On the global stage of the business world, growth is good. The move towards globalisation allows organisations to take advantage of economic opportunity and a diverse talent pool. Coupled with the growing gig economy, there is almost no barrier to entry for someone to work for a company located across the other end of the world.
However, everything comes at a cost. While growth for the business is good, this also means increased complexity in managing global operations and a geographically-diverse workforce. Payroll regulations differ from country to country and the challenges of managing a global workforce can start to pile up over time.
Challenges in managing a global workforce
As payroll regulations are regulated locally, every country will have its own set of standards and guidelines that companies must adhere to in order to be compliant. Non-compliance can result in hefty fines and penalisation. Over time, these penalties can add up.
In addition to payroll regulations, payroll and HR must abide by other legislations including privacy laws (such as GDPR in Europe or PDPA in Singapore). Concurrently, issues relating to personal data and payroll laws are managed differently in each country. In extreme situations, some of these issues may unwittingly prevent an organisation from implementing a global payroll.
The global payroll solution
As organisations continue to search for economics of sale and process excellence, this also means that processes are gradually being consolidated and centralised. The myriad of technology applications available has accelerated this shift towards a global center of excellence (CoE) to manage key business functions. Payroll is the newest entrant on this bandwagon.
Challenges of global payroll
While a centralised payroll platform no doubt yields significant cost savings and streamlines workflows, it is not without its challenges. A CoE for a certain business function has the challenge of keeping processes relevant for each local office while retaining the benefits of running it centrally. The same applies for payroll. If payroll operations at the local level are a mess, chances are the move towards a centralised payroll platform would be at snail’s pace.
The next biggest concern is running local payroll operations at the global level. With the ever changing labour and employment laws in each country, many global corporations turn to local payroll providers for their expertise. According to the 2019 EY Global Payroll Survey, two-thirds (68%) of organisations surveyed indicated that using a single payroll system is important. Yet, only one-third (34%) of organisations believe that a single vendor is able to handle all their payroll needs.
Benefits outweighs challenges
While a decentralised approach may seem feasible in theory, it may not work for every organisation. With a dozen payroll vendors in different countries each using different platforms and processes, it is bound to create inefficiencies including duplicated work, inaccurate data and higher costs.
Payroll providers today have upscaled to support global payroll processes. Payroll platforms today are able to address the emerging global payroll challenges by providing MNCs with the option of an integrated payroll that can handle the complex compliance regulations of differing geographical locations. Many global payroll providers partner with other vendors, such as Workday, to expand their suite of services to cater to global payroll management.
The application of robotic process automation (RPA) has also accelerated payroll efficiencies and accuracy. This game-changer automates mundane and repetitive tasks such as monthly payroll processing, tax calculation and verifying employees’ hourly pay. In fact, Deloitte’s 2018 Global RPA Survey found that organisations that have adopted RPA saw a 90% improvement in quality and accuracy across multiple domains. RPA also does more than simply process payroll – it becomes possible to analyse the critical payroll data and uncover useful insights to help maximise workforce resources, including forecasting turnover rates, track in-hire data, and track employees’ lifecycle.
A centralised payroll platform allows organisations to create accurate global reporting. It also offers better insights into international payroll requirements. Concurrently, operating a global payroll requires a healthy balance between having it optimised while allowing some flexibility at the local level. In the future of work, internationalisation is imperative for the business to attain sustained growth. By centralising and optimising core business functions, leaders can channel their efforts into focusing and conceptualising long-term business priorities to drive organic and inorganic growth.