Technology solutions must work hand-in-glove with expertise on the ground if international companies are to look after employees and remain in good standing wherever they operate.
This was the key takeaway from Maxine Gardner, Lenovo International Director of Payroll, in a recent conversation with Anne Clifford, TMF Group's Global Head of HR & Payroll at the Global Payroll Management Institute.
The pressures and opportunities for companies to operate increasingly in many parts of the world mean greater mobility and more flexible working arrangements for many of their employees.
At the same time, national and local authorities are imposing more laws, rules and regulations concerning tax, compliance and employee rights and benefits. They want more and more information to check that companies are acting properly.
Managing payroll across a global business has never been more complex if employees are to be compensated properly and on time and companies are to remain in good standing.
Here are Maxine's top tips for getting it right.
1. Go native – remember: English is not as widely spoken as you think
While technology solutions abound, company executives should pay very close attention to local languages and culture.
English is the global language of business but for employees in most countries, it is a second language at best – if understood at all. Payroll professionals on the ground must address employees, authorities and regulators in their native tongue.
2. Don't be fooled by the apparent similarity of rules and regulations between jurisdictions
Despite appearances, jurisdictional requirements are almost infinitely variable across the spectrum of employee compensation and benefit structures – basic salary, overtime, pension contributions, share schemes, paid vacations, maternity and paternity leave, health care and funded training.
Managers responsible for several jurisdictions must expect to deal with wide variations within each one in terms of what the authorities require from companies and how companies process employee tax and other deductions. What may be very similar 'on paper' for more than one jurisdiction may well be interpreted differently in another.
For example, there are different caps on education reimbursement across different jurisdictions. Tax and reporting rules on employee stock programs (share schemes) vary widely. An employee's reporting and tax treatment can change on transfer to another country.
3. Don't expect online portals wherever you go
Digitalisation is not universally applied. You'll need boots on the ground to undertake certain processes. In some countries, employees must still appear in person to file paper tax returns.
4. To avoid compliance penalties down the line, check your software systems have been set up correctly from the start
Payroll software must satisfy local data privacy, protection and security requirements and be easily updated given the frequency with which rules and regulations change. Implementing and updating software platforms requires a robust project plan with enough time for testing. To avoid liability for non-compliance, a company must check that its software system has been set up correctly at the outset. If tax treatment is deemed incorrect by local authorities, even years later, there could be heavy penalties.
5. Remember that home-working isn't always a cheap option
Remote or home-working has advanced with technology as some employees seek to improve work-life balance but it may come at a cost to employers. Regulations and tax treatments typically vary across national, state and provincial boundaries. Some authorities may even regard the state or province in which an employee works regularly as constituting a separate corporate entity – with specific legal, health and safety, and tax burdens.
6. Combine data analytics with access to local legislative expertise
Local payroll teams must have timely access to changes in legislation via internal communications, well-informed vendors and individual participation in industry bodies. At the macro level, companies can achieve a tighter grip on global payroll trends and compliance through data analytics. With a well-managed global payroll system, it is much easier to analyse and report on raw payroll data and validate payments to statutory bodies.
7. Give yourself time to comply
Paying attention to compliance requirements is especially important when setting up – or acquiring another business – in a new territory. Payroll professionals need to engage with their local businesses in advance to ensure enough time and resources are assigned to meeting legal and tax entity requirements.
8. Speak up
Above all, it is essential to establish a culture in which skilled payroll professionals have the confidence to identify potential issues and advise management about what needs to be done.
Talk to us
TMF Group has HR and payroll professionals on the ground in more than 80 jurisdictions to service your payroll requirements and provide the knowledge you need beyond payroll: deep local HR and compliance expertise.
Contact us to learn more about our services.
- Maxine Gardner, Lenovo International Director of Payroll, and Anne Clifford, Global Head of HR & Payroll at TMF Group, recently appeared on a panel hosted by the Global Payroll Management Institute (GPMI). Listen to a recording of the webinar.
- TMF Group published a report on the complexities of building and managing a global workforce as part of its annual Global Business Complexity Index series. You can download the report here.
- The full report, an independent investigation into the ease of doing business in 76 jurisdictions, resulted in an in-depth analysis, covering international expansion and sustainable operations in three key areas: accounting and tax, HR and payroll and company secretarial. Download the full Global Business Complexity Index.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.