COVID-19 may have slowed down global operations, but after the worst of the pandemic has passed, international business is recovering. As the Harvard Business Review states with regard to the state of globalization in 2021: “Trade has rebounded strongly, capital flows are recovering, and digital information flows have surged.” However, the impact of COVID-19 on global payroll has been of a permanent nature. As the experience of the pandemic has demonstrated, multinational organizations need to re-think their global payroll processes.
According to the 2021 Gartner Market Guide for Multicountry Payroll Solutions, interest and investment in global payroll transformation has increased from 2019 to 2020. As business leaders and decision-makers seek to improve their international payroll processes, the need for unified global payroll solutions which standardize payroll processes across geographies, consolidate multi-country payroll in a central platform and, by doing so, provide better data insights and reporting is stronger than ever.
But what exactly is the value of a global payroll platform for multinational organizations? Why should you invest in a global payroll solution? Read on as we highlight ten different ways how a global payroll solution can benefit your business.
1. Reduced administrative costs
One of the key features of a global payroll solution is process automation, both in terms of payroll processing and data consolidation. With automated processes, HR and payroll teams won’t have to deal with repetitive payroll-related tasks and thus have more time to focus on driving your business forward.
Another way how a global payroll solution can free up valuable resources in your company is by offering employee self-service functions. If employees are able to access their payslips and modify bank details online, this means a lot less work for HR.
2. Improved data security
As payroll data is highly sensitive, keeping it safe is a priority for businesses of any size. However, this is not always easy when operating in different countries. Transferring data between multiple jurisdictions in order to consolidate your global payroll exposes your company to data breach risks because you will have to comply with the different data protection regulations in each country. Failure to do so could result in heavy fines. For example, fines for non-compliance with GDPR regulations can be as high as 10 million euros or 2% of a company’s entire global turnover. Not to mention the security risks when shifting data from one system to another.
Using a unified global payroll platform, you won’t have to worry about the security of your data anymore. Since payroll providers have higher data protection standards than their client companies, data security is guaranteed during the payroll process. What’s more, when providers are connected via a global payroll platform, the risk of data breach or theft is significantly lower since all data transfers are processed within one single, compliant, well-protected system.
3. Increased resilience thanks to automation & standardization
The coronavirus outbreak has illustrated that a global crisis can have severe repercussions on payroll processing. One of the payroll inefficiencies that were revealed by the recent pandemic was the lack of standardization in payroll which resulted in poor resilience in the moment of the crisis. By switching to a global payroll platform which automates and standardizes data flows and processes across geographies, organizations can significantly increase the resilience of their payroll operations by compensating the lack of payroll professionals trained to operate different systems through standardization and automation.
4. Less to zero payroll errors
Yet another advantage of process automation in global payroll is the fact that the likelihood of payroll errors can be significantly reduced. Errors in payroll usually occur when it is processed manually, which still is the case in many organizations. Even in the era of digitization and technology, low-tech payroll processes involving emails, spreadsheets and several re-entries are still prevalent. As the latest GPA and Immedis global payroll survey revealed, 71 percent of organizations still rely on Excel for their payroll processing.
5. Centralized control over your global processes
Managing a business is always challenging, but for global business leaders, the challenge is even bigger because the problems multiply with the number of geographies. Keeping track of what’s going on in each location is crucial to stay in control. As coordinating international operations can be very time-consuming – connecting to and checking various different systems etc. – having a centralized global payroll platform simplifies managing it.
6. Improved quality of your payroll data
One of the main reasons why it is so hard to efficiently manage global payroll is that there are different data flows coming in from different providers which then need to be entered into your central HCM system. The fact that, very often, the data comes in at different times (depending on whether payroll is run weekly, bi-weekly or monthly in a particular country) and that it is presented in different formats decreases the visibility of that data even further. The result: Without a global payroll solution which standardizes the data for all your geographies and then consolidates it in one central platform, it’s almost impossible for managers to have a reliable set of data and gain insights into the payroll data for their entire global workforce.
Yet, knowing how much you are spending on your workforce in each country is crucial, especially when operating in a fast-moving global environment where you have to make important decisions with very little time on your hands. According to an ISG and Deloitte analysis, payroll costs account for between 50 and 60 percent of company spendings (illustrated on the example of a Fortune 500 company), which is why managing your workforce efficiently is a top priority. Having access to reliable, real-time payroll data is one key aspect to get there. Having reliable payroll data means being able to make well-informed business decisions and to manage your global cash flow more efficiently.
7. Reduced compliance risks
The Global Payroll Management Institute names compliance as the number one global payroll challenge. The reasons for this is simple: Rules and regulations vary in each country and keeping up with legal changes in all geographies can take up a lot of time. For example, a study among compliance professionals from financial services firms revealed that, in 2020, 26 percent of them spent four to seven hours each week updating policies and procedures in order to reflect the latest regulations. Another 22 percent even indicated a weekly time spending of between eight and ten hours.
In order to take the compliance burden off your in-house team’s shoulders, payroll processing can be outsourced to local vendors. However, managing multiple service providers proves to be equally challenging and therefore requires the use of a unified global payroll platform which connects all your in-country payroll partners.
8. Quick set-up process for new geographies
Imagine your business is already operating in multiple different countries and you are planning to expand to several new markets in the next year. This means you will have to hire local employees and set up local payroll – unless you hire them via an Employer of Record. Without a global payroll strategy and a standardized global payroll platform which is designed to integrate new in-country payroll systems, it will take a lot of time and effort, not only to set it up but also to connect it to your other payroll systems.
The value a global payroll solution offers in this context is twofold. First, a global payroll solution which serves as a payroll aggregator (and is thus working with a network of in-country payroll partners) can put you in touch with a suitable provider which is a lot faster than comparing service providers or setting up payroll yourself. Second, a global payroll plattform with the necessary API makes it easy to integrate external providers as soon as they start working and to connect new geographies faster.
9. Increased employee retention thanks to a smooth payroll experience
Employees are central in every business’s success and once you have built a strong global team, you will probably want to keep them. Creating a satisfying employee payroll experience is a key factor when it comes to employee retention. Not to forget that the happier the employee, the better their performance, the better for your company’s bottom line. Global payroll solutions are designed to provide a positive user experience to both employers and employees. Also, by improving the overall efficiency and accuracy of your global payroll processes, you will automatically contribute to employee happiness as well.
10. Easy cross-border payments
The main global payroll challenges companies face when going international are not just about compliance, correct payroll calculation and payslip distribution. One major hurdle for multinationals is the act of getting their global teams paid on time and in their local currency. While outsourcing payroll to a local provider might solve the problem in some cases – i.e. in the countries where payroll providers are legally allowed to pay employees on behalf of the actual employer – cross-border payments generally represent a problem for businesses with a globally distributed team.
There are four major areas which prove to be problematic when issuing payments to remote employees located in different countries: Transactions are expensive and slow, comparing and managing exchange rates takes up valuable time and pricing is anything but transparent. For companies which regularly have to issue payments to different countries to pay their global team, it is essential to find a solution on how to make international payments without spending too much money on fees. A global payroll solution like Lano also includes a digital wallet which allows companies to issue payments to employees in different countries without long processing times and without having to worry about fees and exchange rates.
Global businesses need a global payroll solution
There are multiple reasons why multinational organizations should invest in a global payroll solution. Better data insights, increased payroll process efficiency, enhanced compliance and centralized payroll management are some of the most prominent advantages of a global payroll platform. Businesses that want their multi-country payroll to be efficient, transparent and easy to manage should start to look into unified global payroll solutions and kick off the necessary transformation processes as soon as possible.
Lano helps companies and businesses of any size simplify their global payroll. Our global payroll solution allows you to manage all your local payroll providers via one central platform. Thanks to our automated data flows, you will be able to view and monitor payroll data for your entire global team on one single screen, including your freelancers and contractors. And if you need help setting up local payroll in a new market, our network of in-country payroll partners is ready to assist you in over 130 countries.
Get in touch with us today to discover how our platform can revolutionize the way you manage global payroll.