Top 7 Global Payroll Challenges

As exciting as it sounds, venturing into new territories is daunting. While the process of global expansion has evolved over the years, it still has several crucial aspects that could contain potential risks.

Payroll processing is one such critical facet. With more and more companies expanding their operations to acquire a global workforce, there is a rising need for efficient and effective global payroll solutions.

However, running payroll on a global scale is a challenging task. Many challenges and complexities must be addressed to ensure compliance, accuracy, and timeliness of payroll processing. Here is a list of payroll challenges (with the solutions, don’t worry!) that organizations should be prepared for while managing cross-border payroll.

1. Managing Long-Tail Payroll

Processing payroll in the Long-Tail countries is one challenge that not many organizations consider. Before diving into its complexities, it is important to understand what the term ‘Long-tail’ stands for. ‘Long-Tail countries’ refers to the countries where a company has a low employee headcount. These countries, with a tapering count, are usually at the end of the company’s scope of expansion.

While most payroll providers can seamlessly process payroll for countries with a larger employee headcount, it becomes challenging to process payroll for a heavily distributed workforce. Especially in some instances, the headcount can be as low as single digits. This becomes a critical focus area for organizations as payroll in Long-tail countries poses higher risks, the key ones being:

• the inability to deliver a uniform employee experience across all countries of operations – be it the big head or the long-tail
• risk of non-compliance, as adherence to local country regulatory requirements will not change because of having a low headcount.

Learn more here: What is ‘Long-tail’ Payroll: A Rundown

2. Heavy Dependency on ICPs

We, as humans, are wired to thrive on simplicity. And so we end up choosing the option that seems less complex. As is the case with payroll.

A rookie mistake companies make while expanding their workforce is depending on In-Country Partners for payroll processing. While this might seem like a safer and simpler option initially, ICP dependency comes with its issues.

An organization's vendor or partner management grows as it expands into more countries. This means overseeing multiple calendars, worrying about data accuracy, and running behind deadlines to receive payroll data on time.

Having a reliable local presence, who is an expert in local laws and regulations of multiple countries and can provide the necessary support to the employees in the native language, is a valuable asset.

3. Making the Right Choice: The Perfect Payroll Technology

Having a reliable local partner does not eliminate the need for an organization to have a suitable payroll system.

While payroll technology has seen significant evolution in the past years, there have been hiccups in implementing this technology to consolidate global payroll operations.

With proper implementation, the ideal payroll technology will advocate automation across multiple stages of payroll processing, from data collection to output delivery. This reduces manual intervention significantly, reducing the possibility of errors.

Learn about the next big thing in Payroll | Next-Generation Payroll Technology: Embracing the Era of Autonomous Global Payroll

4. Ensuring Compliance on a Global Scale

There are many dimensions to employment legalities worldwide, and it is critical to remain compliant.

Despite technological advancements, this area challenges companies operating across multiple countries. Each country has its own set of laws and regulations and its deadline for tax calculation. This might not be a threat when a company’s scope is smaller. However, the complexities creep in as business operations expand into newer territories.

Having the ability to transfer this operational risk to industry experts who can help stay on top of things, ensuring you not only stay updated on regulatory changes but provide advice on implementing them - is an option to consider.

5. Safe and Sound: Ensuring Data Security

It is no doubt that payroll data is highly confidential and needs to be handled with care. Various privacy regulations are enforced to ensure that this data remains secure.

However, at a global scale, ensuring payroll data security poses a challenge. Data often comes from multiple sources and hence, needs to be standardized. Combine this with the lack of a single data management system due to dealing with multiple partners, and it’s a recipe for disaster.

Either your organizations or your payroll partner will need to take steps to ensure they remain compliant to SOC and ISO standards and transparently showcase measures taken to safeguard employee data. If you have implemented a HRIS and a payroll system, you will need to carefully monitor data movement between these systems when they are in flight.

6. Reducing $$$: Effective Cost Management

Contrary to popular belief, payroll processing is not and should not be costly!

However, managing payroll budgets has often been a concern for companies. Increasing costs are inevitable when processing international payroll.

Multiple vendors can increase an organization's implementation and vendor costs, resulting in higher expenses.

In addition, businesses also have to consider the fluctuation in currency exchange rates while processing payments. Due to their volatile nature, these exchange rates also significantly impact the cost of payroll services.

A large chunk of this expense can be managed by employing a single payroll solution across multiple countries. By doing so, the payroll provider could mediate these expenses and help eliminate all the accrued costs.

7. Harmonizing Payroll: Standardizing the System

There is a new requirement for every new country a company expands into. Companies often end up using different platforms based on the requirement. While this might be a quick fix during the implementation stage, in the long term, the lack of a single platform catches up to them through multiple data sources, data inaccuracy, and dependence on more manpower to oversee multi-country payroll operations.

In such instances, a unified global payroll system is essential. This way, it will be the only source of information for all payroll data. Integrating with other platforms is also crucial for a global payroll provider, which will allow a seamless flow of data between systems. Providers offer a global view of the payroll process providing HR and Payroll leaders with a bird-eye view of payroll operations. Global SLA reporting also helps measure payroll performance against deadlines to strengthen the overall process, irrespective of the headcount – Big head or Long-tail.

No matter the number of countries in scope, payroll processing should be harmonized.

A Single Solution: The Neeyamo Effect

The challenges may differ, but the solution is one.

Presenting Neeyamo Payroll^TM 3.0, Neeyamo's latest upgrade to its global payroll solution. With technology at its heart, it is designed to streamline and automate payroll processes on a global scale.

Powered by the Global Payroll Tech Stack, it provides the user with a truly global unified platform with a scalable and agile solution that addresses all pain points. With a 180+ country in-house presence, Neeyamo Payroll ensures payroll compliance, enhances employee experience, and provides a seamless payday experience.

Reach out to the payroll experts at irene.jones@neeyamo.com to know more.