How to Find the Best Global Payroll Model for Your Business

Global payroll isn’t just a back-office function—it’s a strategic pillar for businesses expanding across borders. But with fragmented systems, rising compliance demands, and escalating costs, many companies are struggling to find a model that truly supports their growth. How can organizations build a payroll strategy that supports global growth, enables effective cost control, and ensures compliance—now and in the future?

That was the central question explored by Lano CEO and Co-founder Aurel Albrecht and Russell Webb of Phase 3 Consulting during a live session at this year’s HR Technologies UK. Together, they broke down the three primary models for managing multi-country payroll—local, global, and hybrid—and examined the trade-offs each presents in terms of cost, risk, and operational efficiency.

If you missed the event, here’s a quick recap of the key insights they shared, along with practical guidance for choosing a payroll model that fits your global workforce strategy.

Local Payroll Model

In the local payroll model, a company partners with separate payroll providers in each country where it operates. Each provider handles payroll according to that country’s specific legal and compliance requirements. While this approach allows for tailored, country-specific support, it requires managing multiple vendors and workflows simultaneously, which can strain internal resources as the company grows.

Pros:

• Local compliance

• Deep market understanding

Cons:

• High administrative overhead

• Fragmentation

• Slow set-up in new locations

• Lack of unified reporting

Use for:

• Payroll operations in few locations

• Countries with low payroll complexity

• Set-ups that can rely on an experienced in-house manager

Global Payroll Provider

Under the global payroll provider model, a company’s entire global payroll operations are managed through a single provider that covers multiple countries. This model simplifies vendor relationships and supports faster expansion, but companies may need to adapt to the provider’s standardized service framework and limited customization options.

Pros:

• Centralized data and operational control

• Quick expansion to new locations

• One company responsible for all operations 

• Some reporting available

Cons:

• Less flexibility, higher cost in some regions

• Rigid set of services provided

• Often no option to continue working with current providers

Use for:

• Complex payroll set-ups with operations in multiple locations

• Regions with high payroll complexity

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Hybrid Payroll Model

Companies operating with a hybrid global payroll model use a combination of local and global providers to manage payroll for all their locations. The hybrid approach offers a flexible balance between centralized oversight and local customization, making it a strong option for businesses with a varied global footprint and diverse compliance needs.

Pros:

• Good balance of control and local flexibility

• Lower burden on the in-house team

• Mostly centralized operations and compliance

Cons:

• Higher level of complexity in managing vendors and integrations

• Documentation needs to be processed manually for local providers

• Reporting does not provide a complete overview of the workforce

Use for:

• In-house payroll teams with expertise in certain countries/regions

• Complex payroll set-ups with operations in multiple locations

• Mix of countries with varying levels of payroll complexity

Cost vs. Control Trade-Offs

Working with a global payroll provider can reduce overhead but therefore may offer less flexibility or customization. Working with local vendors, on the other hand, provides more oversight but often requires greater investment in systems and compliance. As a third option, hybrid models can balance cost and control but may introduce complexity in vendor coordination and governance.

Scalability and Long-Term Efficiency

Unified global payroll solutions can be more scalable as a business expands into new markets, while decentralized set-ups may struggle to keep pace with rapid global growth or shifting workforce structures. Businesses should consider whether the model they intend to choose supports automation and process standardization across borders.

Compliance and Regulatory Risk

Models with strong local expertise reduce the risk of errors in tax filings, benefits, and labor law adherence. Centralized models, however, may overlook country-specific nuances—unless they are backed by strong local compliance support. Plus, highly regulated industries (e.g., finance, healthcare) may require stricter compliance controls. The company’s appetite for compliance risk will affect whether it handles payroll in-house or outsource it.

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When choosing a global payroll model, businesses need to take different factors into consideration. These factors include:

• Business model: The structure of a business—centralized vs. decentralized—and its plans for entering new markets will influence the complexity of its payroll needs. The chosen payroll model should align with the existing company structure.

• Regulatory environments: Payroll laws vary significantly across countries, and some are more complex or tightly regulated than others. For complex regulatory environments, working with local vendors who have boots on the grounds is the preferable approach.

• System integration: Payroll systems should integrate smoothly with existing HR and finance platforms to ensure data accuracy and streamline processes. For business with a complex tool landscape, working with a single global payroll provider that offers the necessary integration capabilities might pay off.

• Business expansion plans: The chosen payroll model should support future headcount and geographic expansion. A company rapidly expanding into multiple regions may require a more scalable, flexible model than a business that is growing at a slower pace. Choosing a model that can evolve with your business prevents costly overhauls later.

• Internal expertise: In-house models demand deep payroll knowledge across jurisdictions. Global providers can fill expertise gaps but require strong vendor management skills. The choice of one model over the other largely depends on the availability of internal expertise and resources.

Lano combines the strengths of both the local and global approach to running multi-country payroll. Backed up by a network of thoroughly vetted in-country partners, we offer payroll services across a range of 170+ countries. While local experts ensure compliant processes and accurate, timely payments, our global payroll consolidation platform offers businesses a holistic view of their global payroll operations.

Benefit from automated payments and reporting, consolidated data for your entire global workforce, and full vendor choice while maintaining full control over your global payroll. Book a demo with one of our experts today to learn more.