International Payroll: Still A Global Challenge?

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Establishing a robust, secure and accurate international payroll can be a particular challenge for some organizations, especially if there is a high number of countries involved and the organization is liable to change on a constant basis.

And there are other challenges as the world continues to change too. The UK's imminent departure from the EU is just one such example in the continuing evolution of international relationships.

Country-specific disciplines such as SSAE16 (previously Sarbanes Oxley -SOX) in corporate America have also had a major impact on firms and how they operate, making for a particular need for US-listed, or the US-financed companies to improve financial controls.

As emerging markets continue to grow, so does the propensity for having ever more complicated levels of payroll tax legislation.

As organizations increasingly look beyond their traditional domestic boundaries the complications of their payroll processing start to increase.

Being able to track individuals on a country by country basis to determine their taxability is already one of the biggest challenges organizations face in order to be fully compliant with tax withholding rules.

Europe is certainly a challenging place to roll out payroll. Western Europe has the highest number of technical, legal and payroll updates per year, making managing payroll a case of trying to score against constantly shifting goal posts. Europe also has the most payroll populations and the highest number of payroll parameters of all markets given the unique structure of the EU and its 28 member states.

For companies looking to expand internationally, France offers up huge opportunities as the second largest economy and exporter in the EU. The country continues to maintain its status as a world leader in trade and tourism as well as research and development. Despite the opportunity for growth, there are a number of challenges to overcome when doing business in France, none more so than differing payroll and HR. With unique social security systems in place, high corporate rates and naturally, a language barrier, it’s vital to understand the ins and outs of French legislation, payroll and HR compliance.

If you’re thinking of expanding your business to Germany, you’re in good company - 22,000 foreign enterprises have established businesses there! As Europe’s largest national economy and one of Europe’s most cost-effective production locations, Germany presents endless opportunities for growth. However, in order to ensure your business is remaining payroll and HR compliant in Germany, you need an international specialist by your side.

And these are only two examples of international payroll.

International Payroll outsourcing – while appealing in the sense of removing the burden – can be seen as daunting as there is a perceived lack of visibility and control that may cause uncertainty or difficulty in some organizations. But with such a strong return on investment and time-saving argument to support it, can international payroll outsourcing really be ignored as an option?

It is not just about providing payroll. If a new location is set up in a new country, how much support will be provided in ensuring compliance with any new legislative requirements there may be for payroll operations? Or will the payroll agency only become involved once it has been set up?

Also, new countries may have their own HR requirements beyond just the payroll itself – will the payroll agency help with this too, and what if anything is the cost of any help? Outsourced relationships are built on trust, reliability, core value and added value, and by proactively helping the organization to expand smoothly into a new territory, and even proactively challenging the client’s requirements where appropriate and necessary, the last on this list can be evidenced all the clearer.

One of the biggest questions to ask is about coverage. For some payroll outsourcers, it’s all about the easy money, so they will cover only the easy countries – America, Europe, Australia for example. Start talking about some of the more obscure countries in the world and you’ll find they cannot help.

Despite the complexities surrounding international payroll, we are moving towards a simpler world of global connectivity. While tax reporting is becoming more strict and more detailed, the process by which it is submitted is getting easier. But it’s hardly a walk in the park. For many businesses looking to work internationally, the biggest hurdle to overcome is working out what you have to do per country.

In a global economy, growing numbers of US organizations now have overseas employees – as well as US citizens on secondment. For the majority of countries, paying both local and US citizens presents a number of obstacles you may not have taken into consideration. From statutory working hours to annual leave entitlement and contributions to health provision and state pensions, FMP Global is here to guide you through the process.