Managing global payroll can be a complicated challenge for HR leaders in an interconnected world where businesses span continents.
Today, more than a third of all private sector workers in the U.S. are employed by a multinational organization, according to The Brookings Institution. As companies take shape beyond borders, HR leaders grapple with maintaining a consistent employee payroll experience.
Decentralized payroll presents challenges
The complexities of managing pay across different regions have led many organizations to adopt multiple payroll solutions. However, this decentralized approach often results in various challenges. According to a January 2024 Forrester survey (in partnership with global payroll platform Deel) of over 300 global payroll decision-makers, nearly half experienced errors, and 40% dealt with compliance issues when working with decentralized arrangements.
Forrester senior analyst Akshara Naik Lopez told HRE that, considering the extreme complexity of payroll systems globally, it takes significant time and effort to adopt and maintain several pay systems. “This ends up being one of the biggest costs for not having a unified payroll solution,” she says. According to the Forrester study, other hidden price tags include exchange rate fluctuations and training and support costs.
What’s more, organizations with a distributed workforce express a need for payroll solutions that address local regulations. Naik Lopez says these arrangements can produce payroll errors, limit reporting and analysis, slow operational agility and stir up compliance problems. “This makes it increasingly difficult for the HR staff,” says the analyst.
Forrester also found a consequential impact on employees in the form of delayed payments and inaccurate calculation of wages. Not only does this upset workers, but it can degrade the perception of the HR team’s reputation. Problems with payroll are notoriously noisy and can result in bad press and unwelcome reviews on online job hubs. “Over time, this starts affecting an organization’s ability to maintain top talent globally,” says Naik Lopez.
HR leaders are recognizing this isn’t a topic for the back burner. The Deel and Forrester study demonstrated that 63% of payroll leaders will prioritize the improvement of workflows across global payroll systems over the next 12 months. This is not only to alleviate headaches for HR staff but to reduce detrimental effects on employee experience.
All-in-one payroll solutions
Forrester found that respondents’ organizations use an average of six payroll tools, and nearly 90% said that payroll vendors split payroll management internally and externally. To address these challenges, almost half of the respondents shared that they plan to consolidate their network of payroll vendors in the next 12 months.
These platforms propose a unified system that provides a single view of the company’s workforce, streamlining payroll processes and boosting global hiring potential. However, experts say HR leaders must be cautious when selecting a payroll solution that promises an all-in-one experience. Looking for a platform that can efficiently run in multiple countries, offers flexibility and scalability, and provides advanced reporting and analytics capabilities is essential.
Lindsay Ross is the CHRO at Bitpanda, a European fintech based in Vienna with more than 700 employees from 50-plus nationalities. Ross highlights the pain points her department faces from decentralized payroll, including navigating language barriers, reviewing disparate output reports and irregular aspects of the employee experience. She also reports trouble facilitating payments across different regions, which may prescribe establishing local bank accounts and complying with jurisdictional requirements, a process that can be time-consuming and complex.
“Middle man” services that attempt to bridge gaps between umbrella payroll systems and “on-the-ground” providers often result in miscommunications, inaccuracies and misunderstandings, says Ross. Plus, there’s the time factor, with processing delays that frustrate employees and can cause reputational damage to the payroll and HR department.
Advice for HR leaders
Ross offers valuable advice for payroll leaders experiencing similar challenges: “Go global, but make sure it’s a true global player.” She also says it is important to harmonize the tech stack by integrating payroll with HRIS to create a uniform employee experience. Naik Lopez points out that a payroll system should give HR teams a complete view of their organization’s workforce, which ultimately has a positive impact on the ability to manage global employment.
Naik Lopez says payroll pros should check whether their current system allows them to run international operations efficiently and remove the continuous overhead of maintaining local compliance and taxes.
“Work with a firm that isn’t afraid to touch on the tax and compliance issues,” says Ross. “This saves a lot of time, energy and cash when choosing between just payroll or also including advisory services.”
Effective payroll can be a “growth lever” toward global reach, easier decision-making, and improved hiring and retention of talent, according to Forrester. The research suggests that as organizations calm immediate concerns by ensuring accuracy and minimizing delays in payments, they can redirect their attention toward more strategic endeavors, such as analyzing employee data. Scalability and reporting are essentials, says Naik Lopez, and the analytics capabilities are a plus.
Ross says HR leaders should focus on creating a positive employee experience, which means keeping things simple with one platform, easy access, fast resolutions and accuracy. “No one should even ‘worry’ about payroll—it should just be right.”
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