Payroll Complexity in a Globalizing Marketplace
Payroll is by no means an easy task. Continuous changes in local legislation, changing auditing standards, high union involvement, increasing demands to pay employees based on performance, making sure employees receive the correct pay, are all factors that can make your payroll a time consuming and costly process.
NGA’s recently released Payroll Complexity Index gives an interesting overview of where in the world payroll is most complex and makes an interesting read for payroll professionals.
How can a global company use this information?
Many payroll specialists claim that the payrolls they work on are the most complex around. The index gives you a more objective view of the level of complexity by combining a number of parameters retrieved from payroll specialists from different countries.
I have implemented payroll myself for a number of different countries within Europe, and this has given me a good perspective of where complexity in payroll can occur.
One country can have very complex ways of calculating tax and social insurance. Where as another country has very easy rules for this, but compensates this with rules for earning vacation that many people simply do not understand, let alone can build into software.
There is a huge range of payroll related rules within countries which can only be managed by relying on valuable software. The software you choose for your payroll needs to handle the complex local specifics and the provider you choose for implementing your payroll needs to have the skills to understand these complexities .
But in a globalizing marketplace, is this enough?
Many organizations would like to have a global solution that covers every country they operate in, or might expand into. There are however not many payroll vendors on the market who can manage global payroll projects with in-country experts. As an organization this is key because it gives you the confidence that your payroll is run effectively in every country.
Multinational organizations have the following options:
- To contract with a skilled payroll provider who will offer a good range of services at locally competitive prices. However, this requires managing relationships with multiple vendors in multiple countries and not having a consolidated view on payroll data. This type of provider will not think globally, which is a key requirement for any global organization when choosing a partner. Global organizations need experts to assist in complex international payroll challenges, such as managing expats and international transferees in both home and host countries.
- To select a global vendor with a large service delivery footprint with one set of Service Level Agreements. However, if you add a new country with a low number of employees into the project this may become an expensive addition which will not help when building a business case. It is also important to consider if the vendor you have selected has the experience in the country you want to run the service or system in.
- The best of both worlds would be a global payroll which delivers both knowledge and expertise, benefits of scale, and high delivery quality. PLUS a network of local in-country experts that know the regulations inside out. Truly global payroll requires a provider to go global when needed and local when required to deliver its customers a consolidated view on payroll data, cost-efficiency, and a payroll solution that follows the growth path of the organization.
I would like to invite you to listen to the episode 'Going Glocal: Mastering Multi-Country HR' to hear how others are running complex payrolls around the globe today.
To download NGA's Payroll Complexity Index 2013 report click here.