International payroll outsourcing: A guide for multinationals

April 29, 2020

For global companies, processing international payroll internally is complex, expensive, time-consuming and error-prone, and it can put you at risk of noncompliance. To alleviate the administrative complexity and expense of in-house payroll, many companies have turned to an international payroll outsourcing solution. 

What is international payroll outsourcing?

International payroll outsourcing means that a third-party company takes over payroll processing for your company, including administrative functions, such as tax reporting, calculating voluntary benefits and managing employee inquiries. The third party also becomes responsible for record-keeping and maintaining compliance.

Why consider outsourcing international payroll?

Generally speaking, the payroll process is much more complicated than most people know. In fact, producing payroll correctly every pay period can be a minor miracle. But beyond the average complexity of processing payroll accurately, compliantly and on time, managing multinational payroll is fraught with unique challenges.

Working with employees in multiple countries requires ongoing HR support for managing and resolving issues that come up in a typical pay period, let alone when there’s a major technical problem or change in the law. And you’ll need to support multiple time zones (possibly up to a full 24-hour period), languages, regulations and customs wherever international payroll is processed.

How can international payroll outsourcing help your company?

Because of the intricacy and importance of multinational payroll, outsourcing payroll can make a great alternative to in-house payroll. Here’s how:

Spend less and save more 

International payroll outsourcing saves your company money. You won’t need to hire additional staff to calculate payroll taxes or handle statutory tax filings and payroll inquiries. Your company also won’t need to invest in expensive software and hardware to manage the global payroll process, shifting your payroll strategy from a capital expense to an agile operating expense. 

Additionally, outsourcing keeps you protected from the often excessive fines that come from noncompliance.

Maintain compliance around the world

Compliance is a universal issue. Labor laws, data requirements and tax regulations are complicated, prone to change and vary by country. With an average of 35 data items per employee that must be reported, European and South American countries are typically the most complex to process payroll. 

Companies are required to abide by national law, regional law and local law, and to balance those laws with their business practices and the cultural norms of the host country. It’s an overwhelming task and almost impossible if you don’t have a dedicated local expert on hand to navigate the situation and steer clear of the hazards. 

When you switch to fully managed payroll outsourcing, you rely on local expertise and experience to help your company remain compliant, while you conduct business smoothly and without unnecessary stress and disruption.

Improve data security and visibility

When international payroll is processed in-house, you’re exposed to risk of fraud. In fact, payroll fraud happens in 27% of all businesses and is the No. 1 source of accounting fraud and employee theft.

When end-to-end processes are managed by an external party, any discrepancies between payroll, HR and finance departments are quickly reconciled. An outsourced payroll solution is especially beneficial if your company is struggling to improve internal controls or standardize processes across many locations.

Global visibility to workforce spend data is another value-add feature that only a centralized global payroll partner can provide. All local data such as, tax regulations, currencies,  benefits and languages are translated and consolidated into one global view, so you gain unprecedented visibility to payroll insights and are better able to address key business questions and make informed strategic decisions.

Reduce payroll errors and increase employee satisfaction

Employees are generally understanding when an employer has an issue with administration. But they’re rarely patient when it comes to payroll mistakes. People everywhere expect to be paid properly and on time. Nothing hurts employee morale like problems with payroll. When you have a dedicated global expert handling payroll, you minimize issues and can deliver the payroll experience your valuable employees deserve.

Find the right partner for international payroll outsourcing

When it comes to international payroll outsourcing, your success hinges on finding a partner who can support your unique needs and requirements. Here are some important characteristics to look for in a global payroll outsourcing partner.

A wide global reach with in-country experts

When you’re looking for an outsourcing partner, you’ll need a provider with a presence, and experience, in a lot of different countries, who can support your global footprint today as well as into the future.

A centralized payroll solution

With a centralized global payroll partner, you reduce processing inconsistencies and the chance for errors because payroll validation is provided in a single language and currency. You also gain access to workforce cost and reporting information from around the world through a single point of access, giving you faster and more accurate data for analysis. 

On the contrary, a decentralized outsourcing solution will fall short in supporting your efficiency and business intelligence goals. 

A strong commitment to data security

Data security is paramount in business today, especially when it comes to internal systems, such as payroll. When you’re searching for an outsourcing payroll partner, be sure to look for someone who is committed to the highest level of security.

Outsourcing multinational payroll can present great opportunities for companies who realize its strategic importance and prioritize efficiency, local expertise and business intelligence. The key is finding the right international payroll outsourcing partner to help you reach your strategic initiatives.

Learn more global payroll outsourcing by scheduling a free consultation with one of our global payroll experts today.

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