Running a multi-country payroll is a challenge many businesses face as soon as they start expanding into new markets and/or hiring employees abroad. Payroll must be run and managed flawlessly in every location to guarantee wages and salaries are paid accurately and on time.
But given the increased level of complexity, managing an international payroll isn’t an easy task. What’s more, the data and insights from the different local payrolls must be collected and harmonized in a central system.
So, how can multinationals succeed in setting up a multi-country payroll that is easy to manage, fully compliant and transparent? And what does multi-country payroll mean in the first place?
Put simply, multi-country payroll means managing and processing payroll in different geographies at the same time. According to Gartner, multi-country payroll is “an approach to payroll that unifies the provision of payroll software and/or services across a minimum of two countries.”
A multi-country payroll set-up is largely based on a strong payroll system that merges and synchronizes international payroll processes to allow for the level of transparency which is needed for efficient payroll management. Another term that is often used in this context is global payroll.
The challenges of processing payroll on an international level go far beyond the normal payroll complexities businesses face when running their domestic payroll. Global payroll challenges range from payroll regulations that vary from one country to the next to handling cross-border payments in different currencies.
Organizations with a global workforce need a working solution for their multi-country payroll if they want to avoid the following problems that often result from running various local payrolls without a centralized payroll management system.
Lack of transparency if payroll operations are carried out independently, following localized rules and procedures
Low efficiency level of payroll processes
Lack of synchronization and standardization
High risk of not meeting all the compliance requirements linked to payroll
Valuable time and resources spent on managing multiple local payroll service providers
In addition, a multi-country payroll solution ensures that organizations have easy access to consolidated payroll data for all their geographies and entities. Payroll data delivers valuable insights into workforce spendings and other workforce-related information that can be used to improve the overall talent management strategy.
This is also where HR & Payroll Tech Advisor Anita Lettink sees the main driver for businesses to invest in a payroll solution that covers all their geographies: “[T]here is a desire in the headquarter country to understand what is going on with payroll and have at least some level of control over who's getting paid what”, she explains. “So I would say the insights from data and having a measure of control over money are probably two of the most important reasons that companies are starting to think about moving to a global payroll.”
Interested in knowing more about how companies can choose a payroll solution that works for them, and what factors could and should influence that decision? Listen to this episode of The State of Work where our host Sandra Redlich talks to payroll expert Anita Lettink about how to pick the right payroll solution:
In the 2022 Market Guide for Multicountry Payroll Solutions, Gartner states that “[o]rganizations make increasing efforts to streamline their multicountry payroll operation”.
Multi-country payroll management is often a question of managing different local payroll providers. That’s why payroll integration and payroll consolidation are two key aspects to keep multinational payroll operations manageable and guarantee data transparency across the organization. Another key aspect in this context is payroll automation.
Organizations can choose between different types of global payroll solutions, including multi-country payroll providers and payroll software that unifies the payroll data from the different geographies and provides a central interface to manage payroll.
There is no one-size-fits-all solution for managing a multi-country payroll. Which strategy or approach to choose depends on various different factors, including:
Number of countries
Regulatory landscape in the different payroll countries
Number of employees on the payroll in each country
Existing payroll infrastructure
Available payroll knowledge
Multi-country payroll software is different from normal payroll software. Software for domestic payroll provides features and capabilities which are aimed at calculating gross pay and net pay, payroll taxes and other payroll-related deductions.
Payroll software designed for international payroll management, on the other hand, focuses on harmonizing and standardizing payroll data across all geographies and providing rich data insights and reporting to increase payroll transparency. It synchronizes payroll processes, data and reporting for all locations and consolidates the organization’s international payroll information in one single system.
Some of the most common functionalities of a payroll system designed for multi-country operations include:
Payroll security features for cross-border data exchanges and data-storage
Payroll data consolidation for all geographies
Standardized payroll workflows and policies for the whole organization
Global payroll costs analysis as well as country-specific reporting
Global payroll compliance support
To achieve high payroll accuracy rates and increase the overall process efficiency, multi-country payroll software should integrate with other HR and workforce management tools.
The Lano Academy is for informational purposes only and should not be construed as legal advice. Lano Software GmbH disclaims any liability for any actions you take or refrain from taking based on the content contained in this article.
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