When a company’s operations stretch across countries and regions, payroll can become a challenge. How do you ensure compliance, first and foremost, in each country? Every country has its own regulatory framework.
Managing payroll in each country can also become quite messy, cumbersome, and expensive.
The solution that companies lean towards nowadays is to globalise their payroll. But is it that simple?
What is a Payroll Provider?
A payroll provider is an external service that does everything payroll related for your company, from calculating pay and deductions to transferring money into employees’ bank accounts and filing associated compliance submissions.
Payroll providers can perform some or all the payroll functions for a business. There are a multitude of benefits to using a third-party provider, but it is important to consider that a one-size-fits-all does not exist. Payroll is as individual as the company and requires tailoring.
What is a Global Payroll Provider?
When your business works with a global payroll service provider, you have one third-party provider doing your company’s payroll globally.
The global payroll model has different configurations. One is a global payroll provider aggregator model with a global payroll provider in one major market, like the UAE, partnering or acquiring local in-country payroll providers in worldwide locations to process all the payroll globally under one payroll contract. This model is a technology-aided tool that is beneficial in many instances:
- For reducing compliance risks in each country because of local legal expertise.
- Instant in-country cultural knowledge.
- It allows operations worldwide across multiple locations while minimising vendor management, paperwork and confusion.
- Businesses can view country- or regional-specific payroll data and reports. You can even have a single dashboard you can access for all your locations that is maintained by your aggregate payroll provider.
However, the system has also shortcomings, like all systems.
- The greatest risk for using the aggregate model is compliance with data protection laws. Businesses using this model must remember that data protection and security requirements must be adhered to in each country. The contracted provider does not actually run the payrolls they collate from the different countries.
- Even though you can draw standardised or centralised data collated in one source from multiple locations, the source data is not standardised and could present limited visibility of results and reduced robustness of analytics.
- You may have to manage multiple vendors in different countries or regions and time zones.
The latest trend in global payroll is a unified payroll solution that brings a company’s global payroll onto a single, unified platform that is managed in the Cloud.
This model has multiple benefits:
- The cloud uses a single processing engine and centralised database for payrolls in all locations.
- One invoice for payroll every month.
- A single standard of collecting and inputting payroll data globally.
- The payroll validation is in a single language and currency, eliminating inconsistencies or errors.
- Assurance that country-specific payroll data inputs and calculations are in accordance with local requirements, while reporting in a single application.
- Even where payroll providers partner with in-country or regional payroll experts, the processing still takes place on one platform.
- Data and workflows are standardised and streamlined across locations.
- Businesses have a deep overview of payroll while retaining control, solving the biggest risk of data protection and security.
What is a regional payroll provider?
Where a global enterprise defines geographic regions of operations, countries in geographic proximity could be grouped under the same region. Often having regional payroll solutions, as opposed to country-specific payroll solutions, can simplify payroll functions. This is also true when outsourcing to regional payroll providers.
For example, a business that operates in Europe, the USA, Africa and the Middle East could have payroll providers in each of the regions that manage the company’s payroll for the countries in those regions.
This is similar to having outsourced payroll partners in different countries, but clearly having one regional payroll specialist responsible for multiple countries within that region has cost and centralisation benefits, while remaining close to legal and cultural idiosyncrasies of each region and its countries.
Regional payroll service providers are a hybrid solution between local and global payroll providers. It offers flexibility and traceability, while also simplifying payroll across multiple locations.
The difference is subtle and would greatly depend on the business model your company follows. OPS as a regional UAE payroll expert can discuss your needs and create bespoke payroll solutions, regionally and globally.