The business world is wide, and that means expansion. Which is great. Growth brings a lot more employees, and with them diversity of thought and company culture. But it also brings a lot more responsibilities. Especially for the payroll team!
Perhaps you started in one office in Manchester, but now you might have Melbourne, Mumbai and Munich on the location’s dropdown menu – that’s a lot to think about. And you need your payroll to excel for you, wherever you are in the world. What works in the UK won’t necessarily be relevant in India, so you’ve probably realised that you need a hand managing all your payroll. But what’s going to work best? What sort of international payroll solutions are there? And what’s the dream ticket for you?
What are the different options for global payroll services?
Payroll services come in all shapes and sizes, because one size definitely doesn’t fit all in HR and payroll. Let’s check out your options.
1. Software as a Service (SaaS)
This is the one which delivers over the internet. A payroll software that’s hosted in the cloud, with no need to install or maintain anything on your own servers. Subscribe to the service and you’re basically good to go.
- Quick implementation
- This system can grow with you (scalability as they call it in the trade)
- Data access from anywhere with internet
- Streamlined payroll processes
- Improved data accuracy
- Increased data security
- And reduced stress – because compliance and reporting are handled for you.
In fact you get all the usual qualities you’d expect from a bespoke payroll service. You may already be using a brilliant SaaS in one single domestic location and it’s brilliant.
But a small word of caution. If you’re now shopping for a global scale solution, you’ll find it’s not quite the same.
We humans are brilliant at making that move across continents. These software solutions aren’t always quite as travel friendly. Magic for Manchester, a bit mediocre for Mumbai.
HR and payroll processes and legislations are unique to each country. You need individual licences for each place and a shared service centre to run it. So that would mean your workload getting a lot bigger and a lot more complicated:
- Funding and maintaining all the interface requirements
- Recruiting and training your payroll experts to deliver the payroll
- Making sure they have the language skills to answer queries from your international employees.
It’s all possible, just an expensive model unless you have a lot of employees in each added location to make the investment worthwhile.
2. Bureau payroll services
A payroll bureau is part in-house, part third-party. You maintain control of your payroll processes, but rather than carry out all of it, you can let some elements be handled by your chosen provider. Employ your staff, set the timetables, and oversee the processes, but know that some of the more challenging tasks are handled for you. The third-party provider typically offers a pre-packaged solution, and this option is your flexible friend.
Play to your strengths: feel confident that your staff are on top of the parts they’re trained for, and don’t worry about the tasks your provider is handling. You no longer need your own in-house experts for every single aspect of payroll processing.
And it’s not just about skill set; this option buys you time. And that’s not something you get very often! By handing over payslip production or expenses processing (just for example!) you save your own payroll team so much time. They can reclaim those hours in the day to do something else. Hey presto – your in-house team is refreshed, ready to refocus on another project.
However the tasks are divided up, a bureau solution makes sure you always have cover in the areas you need them. Stay legal, know the rules, and always ensure compliance.
And possibly the biggest win for a global organisation is that you can tailor each of your bureau service providers in each location. Your third-party collaborator can be local to each country you’re based in.
3. Outsourced services
Sometimes known as fully managed payroll or full-service payroll, outsourced services are the whole kit and caboodle of payroll. You engage a provider and they manage your entire payroll process (pretty much) from beginning to end. This is obviously very handy if you don’t have an internal HR or financial admin team available in a location. Or you might have those teams, but they’re needed on other business activities. Global payroll outsourcing has lots of benefits:
- More time: You get to focus on your core business.
- Save money: Even factoring in paying for the outsource service, it could still be cheaper than employing and training payroll staff.
- Increase efficiency: You get a dedicated team, with no other demands on their time.
- Access to expertise and technology: The outsource provider has all the most up to date tech at their fingertips and running a global payroll demands a lot of knowledge about all the different locations and their legislations. Your outsourced team has that knowledge already.
- Total compliance and safety: Avoid the pitfalls as the provider predicts all the potential bumps in the road. They’ve done this before and you’re in safe hands.
This is a system with huge benefits for international organisations. The provider supplies the people and the knowledge, so you don’t need to. It’s quick, safe, and reliable.
But there is one small caveat. You won’t be outsourcing all your employee obligations. You’re still legally responsible. But by choosing a great outsource service with proven experience in the jurisdiction you’re expanding into you can minimise the risk of non-compliance.
Take a look at our blog about International Payroll Outsourcing Advantages for more on this whole subject in general.
How much do global payroll services cost?
It’s not as easy as you’d think to put a price on global payroll services. You might assume the costs were the same everywhere, in every location and with economies of scale. After all, it’s just paying employees, making sure their wages, bonuses and benefits are correct, and doing all that other fiddly stuff with calculations. So it’s a numbers game, right? Frankly, no! It would be great to just work out a percentage of the whole payroll amount and charge that. But when we’re talking global payroll, it’s complicated.
Payroll costs don’t correlate with economic wealth in a country. Some countries might have lower wages to dispense, but a lot more red tape to negotiate to get the payments calculated and made. You might find that one of your locations has experienced a lot of legislative changes in a tax year or just has a very complex national system in place. Each location will mean that your payroll service needs to charge you differently and each change or variant needs an action to keep your payroll up to date.
Here are the major costs that have to be factored in when working out a fee for global payroll:
- Compliance costs: every country has its own idiosyncrasies. Ever-changing, complex regulations require a lot of time and resources to ensure compliance.
- Set up costs: a global payroll set up can involve substantial administrative work. Setting up bank accounts, registering with local tax authorities, creating the payroll schedule all cost money.
- Integration costs: integrating global payroll services with an existing HR and accounting system can be challenging. You may need to go bespoke. Anything custom made can get expensive. Just think of those custom Nike iD Air Jordans!
- Currency exchange rates: when you’re rolling out global payments in lots of different currencies you’re going to be exposed to fluctuations in exchange rates. And banks don’t make transactions for free. Remember the shocking fees on your bank statement after a week’s holiday abroad… How much did that cold beer on the beach work out at with the added currency fees? Now apply that to your whole organisations payroll.
- Communication costs: going global means you’re communicating with your employees across languages and time zones. You may need to allow resources for translating payroll documents and provide customer support in multiple languages and coordinate with local providers.
Every payroll projection will have factored in these basic costs. But then there are the add-ons which are unique to each location, each organisation, and each employee. So taking a percentage of the whole payroll amount isn’t really feasible. A flat fee per employee per payroll run is common, with additional fees for compliance and reporting services, currency conversion and any other extras that crop up.
Once you know your specific needs, in whichever location, it’s a question of getting a quote from a provider. But there’s more to consider…
Hidden costs in global payroll services
You’ve heard it before, payroll is full of twists and turns and complexities. Which means that you have to watch out for lurking costs associated with those complexities… It’s the payroll equivalent of reading the small print. We can all spot the main payroll functions you’d expect to affect the bottom line on your payroll bill. But some charges are hidden. You need to make sure you’re aware of everything your provider might charge you for, so make sure you ask about:
- Seasonal highs and lows will impact the cost of your payroll – more employees to on- and off-board. Its likely seasonal staff also have complex contracts. So bear in mind that this might all come with a price.
- Any out of cycle transactions will carry a separate price tag. And those out of cycle things do happen…. Be sure you work out the costs on that so you don’t end up with a big bill every month.
- Overpayments will also carry a fee. As will reprocessing and additional payments.
- If a mistake happens in calculations and you end up making an inflated payment that’ll cost and so will the process to recover it.
- Bad Debt write off is another one to add to the bill! And when all the efforts to recover those debts fail and you cut your losses, where is the money to pay the fees going to come from?
- Printing costs. It’s mandatory to provide paper payslips still in some countries and that comes with (guess what?) more cost.
- Handling employee queries. Some providers will charge you for every transaction they have with your team members.
- And last (but not necessarily least) reconciling the accounts for third parties, like your pension providers, and the various tax offices in your global locations.
These all add up. And you don’t want that sinking feeling to hit you once you’ve signed a contract. So whichever provider you choose to go with, ask those hard money questions upfront and be sure you know what is and isn’t covered as standard.
So how do you choose your perfect payroll partner? You can’t just swipe right, that’s for sure!
Here’s the checklist of all the things you need to consider when shopping for the perfect supplier fit for your business.
1. Knowledge of local and regional compliance/legislation
Choose a company with legal expertise in the locations you need your payroll.
2. Experience in the territories you’re operating in
A firm may be doing wonderful things providing immaculate payroll in Fiji, but if you don’t operate in Fiji, look away now – no use to you in la belle France.
3. Processing simplicity
All the bells and whistles are no good to you if you can’t actually use them. Sometimes simple is best and user friendly is key.
4. Integration capabilities
By that we mean, are you compatible? It’s no good flirting with the provider with the pretty graphics if their platform won’t seamlessly merge with your existing tech. Huge custom alterations to force integration just isn’t cost effective.
5. Data security
Payroll data is sensitive information, and you need to protect it at all costs. Check that the provider you’re considering has great database security in place. There is also a lot of compliance around data protection regulations. You need to partner with an organisation that takes these rules seriously. If they aren’t complying with all the legal requirements, then you could be the one facing fines.
6. Scalability and flexibility
Choose an outfit who will accommodate your growth spurts, both upwards in numbers and sideways into new locations. You need to be confident they can handle more employees, new territories and all the challenges you throw at them.
7. Customer service
You can tell a lot from that initial contact with a business. Did someone answer your call, reply to your enquiry quickly, personably? A customer service team can make or break a deal. A bad first impression is unlikely to lead to a match made in payroll heaven.
8. Global payroll alternatives
The main contender here would be an EOR. You might want to go one step further than outsourced payroll. And that step takes you into the world of An Employer of Record. An EOR is the legal employer of a worker in a certain country. These companies not only cover all your payroll processes, but also legally employ the talent on your behalf. There are important differences between an EOR and an outsourced payroll provider so check out our blog all about An Employer Of Record to learn more and see which would serve your situation best.
Be prepared, and if in doubt… ask the experts!
We’ve covered a lot of ground here. Choosing a payroll partner is a huge task. It’s not overly dramatic to say that the future of your organisation may depend on it. We’ve touched on some of the things available and some of the things you could consider.
But you might feel it’s time to take things one step further and actually discuss your options with the experts.
We’d love to hear from you. At Cintra Global we have a range of options and all the time in the world to chat to you about international payroll outsourcing.
It’s what we do, it’s what we’re passionate about, and hopefully, it’s something we can do for you.