International Payroll Management – Challenges and Solutions

International Payroll Management – Challenges and Solutions

The task of international payroll management can be daunting, especially if you’re new to the process or don’t have much experience in handling overseas employees. But there are common pitfalls across all types of organizations, regardless of size or industry, and they can be damaging to your business if you’re not aware of them and prepared to handle them as they arise.

If you don’t know exactly what to watch out for, you could be putting yourself at risk of encountering some very common pitfalls in international payrolling management. This article will discuss the nine most common pitfalls and how you can avoid them to keep your employees and budget happy!

Top 9 Global payroll challenges

1. Accomplish global compliance

When you set up an international payroll management process, it is important to understand the local regulations for your employees. You must ensure that your company complies with all applicable tax and labor laws. Failure to do so may result in penalties, fines, and possible imprisonment for your company or employees. If a foreign employer deducts taxes from an employee’s paycheck but fails to remit those taxes to the appropriate government authority, both the employer and the employee can be prosecuted. Achieving compliance respectively to each country is a mammoth task. It can go wrong in any direction and can affect the payrolling management completely. Partnering with third-party payroll service providers will be the smart solution to ignore this pitfall in your business.

2. Standardizing technology and processes

It is important to standardize technology and payroll processes between your company’s head office and international locations, as this will make it easier to manage employees remotely from both sides of the globe. To have better oversight, an executive should lead the charge in establishing internal system policies in sync with each country’s set of rules, otherwise which might lead to confusion and potential discrepancies. This is one of the challenges to deciding the right technology so you must be able to use the same system for payroll in different countries to avoid difficulties in integrating the payroll processes.

3. Ensuring accurate data management

One of the most common pitfalls companies face when performing international payroll is inaccurate data management. To avoid this type of situation it is important to make sure payroll data is accurate and up-to-date, which can be done by using an international payroll system or through manual checks from within your own company. This will ensure that all employees are being paid appropriately, which will help keep your business out of trouble with the IRS or other governing bodies.

4. Monitoring multiple vendors in various countries

While building a workforce overseas, you will come across multiple vendors in different countries who are entitled to take the responsibilities of local government laws, compliances, administration functions, etc. Not only do you have to keep track of who is doing what, but also how much money has been paid and when.
To avoid this issue, you might need to hire international payroll specialists who will manage your payroll as well as coordinate payments with all the vendors. They can be really helpful to get everyone on the same page and ensure that everything goes smoothly.

5. Eliminating currency exchange errors

The exchange rates are constantly changing, so it can be difficult to have accurate conversions when you are paying your employees from different countries in their local currencies. To avoid this pitfall, every company must use the integrated system for up-to-date conversion rates. Partnering with experts who are adept in handling currency conversions and payments can make your international process smooth without errors and conflicts.

Related read: 11 Common Payroll Mistakes and How to Solve Them

6. On-time and precise payroll

Another common pitfall is the fluctuations in workers’ set pay dates and times. This issue can lead to confusion when employees don’t know when they will be paid and if their hours will be compensated correctly. To avoid this pitfall, ensure a set date and time for employee paychecks by including it in your contract or agreement with your employee. Different countries follow different pay schedules according to their payment policies. It is critical to identify that and proceed with monthly payroll to avoid the dissatisfaction of employees. For example, the Philippines is having a bimonthly payroll cycle where you must pay the employee once every two weeks at intervals not exceeding 16 days.

7. Cost management

Paying internationally to your remote teams is not a cakewalk! It requires lots of checks and validations correlated to the employee salary scale and other factors. To perform such a mundane but difficult task, every company must invest considerable money and time. Managing the cost of the payrolling process is another challenge while embracing international recruitment. Only a PEO, EOR, or payrolling outsourcing company who has fully automated payrolling can save this overhead cost rather than delegating this to your in-house team.

8. Keeping employee data secure

Cybersecurity of IT infrastructure is one major factor to consider when you are handling too much sensitive personal data of employees. Personal details, identity credentials, bank account details, and other important employee information can be attacked by hackers which will lead to privacy breaching complications. This kind of threat directly affects the company’s reputation and sustainability. It needs to be handled carefully within the system. To avoid this cautious risk, it is strongly recommended to rely on secure software-based service providers where your data will be protected and secured with maximum attention.

9. Challenges in attendance and leave management

When there are different standards for vacation time, sick leave, and personal days across countries, it can be hard to keep track. Furthermore, because the work culture might differ from country to country, knowing whether or not it’s appropriate to ask for someone’s availability is also a challenge. This is because some cultures value people’s time away from work more than others. Not having proper tracking of the working hours, leaves, early or late logins and logouts, and irregular time-offs can cost a lot to a company by paying them more or less. Solidifying the attendance and leave management in a single platform is highly significant.

How Global Squirrels solve global payroll challenges?

Global Squirrels has developed the most innovative and simplified SaaS platform for smooth international payroll management processes. We have the capability of scaling your business over cross-border according to the countries you are targeting for expanding your talent pool.

Our platform is designed after the in-deep research to overcome the global payroll challenges. Please feel free connect with us and get free demo today!

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