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A Global Payroll Is For Companies That Work in Many Countries

Global Payroll – What is it?

For preparing a payroll you require to calculate the earnings of each employee, keep back what is for income and other social taxes, manage any bonus, expenses, commissions, and any benefits so that the payslip reflects the correct payment that is to be delivered to that employee. A payroll will also keep records, on the employees’ behalf, a track of his or her, working hours, make payments to tax authorities and other stakeholders, and also keep track of paid time off.

In a global payroll outsourcing scheme is the same process, but takes into consideration factors that bring on more complex issues. Every country has its own laws for labor and tax. A global payroll will have to keep track of various data streams in different spreadsheets, and keep expense invoices in different measurement units, at times in different languages. All this can be a bit overwhelming.

Every multi-country payroll is defined in the same way, irrespective of whether a company has an actual presence in a country where it hires employees, or works through another employer of record or international PEO, or hires independent contractors. The difference between a local payroll and a global payroll is the ability of the payroll to simultaneously work in different countries, so that it becomes easy to manage when the company hires or pays a workforce abroad, and also does all this in a simple way.

Why Is A Global Payroll Complex?

Local payrolls can also be complex, especially where it needs to handle thousands of employees with all of them working in a single location where all legal and tax codes are the same. But the complexity in a global payroll is threefold, and if the number of countries are in the dozens, this task can become overwhelming unless you can find a technological solution.

Tax codes and labor laws vary in each country and can also be different for each person. The tax structure applicable to each employee depends on a number of factors, like salary structure, age, as well as family status. There is also no stability in laws, which legislatures can change without any warning. Every country also has its own currency and language, while there are also different standards for bonuses. Some countries require the payment of a 13th salary as bonus.

This requires collection of a staggering amount of data which the international payroll is required to process. Each location and every department in it, has to provide reports on time and attendance, expense reports, and data on commissions and bonuses. Every month, the earnings of an employee can keep changing, leading to different tax rates. It is also necessary to calculate benefit packages. To add to this there can be variable costs, like bonuses and expenses that require to be calculated in gross to net.

Every report comes to the global payroll in different formats and possibly different languages. They have all to be aligned and calculated, leading to another level of complexity. Payments need to be sent to at least three parties, the employee, the tax authorities and benefits vendors. The number of parties could be as many as 10.

The manager of a global payroll is required to coordinate each of these local payrolls and combine them to make a global payroll. This job can be very complex and taxing, and this makes it difficult to deliver an error free gross to net international payroll that is accurate.

In this modern age, a true solution for a global payroll should be able to address this complexity. A multi-country platform that is sophisticated, will consolidate all data streams, automate workflows, and make it simple to standardize information. When combined with a dedicated project manager, who is always abreast of any changes in laws, and the partners in a country, it can result, every month, in an international payroll that is in time and in full compliance.