poor old payroll. You can get it right 100 times and no one will thank you. But get it wrong once and all hell breaks loose. In fact, is there any more important function to management-employee relations than payroll? I would argue not.
All the modern fripperies of HR, from cycle to work schemes to free coffee and gym membership, pale in comparison to getting paid accurately and on time (although admittedly, free coffee does come a close second).
Payroll across borders
But effective payroll isn’t as simple as updating a spread sheet once in a while. If only. It’s an ever changing balance of compliance and risk reduction that entails staying current with HR technology, complex regulations, and public policy. It affects everything from compensation and benefits, to health care and retirement programmes.
This is tricky for single site organisations, but it’s mind-achingly complex for global businesses. As companies expand across borders they inherit new HR tools and systems, efficiency slows and risk of error increases. Global firms manage an average of over 32 payroll systems at once – that’s the corporate equivalent of spinning plates. And even if they manage to master that particular circus trick, or adapt their existing systems to accommodate all new employees, those systems would still have to take into account the different employment laws, rights and taxation for each new jurisdiction.
Managing the HR costs effectively
The costs of doing all this, per employee, are steadily rising year over year. Global payroll is a complicated equation to solve. In fact, according to Ernst & Young, 55% of global firms doubt they will ever find a payroll solution that satisfies their payroll needs. On top of this comes the required technology infrastructure, which can become particularly expensive when a company operates in multiple locations across the world.
However, in order to reap the benefits of standardisation and automation, HR and payroll can work in harmony. Working with a single supplier and implementing a cloud-based Human Capital Management system will help organisations move forward on this journey and further reduce costs. The complexity of international payroll can slow down the pace of expanding into new lucrative markets, thus limiting growth opportunities. By working with a global HCM partner with local expertise, companies can transfer the responsibilities and risks to a third party provider. This will not only ensure compliance across all markets, but will make the expansion process smoother, faster and more efficient.
The power of standardisation and automation
By standardising, automating and outsourcing, payroll can become a strategic asset rather than a constant worry. When this function isn’t structured correctly, payroll costs combined with personnel and benefits administration could account for up to 35% of total HR costs.
More than two-thirds of HR leaders say they want unification and coordination in payroll and HR systems worldwide. They see a global HR and payroll system as part of the global expansion.
ADP’s global payroll solution for example has local experts on the ground in over 100 countries, to meet demand. By harmonising payroll and HR administration across disparate systems and tools, cultures and languages, and at the same time ensures compliance with fast-changing laws, contracts, collective agreements, social security systems and tax regulations that differ by country – even by city in some regions of the globe.
Ultimately HR and payroll share the same goal – to support the people within the organisation. It could be said that HR is a company’s backbone, with payroll being the key way to recognise its most important asset. In order to support their employees, HR must look to drive these functions towards a more integrated model. A harmonised HR and payroll operation is a cornerstone of managing Human Capital, enabling the organisation to get relevant data about their workforce, become more productive and meet its strategic business goals. Not to mention the relief not to have to worry about getting it wrong. Don’t you agree?
For more insights on how to implement an effective global payroll strategy check our website.