3 Global Payroll Models: Choosing The Best Fit For Your Global Business
Outsourcing your payroll – and choosing the right global payroll model – is an important decision for any business. Data privacy, compliance with local laws, and technology limitations are all challenges of managing global payroll at a global company. That’s why it’s best to choose out of the 3 most popular global payroll models for your business. So, your payroll will remain efficient, compliant and accurate.
Here we share all you need to know about the 3 global payroll models. We’ve listed the advantages and disadvantages of each model to help you find the right provider.
3 Global Payroll Models
There are 3 popular global payroll models to consider:
All Under One Provider Model
Provider By Region Model
All Local Providers Model
The best approach for your business will depend on a few factors, including the size of your organisation, the number of countries you operate in, and your budget.
All Under One Provider Model
Here, you can outsource your global payroll to a single global payroll provider. Through this model, you can streamline all your payroll operations across every country you operate in. This type of provider will have a presence in all the countries you trade.
This model is most suited to businesses looking for consistency across all payroll.
Simplified management: When your payroll is under one single provider, there will be less administrative burden. You can easily manage all your operations under a single team.
Compliance: Tax laws, rules and regulations differ for every country and managing this can quickly become complex. Under one provider, you can ensure compliance with all local tax and laws – reducing the risk of fines.
Greater control: When you choose the ‘all under one provider model’, you’ll have better control over your global payroll . This means that all your operations are aligned with your wider business objectives.
Integration challenges: Potentially one of the biggest challenges is integrating all your global payroll operations under one single provider. It can be time-consuming, especially if you have multiple legacy systems in place.
Less local expertise: Some providers of the ‘under one provider model’ may not have a huge presence in every country you operate in. To lessen this risk, ensure that the global provider you choose has a large presence in all the countries where your business operates. Without this, you’re at risk of compliance and regulatory issues that could harm your business.
Risk concentration: When you rely on a single provider for all your payroll needs, you may be exposed to greater risk if there are any issues with their services. However, all global providers are well-equipped to deal with potential threats, so you’ll likely be highly-protected.
Less room for flexibility: One single provider may not offer the same level of flexibility as multiple providers, which can limit your ability to change something on a country-by-country basis.
Examples of All Under One Provider Models:
Provider By Region Model
If you’re looking for a more tailored approach to global payroll, the ‘provider by region model’ involves engaging with multiple regional providers. Here, the regional providers you partner with will be responsible for managing payroll in the regions where your business operates.
For instance, provider by region may cover all regions your business trades in across Europe or Latin America.
You’ll have greater flexibility with your payroll management, but there are a few potential challenges to consider, including inconsistency and a greater administrative workload.
More local expertise: Working with regional providers can offer more specialised knowledge of local regulations and cultural differences, which can improve communication – whilst also reducing your compliance and regulatory risk.
Greater flexibility: If you need to change something on a regional basis, working with a regional provider means you do not have to worry how it will affect other regions, like with a single global provider
Cost-effective: Some regional providers may offer cost savings when you compare with the total cost of a single provider. However, you should consider all options and ensure you get quotes from a multitude of providers to compare.
Integration challenges: You will be working – and managing – multiple payroll providers. As a result, this can be complex and time-consuming. It will be even harder to integrate when you have different legacy systems in place.
Inconsistency: You’re at a higher risk of inconsistent payroll processes and reporting, as providers will share their findings in different ways. This may impact accuracy and efficiency, especially if you have to collate all regional data to share internally with your colleagues.
More administrative tasks: Managing relationships and deliverables with multiple providers may mean more administrative tasks, especially if you have separate agreements and contracts with all providers.
Higher risk of data breaches: Your data will be stored in multiple locations across different regions, so this can increase the threat risk of data fraud, breaches and cyber attacks. However, every regional provider will protect your data as much as possible and will have secure processes in place to mitigate this risk.
Examples of Provider By Region Models:
All Local Providers Model
The ‘all local providers model’ refers to using local providers for your payroll in each country where your business operates – rather than region-specific, or using only one single provider.
It is best suited for organisations that operate in a few countries, or if you’re looking for local expertise to best-manage your payroll. However, with the advantages of local expertise comes the challenge of managing multiple providers across different countries.
Below we’ve shared the benefits and disadvantages for the ‘all local providers model’.
Local Expertise: When you implement payroll providers on a country-by-country basis, you’ll be working with experts who are familiar with local traditions, language and most importantly, tax regulations.
Cost savings: If your organisation operates in a few countries, it makes more sense to choose local providers – and it can save your business money.
Improved customer service: Local providers can easily deal with any issues that quickly arise through their localised customer service. However, any provider should have a great level of service in place to help with any issues.
Higher risk of integration challenges: Managing global payroll on a country-by-country basis and working with a variety of providers means you’re at a higher risk of integration errors. Managing this level of payroll means you’ll be co-ordinating data from different sources, and ensuring they’re compliant with legacy systems.
Complex systems: Your providers and their internal systems will input data differently and reporting will vary. This can quickly become complex and time-consuming for your organisation.
Technical compatibility: Payroll systems used by local providers may not be compatible with each other, which means it will be difficult to integrate.
Examples of All Local Providers Model
What To Ask When Choosing Your New Global Payroll Model:
Above all, you cannot rush any decision when it comes to choosing your new global payroll model. Asking yourself – and your stakeholders – the questions below can help you make an informed decision about the model that is best suited to your business needs.
You should take the advantages and disadvantages of the 3 global payroll models into consideration, especially if you have a set budget in mind and you only trade in a few countries.
What is our level of expertise in managing payroll across different countries? For instance, do we have the necessary in-house resources to manage global payroll efficiently?
What is our budget for global payroll management?
What are our data requirements across the organisation?
What level of customer service and support do we need?
How do we plan for future global growth and expansion?
How Global HRIS can support your global payroll project:
Our dedicated payroll experts can help you pick out of the 3 global payroll models, based on your business needs. We can test your payroll systems and processes to identify issues before them before they become critical.