Global payroll is a challenging but crucial aspect of any multinational company. Payroll processing presents numerous challenges, even for seasoned professionals.
Therefore, companies decide to work with global payroll partners to ensure streamlined and easy payroll calculation and payment disbursement.
This article sheds some light on the seven most common challenges of payroll processing. Read on to learn more about these challenges and their solutions.
The Most Common Challenges of Payroll Processing:
The common challenges of payroll processing include:
According to a report by the renowned Global Payroll Management Institute (GPMI), payroll compliance is the number one payroll challenge for companies.
Every country has different tax and labor laws. These laws are regularly amended. Companies have to adhere to these changing laws to stay compliant. Businesses partner with a global payroll company to focus on the core elements of their business to stay compliant and avoid heavy fines and other legal consequences.
Solution:
HR managers and payroll processing teams must stay updated about the changing tax laws and work with professional global payroll companies.
An HR or payroll manager has to go through a lot of calculations to process a salary, including the calculation of attendance, wages, overtime, incentives, deductions, taxes, benefits, and disbursing it on time. An inaccuracy in any step of this process may result in issues for the employee and the HR/payroll manager.
Solution:
Companies can work with a good global payroll partner to ensure that all employee data is updated and accurate. By partnering with a global payroll service provider, they can leverage the advantages of technological advancements such as automation and global payroll tools. It may help them reduce the risk of errors and streamline the payroll process.
Companies find cultural barriers to be a key challenge that may lead to inaccurate and delayed payroll.
Cultural differences may further complicate the payroll process, including working across different time zones, linguistic differences, maintaining foreign bank accounts, and currency exchange rates.
Global money transactions often include high conversion fees. Some foreign workers may only accept payments to government-approved bank accounts.
Companies should prepare appropriate payroll documents in the local language and ensure real-time payroll support for employees across different time zones.
Solution:
A global payroll partner can help you overcome this challenge by working with local professionals and ensuring global payroll processing remains compliant with specific country requirements. They also provide local, real-time support for international talent.
Companies should integrate payroll data with other systems to ensure timely and accurate payroll processing. However, this integration poses a challenge to the system if it is from different vendors.
The setting up of the integration process needs significant resources and tools, including testing, troubleshooting, and data mapping. However, if there are any issues with the integration process, it may cause delayed payroll with discrepancies.
Similarly, the integration of apps may pose a security threat to the data. This can also lead to the risk of data breaches, which can prove to be a costly affair for the company.
Solution:
Organizations should collaborate with vendors to ensure that the integration is set up correctly and appropriate security measures are in place to safeguard employee data.
Some companies pay their employees on different pay schedules, such as weekly, bi-weekly, and monthly. Managing this pay schedule is hard to maintain and poses a significant challenge to the companies.
Payroll processing for different pay schedules requires businesses to track deadlines and payment periods, which can enhance the risk and is time-consuming.
Companies with multiple or different pay schedules encounter key challenges, such as cash flow management issues, which can lead to uneven payroll expenses and cash flow fluctuations.
Solution:
Companies can work with a renowned global payroll partner to handle multiple pay schedules and automate payroll processing. These partners use sophisticated payroll software and tools to ensure accurate payment calculations and timely processing for multiple pay schedules with better efficiency.
Businesses also need to establish clear processes for multiple pay schedules, including deadlines for payroll, to avoid any delays and ensure compliance with payroll processing.
Confidentiality maintenance is a key challenge in payroll processing while working with third-party service providers. Therefore, many companies collaborate with a global payroll partner to ensure safe and secure employee data.
Sharing the employees’ data with a third party can enhance the risk of data breaches or unauthorized access to confidential data. It may also pose a threat to maintaining confidential data within organizations.
Solution:
Companies should use appropriate data security measures to safeguard sensitive employee data, whether they partner with a third-party payroll partner or process payroll in-house.
They must review the service provider to ensure that the payroll partner has appropriate security measures to protect data. Businesses must have clear and stringent policies to handle and access payroll data within the organization.
Companies should run awareness programs and training sessions to help employees understand the significance of maintaining the confidentiality of sensitive data appropriately.
Businesses, startups, and human resource managers encounter some of the key payroll challenges from the employee side, including:
Some employees do not accurately record their attendance, leading to miscalculations of payment, overtime, and other aspects of payment to the company.
Employees do not submit their necessary documents, such as leave applications, timesheets, overtime sheets, and other expense allowances, on time to calculate appropriate payment, which human resource managers and small business owners find difficult to handle. This ultimately leads to payment processing delays and errors.
Employees fail to update their details, such as bank account numbers. This also leads to payroll processing errors and delayed payments to them.
Employees misunderstand payroll policies regarding disputes and potential legal implications.
Solutions:
Companies can handle these payroll processing challenges by using the following policies:
Companies should provide regular training and awareness to their employees to ensure that they understand how to record their attendance, submit timely documentation, and update their key information.
Companies should use automated payroll systems that can help them identify and fix any discrepancies in attendance, personal details, or expense allowance-related data and mitigate the potential risks of errors and delays in payroll processing.
Companies should have clear communication with their employees by establishing key channels like employee help desks and support systems to ensure that employee queries are resolved within a stipulated time frame. These channels can help promptly resolve any misunderstandings or disputes between the company and employees.
Payroll records audits can help companies identify and correct errors in their payroll records, ensuring timely and accurate payroll.
Payroll management for global talent is important to any international expansion strategy. Multinational companies can get rid of every challenge of running payroll for global talent by partnering with a global payroll partner like Global Expansion.
Global Expansion is the only global EOR service that is operational across 214 countries and territories.
We ensure on-time, accurate payments through our global payroll solutions. GX also helps international companies by managing global payroll, employee benefits, global immigration, and employment compliance.
By partnering with Global Expansion, you can enter new markets and hire globally without setting up an entity. We take care of everything from onboarding to benefits administration and compliance to help you focus on core business operations.
Contact us to learn more about how we can help you simplify hiring global teams and overcome key challenges.