Navigating global payroll as a multi-national organisation

By: Anna Koretskaya

Date: 11 August 2023

Business expansion is not just about entering new markets, increasing customer flow, and exploring new opportunities. Along with these advantages, companies must also navigate the challenges of local employment rules relating to taking on employees and making fair and timely payments, compliance with tax regulations, and much more. If you haven't had prior experience with employing overseas staff and are setting up such processes for the first time, this article will help you take the first steps.

And remember, there are specialised companies in the market that are ready to help you overcome these and other challenges. In particular, a payroll provider will keep track of regional employment regulations, benefits provisions, insurance, taxation, and many other nuances.

So, what is Global Payroll and what do I need to know?

The term "global payroll" refers to a system that manages employee pay, taxation, insurance, and benefits for individuals hired by international companies to work in regional offices. This system helps address key challenges faced by international businesses when opening branches in new locations. These challenges are broadly the same across all industries, with only minor differences.

The main difficulty lies in dealing with local and often highly variable tax requirements and compliance with local laws. The problem is that there is no universal solution for all countries, and everything depends on the region where you plan to conduct business.

What to do when opening an office abroad?

Even if you plan to outsource payroll, thoroughly research the requirements and learn about the pitfalls of doing business in the selected region. This is extremely important, and can help you avoid a whole host of problems in the future. Once you have done your research, you can:

Register as an employer in the country where you plan to hire employees, launch products, and establish all business processes.
Consult with experts on local employment laws relating to holiday, working hours, sick leave payments, employee insurance arrangements, and so on.
Gather all the necessary information and documentation before officially registering a newly hired employee.
Ensure you have secure data storage and protection systems to avoid future issues. Mishandling data, leaks, disclosure, or data sharing with third parties can result in fines and serious reputational damage for the company. It's better to take precautions in advance rather than pay for negligence later.
Verify your right to employ the selected worker in a specific country. Some individuals attempt to find employment without the right to work in a particular region. Therefore, you should check the documents of new employees. In some cases, online verification services are available, such as those in the US and the UK.
Ensure that employees can easily and promptly receive their wages. Make payments considering time differences and the specific payment system you are using. Always verify whether employees have received their payments within the specified deadlines.

Don't forget to pay taxes on time, as penalties for non-compliance with tax legislation are much higher, and such risks are not worth dealing with.

Monitor fair pay

Managing payroll in multinational organisations entails dealing with the diversity of living standards and economic conditions in the countries where you operate. Differences in wages can have an impact on employee motivation and satisfaction. For example, a salary considered sufficient in one country may be inadequate in another due to differences in living standards and prices. This can create challenges in attracting and retaining talented employees. Additionally, managing different currencies and exchange rates poses a challenge that can affect wage costs and company profitability. It is necessary to carefully analyse these disparities and make strategic decisions regarding compensation and wage harmonisation in different regions.

Outsourcing global payroll is the most efficient strategy

A payroll provider is a company or organisation that specialises in providing payroll processing services to other companies. They perform a wide range of functions related to payroll management, including salary calculation, taxation, record keeping and reporting, payment processing, and other essential aspects.

Advantages offered by global payroll companies

Payroll providers ensure high-quality service and accuracy in salary calculations, enabling companies to avoid errors and potential sanctions.
Companies can focus on their core activities, reducing the burden on internal resources.
Payroll providers consider various options to optimise the hiring process and payment systems, both in terms of budget and employees. Such services often help international businesses find compromise solutions that satisfy both employees and employers while complying with local laws. Cost-saving methods can vary greatly, and these proposals are developed individually.
Outsourced payroll providers use modern technology and software to automate payroll processes and provide clients (you) access to an online platform for viewing and managing financial data and documents.
Specialised companies take responsibility for timely tax payments and reporting to relevant authorities.
These companies use secure networks and servers, perform backups, and ensure protection against unauthorised access.

Thus, such companies help manage the complexity and risks associated with international payroll. In addition to the mentioned advantages, a specialised company or service helps adhere to other strategies for managing employee compensation. Specifically, such a service can take responsibility for implementing shared policies and procedures that help avoid disparities in wages between different company branches and standardise employee payments.

Many payroll companies also offer a global human resource management system that encompasses all company branches, ensuring fair calculation of bonuses, incentives, transparency in promotions and career advancement, and more.

With these measures, companies that expand internationally minimise risks, while their employees receive timely and fair payments. Moreover, all of this is done within the framework of legal norms, which is extremely important for all participants in the process (employer and employees).

Remember that no matter what area your company is developing, there are always solutions that will allow you to optimise processes in such a way that they will benefit and contribute to further growth. When you outsource payroll and compliance responsibilities, you can lighten the load on your staff and allocate those resources to propel your business forward giving you an advantage over your competitors.