Global payroll and its features

What is Global Payroll?

Payroll is the method that involves calculating every employee’s earnings, keeping the correct assets and social taxes, accomplishing bonuses, commissions, taxes, and benefits, and delivering the proper payment to the employee, with a payslip. It also includes keeping records on behalf of employees, making payments to all the necessary stakeholders (such as tax authorities), keeping track of work hours and paid time off.

Global payroll is the related process, repeated for each country, but with extra levels of complexity. Tax and labour laws differ widely from country to country. Preserving track of various data streams – several spreadsheets and expense invoices in other languages and different measure units – can be overwhelming.

Global payroll is the process of combining all payroll data streams from across the globe into one place, systematizing the data, and calculating and delivering payments around the world in local currency in full legal compliance.

The meaning of global payroll is the same, regardless of whether a company has an entity in the country where it is hiring, working by an employer of record (EoR) or hiring independent contractors. What differentiates a global payroll from a local payroll is carrying out the necessary payroll actions for different countries simultaneously, making it easy to hire and pay a workforce abroad and simple.

What Makes Global Payroll So Complex?

A local payroll can be complicated, particularly in an industry with thousands of employees, even if all of them are in a sole location and fall under the same tax and legal codes. But a global payroll can be at least three times more complicated. When there are dozens of countries concerned, it can be merely overwhelming – unless there is a technological solution.

Labour laws and tax codes are different in each country and from person to person. Every employee’s tax rate is based on numerous factors, including salary structure, age, and family status. Laws are also volatile. Legislative changes happen without warning. Languages and currencies are different from country to country, and so are standards for bonus payments. Many countries require employers to pay the 13th salary as a bonus.

The number of data aims that need to be gathered and processed can be staggering. Every department in each location must accommodate time and attendance reports, expense reports, and bonus and commission data. Earnings can vary each month, and therefore the tax charge could be altered. Benefit packages also need to be calculated.

All those reports will arrive in different languages and different formats. After they are all aligned and calculated, there is yet another level of complexity. Payments must go to no less than three parties (employees, tax authorities, benefits vendors), and sometimes as many as 10.

Global payroll in the modern age is designed to address this complexity. An advanced global payroll platform streamlines the data streams, automates the workflows, and standardizes the information to make it simple. When combined with in-country partners and a dedicated project manager to stay on top of law changes, the result is a perfect payroll in full compliance on time every month.

Payroll Models – Aggregate or Wholly-Owned

To keep compliance, stay informed of authoritative changes, and work efficiently with the local culture, a global payroll company must have a local presence. In today’s international payroll aspect, there are two primary models.

One model is the wholly-owned model. Companies open offices in those countries to manage the entire operation in-house. Another model is the aggregate model. Companies build connections with at least one local company to carry out the payroll – regularly accounting firms or law firms. The ICP is hand-picked, vetted, and provided with the technological support of a payroll platform.

When it comes to ICPs, one size does not fit all. Simultaneously, the wholly-owned model has an instinctive appeal because it seems more combined and controlled. In reality, it has proven to offer less flexibility, transparency, and accountability than the aggregate model.

With the aggregate form, payroll suppliers in the local country compete for the global payroll resolution provider’s’ business’. That makes them more responsible and enables the global payroll company to work with only the best ICPs. The aggregate model also provides maximum flexibility. If an enterprise has a particular demand, it can be matched with the right ICP.

The most reliable solution is a payroll aggregator and a cloud-based payroll platform that gathers data from all locations and presents a unified view. Together, the effect is a potent combination of compliance, transparency, and data consolidation.

Real-Time Reporting

As payroll is the only largest cost item for any company, it makes sense to control that spending as closely as possible. Knowing how much is being spent at any time and precisely where the funds are going is the basis of control. Otherwise, it’s nearly impracticable to make effective business decisions on raising investment, or if necessary, cutting costs. Without real-time business intelligence (BI) reporting, it is impossible to run an efficient global operation.

However, with a manual payroll, keeping track of total payroll spending, or even how many employees a company has in total, is a considerable challenge. It means reconciling data from many sources, often in various styles and languages, adding up all the figures, and hoping that it matches the total paid.

Real-time reporting is the only effective way to keep track of payroll spending. When all the information is consolidated into a single dashboard, it’s easy to see the essential knowledge and to use it to make strategic decisions. Did your payroll spending go up or down this month? Do you know why it changed? With real-time reporting, the information is ready at your fingertips.

A good reporting suite will allow clients to compare spending by time (month or month, year over year, etc.…) location (costs of hiring in one country vs a different country), and overseas project. It provides a broad overview of all payroll spending and offers an option to drill down to each element and examine it closely.

Getting Started with Payroll Automation

When a company starts to contemplate expanding abroad or moving from standard payroll to an automated payroll system, whether or not it is already part of the global economy, it’s crucial to know how it will benefit from the move. One of the first concerns is whether the new system will process the company’s employment type is most likely to utilize.

An easy way to manage it is to work with a global payroll provider. The combination of state-of-the-art software solution, expert ICPs by the aggregate model, and in-house provision for assuring every detail are addressed can resolve all of the payroll problems.

One right way to find a payment provider is by request for proposal (RFP). Formalizing the RFP can also assist the company think through what it must have in a payroll provider to concentrate on instead of just looking for the most advanced technology, the most widespread range of services, or only the lowest price.

Global payroll can be a huge undertaking. But working with the right company that can manage all types of employment models supports an easy transition movement between the three main types, provides an automated payroll platform, with payroll processed by local experts whilst offering individual support, the process can be relatively simple.