Your payroll career is flying high. It seems as if you’ve been processing payroll in the United States forever. Surrounded by the comfort of your experience and knowledge, you feel confident when your boss calls you into the office to talk about a new opportunity. She says, “The company is expanding our operations globally, and we need to prepare our team to expand beyond the U.S.”
Beyond the United States? But you only know the United States. It’s hard enough to understand differences between states, counties, and cities. Now there’s an expectation to learn rules of other countries? What do you do? Where do you go? Who can help?
Taking your payroll experience global doesn’t have to be a scary situation. Whether you assume responsibility for payrolls in other countries or you have team members in other countries, here are the first five of 10 things you need to know as you start your global payroll adventure.
1. Get a Global Education
The first step is to become educated on global customs and practices. Understanding the culture of the countries in which you will work is key. Not only will it help you understand how to work in these countries, but it will also show respect to your new colleagues. For instance, it is good to understand the country’s views on gender, sexual orientation, and religion. A lot of payroll professionals are female.
Going into a country that is male-dominated may require a different approach to how teams interact. On a lighter note, if you will be working with colleagues in Europe, make sure you adhere to schedules and are on time for meetings. That’s a mark of professionalism in many European cultures.
There are some resource groups that you can join, including membership in the Global Payroll Management Institute (GPMI). It is a great start to building your global payroll network. There are other organizations based outside of the United States as well, plus individual countries’ professional payroll organizations (e.g., The Association of Payroll Specialists (TAPS—Australia), the Chartered Institute of Payroll Professionals (CIPP—U.K.), the South African Payroll Association, the Canadian Payroll Association (CPA)). You can also find resource groups on professional social media platforms such as LinkedIn.
2. Determine Your Payroll Model
When it comes to determining the type of organization and support model to follow, consider why your company is going global. Is the company expanding operations either by growth or by acquisition? Or, has the company always been global and it’s now just looking to consolidate and standardize? This is important to know so that you can understand what tools and resources the company may already have versus what may need to be secured.
In some acquisitions, the solution—the vendor, software, and such—may be included. In other cases, it isn’t. For example, in one of my experiences, the company acquired employees in over 40 countries without any HR, payroll, or benefits platform. We had to source and implement solutions that would work not only in the 40 countries we were in, but also in the other 20-plus countries we knew we would grow into.
After knowing what your future global footprint looks like, you can evaluate the types of service models and each of these solutions as a “sweet spot” that makes sense for them.
Here are the types of service models for global payroll:
• In-house, typically with large enterprise resource planning (ERP)
• Outsource with an in-country provider (ICP)
• Outsource to a global payroll provider that may use ICPs
• Outsource to a global payroll aggregator that uses ICPs
• Accounting firm
Global payroll providers and global payroll aggregators are great solutions if you are in a variety of countries or have a small number of employees in those countries. It’s easier to manage one vendor than to manage vendors, or ICPs, in each of the countries in which you are running a payroll. Sourcing directly with an ICP may be more cost-effective if you have a large number of employees in a country. In some countries, such as Russia, the payroll function is very tightly coordinated with the accounting function; using an accounting firm might be the best option.
Overall, if you are in multiple countries with varying numbers of employees in each country, you’ll find having a hybrid approach is the best. Evaluate each country and the business you have in that country to determine your ideal global solution.
3. Design Your Organization
Will your organization be centralized? Regional? Country-specific? As with determining the model, how your organization is designed is driven by the reason you’re going global. Your organization should consider the following:
• Business acumen—Your team should be staffed with teammates who know the business. This may be more complicated in a global organization because the business may have different priorities across the regions.
• Language requirements—You should know the language requirements. Find out if employees are multilingual or if they only speak the local language. Ask if the country has a legal requirement regarding language use.
• Software/vendors—If your company uses local, in-country providers, then you will possibly need local teammates who work in the same time zone and speak the same language as the vendor.
• Time zones—During what hours do your employees expect support from you? Knowing this will assist in determining where the payroll team should be based.
4. Get Stakeholder Engagement
In a U.S. payroll, when determining when or how to expand services, groups such as tax and legal are involved to determine in which entities and jurisdictions employees can be hired and paid. When going global, there are many other factors to consider. First, the timing to operate a company in a country can be quite lengthy, sometimes as long as nine months, and that’s just to get the entity set up.
Second, it takes more than just legal, tax, and payroll to set up the entity. In some countries, payroll is more than payroll; it also includes accounting, workers’ compensation, or benefits. As an example, quite a number of countries have statutory benefits, or benefits required by law, typically funded by payroll social tax withholdings. Your company may choose to complement statutory benefits with supplemental benefits. Setting up global payroll requires collaboration with finance, treasury, accounting, legal, corporate tax, risk management, and human resources.
5. Figure Your Disbursements
Similar to the United States, there are different options for disbursing cash: a) use the company’s bank account and a bank file or b) fund a third-party vendor, who then funds employees. You could also use a combination of these. Going global adds extra layers of complexity due to country requirements and currency conversion.
A country may have requirements as to how cash moves in the country:
• Might require net pay to employees be distributed from the company’s bank account so that the deposit is labeled as from the company
• Might require income tax payments be made only from the company’s account
Your company may have a preferred approach for moving money:
• Press the “easy” button and use a third party
• Keep control of the money and use its own bank accounts
If you do choose to use a third party, be sure controls are in place to validate the third party is transmitting the funds.
Part II of this article will discuss registrations, change management, employing consultants, implementation milestones and requirements, and the design/test/employ/review methodology.
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Robyn Maslouski, CPP, has been a Certified Payroll Professional (CPP) since 1996. Maslouski spent many years in the payroll profession in the telecommunications, banking, and health care industries. Throughout her career, Maslouski has implemented HR, payroll, and service center solutions across 50 countries. She was the American Payroll Association's (APA) Payroll Woman of the Year in 2013.