It’s truly exciting for any company to be growing internationally. You may be preparing to go international or already have been for years.
Running an International workforce is one of the most challenging endeavours in payroll. Fortunately, there are two ways to run payroll; in-house or Outsourcing.
In this article, we will unload how International payroll outsourcing is the simplest solution to your international success and how to do it.
What is International Payroll Outsourcing?
International payroll outsourcing is handing over the global payroll responsibilities of your company to a third party.
Which payroll functions can be outsourced when running global payroll?
Each payroll service provider is different, but they typically include:
- Payroll processing (payslip processing).
- Employee onboarding.
- Calculating statutory deductions, company contributions and allowances for each respective country.
- Administration of employee profiles and benefits.
- Third-Party Payments
- Statutory and Internal Reporting
- Filing returns to the respective authorities.
- Employee Self-Service Management
It will be vital to determine how and what gets outsourced. It’s up to the company to decide which parts of the payroll process they want to hand off to the external service provider.
When should you consider Outsourcing International Payroll?
We are in a digital era where applications handle the growing list of rules and regulations the government sets alongside financial experts. It’s not easy to become well-practised in managing the payroll complexities of one country, let alone multiple countries. It’s almost always for this reason alone that companies outsource their payroll to international payroll service providers. The company may also be searching for a better or more cost-effective solution.
However, some companies with a multi-national footprint manage their own payroll. Such companies keep close working relationships with local consultants who assist with complexities and issues they may encounter. However, this can come with further challenges, such as differing work hours due to different time zones or language barriers.
Pros and Cons of International Payroll Outsourcing
For general pros and cons of payroll outsourcing, find here.
Here is a Specific list of the pros and cons of international payroll outsourcing.
- Gain access to a team of payroll experts for consolidated price.
- Your company can become more agile as you do not have to manage payroll changes internally.
- Keep financial data private – reduce the risk of sensitive data being shared inside the company, such as payslip information.
- Reduce payroll errors – better expertise results in increased compliance.
- Hand over challenging payroll procedures.
- A possible limitation in Payroll access.
- Limited control of the workforce managing your HR and Payroll.
Are you looking to go international?
What are my options when I want to Outsource my International Payroll?
There are essentially two different payroll outsourcing solutions for international organizations and businesses:
1. Contracting a payroll outsourcing service:
This can be:
- A Global payroll service provider.
- Separate local payroll partners in each hiring destination
- A payroll aggregator who subcontracts several in-country providers to offer you multi-country coverage.
2. Hiring your team via Employer of Record companies:
An Employer of Record Company effectively acts as the employer of the person you want to hire. They will manage all the payroll and other necessary compliance admin, but the hire will work for you. This makes it simple to expand your workforce in a new region without worrying about complexities.
What is the cost of international payroll outsourcing?
Payroll service fees vary significantly from country to country due to currency conversion, payroll processes, and general payroll requirements in differing countries. The headcount, needs, and unique requirements will also affect the cost. Unfortunately, there is no clear-cut way to say how much it costs, as this will also depend on which option you choose for your international payroll, as defined in the previous point.
You will come across other pricing models as you request quotes from different service providers. There may be quotes primarily based on the payroll frequency, a different company may only ask for a fixed fee for the service, and another company may charge you per employee.
When choosing a Service provider, it will be critical to look beyond the price of each option. But instead, focus on which offering contributes the best value to your company. Value added to your business propels your business into future growth.
How to outsource payroll successfully on a global scale
Success doesn’t happen by accident; it always begins with preparation. Here are some ways to prepare yourself and your company for a successful global payroll.
Communicate your business growth plan. Communicate your growth plan with your payroll provider. This will help them structure your payroll accordingly, resulting in the optimal setup for your payroll.
Know your Needs. The key to choosing the right solution is in knowing your needs. Be thorough with creating a complete needs analysis. Most payroll providers will have a process to identify all your needs and can assist you in this journey.
Choose the right payroll partner. This is a challenging decision, so be sure you can trust the payroll provider and that they have a respectable record and history in the industry.
Expectations. Make sure that you understand what their expectations are and what your expectations are. Take time to understand how items will be executed and handled.
Understand the emergency plan. What will happen if the company makes a mistake or cannot fulfil its needs at any given point? How will the payroll duty be fulfilled if the main person over it cannot meet their commitment? If needs be, is there an exit clause in the contract?
Do a Parallel run. A Parallel run is a test run used to ensure a smooth handover.
Be strategic about when payroll is migrated. Payroll setups are complex and require time to get everything in order. Usually, the beginning of a financial year is the best time for everyone.
Have a year plan. Understand what your payroll provider needs from the company at different times of the year.
Make use of ESS for employee-related admin. ESS can make employee-related payroll admin a breeze. By using ESS, you can remove the administrative intermediaries and get data straight from an employee into the payroll.
Prepare your team. Payroll affects the entire workforce. It is vital to get your employees onboard and up to date on upcoming payroll changes. It is especially important to prepare all employees involved in future payroll processes of any kind so that they can be trained and equipped on how they will fulfil their future tasks.
Be aware of global payroll challenges. Global payroll is the most challenging payroll. Your payroll setup may include a workforce with differing work hours, language barriers, admin and regulation challenges, and payment challenges.