Two options to deal with the complexities of a global payroll

If you have any number of employees living and working overseas or globally mobile, you’ll be all too familiar with the payroll and payments complexities involved.

For a start, there’s the administration and cost involved for the business. Then, for international payroll, there’s currency variations and covert fee structures to consider. These can lead to payment inaccuracies and delays for your employees. On top of that, globally mobile employees face the potential of double (home and host country) taxation or gaps in National Insurance records and pension payments.

All in all, a veritable minefield for you and your employees.

And with the growth in global assignments¹ it’s a situation in which an increasing number of companies are now finding themselves. So, what’s the best – nay simplest – way of managing such circumstances?

You generally have two overall options available to you – either source third-party support or manage everything in-house. Here we weigh up the pros and cons of both approaches.

Third party support

Pros

You can outsource to specialist payroll and payment solution providers.
Payment specialists will ensure you keep on top of currency fluctuations and the local tax and regulatory requirements of every country in which you have employees. Plus ensure delivery certainty.
A specialist can handle everything for globally mobile employees: your UK payroll, the tax equalisation and the payment of part of the monies in GBP and part in local currency.

Cons

Unless you can find one provider to offer you a fully integrated solution (and there are one or two out there), you’ll find that multiple specialty providers are required.
Managing multiple providers can be as time consuming and complex as managing everything in-house, primarily due to the lack of joined-up working.
Not all third-party payroll providers have the proprietary technologies to specifically handle bulk international payments. Things like: in-built adherence to ever-changing local payment regulations; and strategies to manage currency fluctuations more effectively.

In-house arrangement

Pros

It would sit well with the centralised strategy adopted by most multinational companies, allowing for improved control.
It makes communications on a local level easier.
You have one point of contact for everything: your payroll department

Cons

What you gain in control, you can lose in complexity.
Understanding local tax restrictions and the nuances of various international insurance policies across borders represents a big challenge for any busy payroll department.
Any inaccuracies or delays in payments might be harder felt by both the business and its disgruntled employees.

And the verdict after weighing up all the pros and cons? International payments and payroll are complicated. Period. While there’s no secret recipe for simplification, the key is to draw upon as much expertise as possible. The ideal scenario would seem to be a combination of the above in terms of the control of an in-house solution along with the dedicated specialisms afforded by third parties. An integrated programme from one source could just represent nirvana.

Equiniti has produced a a free White Paper entitled ‘How to simplify overseas payments & payroll’, including a case study from Heriot Watt University.

The author is Andrew Woolnough, Director of HR Solutions at Equiniti.

This article is provided by Equiniti.

^Reference

¹Talent mobility 2020: The next generation of international assignments, PricewaterhouseCoopers, 2010