When a company decides to go global, it needs to plan out appropriate salary payouts to all of its employees and freelancers along with benefits that may be required by local laws. In other words, it needs to figure out how their global payroll management is going to work. In this article Token Talent discusses global payroll management and what you need to pay attention to when going global.
Global payroll management is the set of operations to streamline payroll data across international divisions within a single organization to deliver accurate salaries to its employees in full legal compliance with their local regulations. The process of unifying and accurately systematizing data is the same for hiring through an EOR (employer of record) or hiring independent contractors. The main challenge behind global payroll management is to set up a system that performs necessary payroll procedures simultaneously across countries. This challenge can be further broken down into smaller difficulties that international businesses are likely to face.
Global Payroll. Major Obstacles
Labor Laws and Tax Codes
In every country, the role that employers pay in payroll tax payment is different. In Europe, it is often the employer’s responsibility, and so employees receive money and don’t engage with the tax authorities at all. But in other states, employees and employers are equally responsible for proper tax dedications and pay their shares separately. At the same time, laws and regulations are altered frequently, and meeting requirements is increasingly difficult as the company enters new countries.
Massive Data Collection
Global payroll management must also take into account a large number of variables that affect salaries, such as public holidays, 13th salaries, etc. And it only gets more troublesome in case of sales representatives that get shares of how much they sell.
Transparency & Reporting
Once a company goes global, it is exposed to multiple organizations that control payroll in different countries. So companies are likely to even have one EOR per country they are in. Importantly, an international business needs to store data in appropriate language and format to both use it for its own needs and to be transparent for audits from local controlling bodies.
Payment
After the company finalizes the numbers, it sends money directly to employees, tax authorities, benefit vendors (such as health insurance providers), and local B2B partners. These transfers often require more than simple card-to-card payments. Effective global payroll management involves selecting and integrating the right payment methods that comply with each country’s regulations.
Data Management & Protection
Data associated with payroll is the primary target of cyber-criminals. Thus, it needs to be subject to the highest cyber security protection protocols — GDPR in Europe and CCPA in the US. It is critical that businesses are putting maximum effort into protecting the extremely sensitive personal information of their employees.
How to run a Global payroll?
1. In-House Payroll Management
Many new businesses cannot afford an EOR (Employer of Record) partner. While testing a new location, it’s often easier to rely on existing staff to manage payments for remote employees.
Pros:
- Cost-effective
- Suitable for testing new markets
Cons:
- Requires local knowledge that may not be available
- Not scalable and may overwhelm the team
2. Location-Based Payroll Management
As your business grows and establishes a presence in multiple countries, hiring an agent or contractor in each location becomes a viable strategy.
Pros:
- Local experts ensure legal and tax compliance
- Enhances security and staff protection
Cons:
- Limited data integration between locations
- Difficult to access and compile payroll data across regions
3. Unified Payroll Services
To streamline operations across all countries, businesses can partner with a single payroll management provider that handles everything centrally.
Pros:
- Seamless and scalable payroll processes
- Standardized and easily accessible data
Cons:
- Sharing all employee data with a third party may feel risky to some businesses
What types of global payroll providers exist?
Global payroll providers run on different models that can roughly be classified as wholly owned and aggregate.
- An aggregate model means a network of partners to perform payroll management locally. Basically, a team in your home country has partners across the world to manage payrolls locally.
- A wholly owned model is when a provider has their very own branches across the world. Instead of aggregating partner organizations, it develops its own network of offices across the world.
How can SMEs stay compliant globally?
SMEs are always on a budget. It is startups and companies just starting out that are particularly careful with how money is spent. Where there is an opportunity to do things in house at a lowest possible price, they will go after it. That’s why delegating payroll management may not be an option as global payroll management solutions tend to be expensive.
Yet going global is a necessary measure if a business intends to increase revenue. For SMEs, global payroll management is as crucial as it is for large businesses and corporations. Staying compliant is a prerequisite for successful international growth. Thankfully, there are affordable pay-as-you-go alternatives to costly partnerships.
Token Talent is a top option. It acts as a B2B partner on a B2B contract and it helps companies pay their employees and freelancers worldwide. Through a wide network of banks, Token Talent is able to deliver payments from you to your teams anywhere in the world. Token Talent is always on the lookout for changes in laws and regulations, so closing documents it provides for employers and their recipients are created in accordance with international requirements.
Conclusion
- Legal and finance are the ever-lasting pain points for any business whether it develops solely within its home country or ventures out for new markets.
- Failure to meet requirements established on companies in overseas locations leads to financial losses, such as fees and penalties, and it may even lead to full-scale criminal prosecution.
- For companies looking for more affordable pay-as-you-go alternatives, one of the best B2B software solutions is Token Talent. It simplifies payroll-related processes through seamless synchronization and secure money transfers. Thanks to its wide banking network, companies can send payments to any employees and contractors without having to worry about geographical borders.
- Token Talent acts as a B2B partner for companies. It provides necessary closing documents for legal and financial purposes so businesses can lawfully declare spending.
