Payroll management is an essential part of running a business, but it becomes increasingly complex when managing a global workforce. You must navigate through different tax laws, payment methods and compliance requirements in every country your business operates in. One critical decision for every business is whether they use local payroll vs global payroll.
Local payroll involves managing payroll processes in each country where your company operates. On the other hand, global payroll means you’ll have a centralised system in place that manages payroll processes for the entire organisation.
When you decide between local payroll vs global payroll, you need to consider a few factors. Cost, compliance requirements and your business’s strategic goals are a few things you need to think about.
Below, we’ve shared the differences between local and global payroll and the signs your business is ready for payroll globalisation.
Put simply, local payroll focuses on managing payroll processes within a specific country or region. Global payroll involves consolidating and managing payroll across multiple countries or regions.
The main difference between local and global payroll is the complexity of managing these processes, with global payroll requiring more alignment across many different areas, which may have different time zones, cultural differences and tax regulations.
Local payroll is the process of managing payroll for employees in each country where a company is present. This involves complying with the country’s local laws and regulations for tax and social insurance contributions.
Typically, you will work with a local payroll provider or hire a team of in-house staff who are familiar with the country’s specific laws and regulations. For instance, if your business operates in the UK and USA, you’ll have two separate teams (or providers) for each country.
Your global payroll can be centralised and standardised for all employees across your entire organisation – regardless of their location. Global payroll means that you can manage your processes in a consistent and standardised way.
In a global payroll system, all your payroll data is stored in one central location, which makes it easier to track and manage all information. This often leads to greater efficiency and accuracy for your data.
You’ll also have more visibility and control over your processes, so you can quickly identify compliance issues and fix them.
It’s important to follow best practices for local payroll and global payroll for several reasons. You will improve accuracy and efficiency of your payroll, reduce costs, and ensure compliance with regulations.
Below we’ve listed the 5 best practices for an efficient, accurate and consistent payroll.
You must understand and comply with the specific payroll and employment regulations in each country or region. You should stay updated on changes to tax laws and reporting requirements.
Spend time identifying repetitive and time-consuming payroll tasks that could be automated. Implement tools and software to streamline data entry, payroll calculations and reporting.
You should regularly review and update your data privacy to align with local regulations. Protecting your employees’ data is one of the most important parts of any payroll.
Investing in the right technology will streamline your local and global payroll operations. It will save you time and money, as well as ensuring your business stays up-to-date with the correct tax rates, deductions and legal requirements for every employee.
Payroll audits are considered a best practice for both global and local payroll. Audits identify errors, discrepancies and anomalies that could put your business at risk of inaccurate payroll.
Payroll audits also serve as a deterrent to fraudulent activities. They help uncover any issues with falsified timesheets and unauthorised changes to employee records.
Finally, they foster a culture of continuous improvement. You will gain valuable feedback and recommendations for enhancing payroll processes.
If your company has employees in multiple countries and uses local providers, there are signs that show you need to globalise your payroll.
If your business is rapidly expanding across different countries, it’s increasingly difficult to manage different processes. Managing different payroll providers, payment methods and compliance requirements, can be time-consuming, especially whilst you’re expanding your business.
If your team is struggling to consolidate data from different providers, it may be time to consider globalising your payroll.
Different providers will share different information – especially on a country-by-country level. If you’re struggling with visibility for your data or reporting, you should consider consolidating your data into one system.
Often, a centralised global payroll system is more cost-effective than multiple, smaller providers. For ease, you should compare the costs to see if it’s cheaper to standardise your payroll across every country.
Globalising your payroll involves several steps, to ensure a smooth transition from your legacy system to your new centralised global payroll system.
Your first step should be assessing your current payroll processes. Identify the countries you operate in, the different payroll providers you are using, and any compliance or reporting issues you’re facing.
Look for a provider that has experience of managing payroll across multiple countries. Alongside this, check any new provider has dealt with any compliance issues you’ve previously experienced.
Make sure your new global payroll provider provides the right amount of support and they can help scale your payroll.
Above all, don’t rush this step and ensure you’ve collected a payroll RFP (request for pricing) for any potential provider.
After you’ve selected your new provider, it’s time to develop a project plan. you must develop a project plan. You should consider investing in specialist consultancy support for your payroll project management, as it can reduce cost and improve efficiency. Often, your new provider will either draft your plan, or heavily support you in creating it.
Switching over to a new system puts you at risk of errors, inaccuracies and non-compliance. Firstly, work with your stakeholders to develop a timeline, key objectives and finalise your budget.
You will now need to collect and consolidate all payroll data from your current providers. This is one of the most critical steps that can cause delays in the project if it isn’t carried out correctly. You should include all employee details, salary information, tax records and compliance documentation.
This can be a lengthy process, but it makes the transition easier.
You cannot risk inaccurate or data that contains errors. So, before you go live with your new software, you need to test it. This involves running test payrolls and ensuring that all your data has been transferred correctly.
You should also run a test payroll alongside your legacy data to ensure it’s working correctly. Then, you can compare both sets of results to check for any errors.
At Global HRIS, we take pride in being the only consultancy in the industry to provide specialised and dedicated payroll testing services. Our expertise and focus on payroll testing will give you peace of mind knowing that your data is thoroughly validated before going live.
Once you have tested the new system, you can go live. This involves transferring all your employee data to the new system and ensuring that all processes are running smoothly.
As soon as your new system is live, you should provide training and on-going support to your employees. This will ensure that they understand the new payroll process and can effectively use the new system.
Transitioning to global payroll requires careful planning, collaboration and investment in the right payroll software. You should conduct a thorough assessment of your organisation’s needs, including evaluating legal and compliance requirements.
Secondly, you should collaborate with local experts who have in-depth knowledge of the countries you have a presence in.
Finally, you should invest in a reliable global payroll system that can handle multi-country payroll requirements.
Don’t underestimate the importance of project management either. Transitioning to a global payroll solution requires designated resource, budget allocation, and stakeholder management.
Our dedicated team of payroll consultants will support you with both local and global payroll. We’re here to help at every step: whether you’re transitioning from local to global payroll or you need to test your payroll, we’ve got you covered.