Payroll is a document that states the monthly earnings of all employees in your company, with details on the income tax withholding, commissions, bonuses, social tax, and benefits. The payroll correlates with the payslip, which is the document that delivers the monthly pay to the employee. Also, keeping track of the worked hours, paid vacation, tax payments and other such things are part of the payroll process.
Global payroll is similar in nature, but it is more complex, due to the fact that it repeats for multiple countries. Labor laws are different from one country to another. Tax is also different. Currencies are different. Under these circumstances, keeping track of all details, invoices, expenses, and other data streams requires a huge volume of work and multiple spreadsheets to juggle each month. This can easily become a hurdle, even for the most efficient company out there.
A multi-country payroll stays the same, regardless of various differences such as the presence of a country office where the hiring takes place, and the hiring of permanent staff or the use of an employer of record. Global payroll outsourcing is an extremely valuable tool that allows businesses to carry out all local payroll processes in all countries of interest, for the smooth management of the workforce abroad. This keeps things simple and allows multi-country companies manage their workforce in a seamless and effective manner.
Why Is Global Payroll Such A Complex Process?
A business employed thousands of people will have to manage a complex payroll, even though all of them are located in the same country or city and therefore fall under the same labor codes and tax laws. Just imagine this process applied to several different countries and you’ll have an accurate picture of the complexity of a global payroll. Global businesses must rely on technology to handle this process.
Tax codes and labor laws are not only different from one country to another, but also from one employee to another. The tax rate may depend on the age and family status of the employee. Laws can change on a very short notice. Currencies are different, bonus structures are different and the legal treatment of these bonuses is also different from country to country. In some countries, the law requires employers to pay a 13th salary by the end of the calendar year.
These are numerous incoming data streams that require recording and processing. This is the role of an international global payroll. All different time sheets, expense reports, bonus data and benefits become part of a huge database. Add the variable costs into the mix and you’ll see that global businesses do need to rely on powerful software tools to have this job done without hiccups.
Once everything is calculated, the next step is to send out payments to all of the parties entitled to receive them. These parties include employees, tax authorities and suppliers, among many others.
On top of all these, the process doesn’t allow for error, no matter how small. Everything needs to be accurate and timely, and this adds to the complexity of this process.
A reliable global payroll solution should take all of these into consideration. It should be able to seamlessly consolidate data streams coming from different countries. It should also automate the workflows and standardise the information, in order to create a common ground for everyone in the company to rely on. Furthermore, it should be easy to adjust to reflect law changes at any given time.