Poor payroll policies and processes – what’s at stake?
Article 5 minute read

Poor payroll policies and processes – what’s at stake?

26 March 2018

One of the biggest challenges to effective global payroll management is not having access, in many cases, to adequate international systems, policies and processes.

Although all respondents to the Global Payroll Association (GPA) and TMF Group’s annual industry trends survey operated internationally, a shockingly high seven out of 10 said they had no global policies that applied to all payrolls. A similar pattern emerged in the case of processes.

Darren Beal, TMF Group HR and Payroll Portfolio Director, isn’t surprised by the results.

“It’s easy to see how these gaps occur,” he says. “If you’re a company starting up in a new territory, you might start with just one or two people who will be tasked with building up that new market. You won’t have an HR, Legal or Payroll department in that country. The main focus will simply to get these individuals paid. But where are the regular business controls, the sign-offs, the approvals? In real fact you are just getting by in that country; potentially lapsing outside the legal expectancy of that country, or outside your own global procedures.

“If that market grows quickly, and you end up employing many employees, then regular business practices will be deployed in time. But if you stay small in that country, that’s when the potential gaps occur, and you’re exposing yourself to risk.

“A lack of consistent policies and processes can be a significant issue, but if you engage with an organisation such as TMF Group, we can help put some controls in. If you engage a professional third party, it by default will introduce a natural rigour and control into your payroll management across your organisation.”

Global inconsistency

Of the 69.4% of those interviewed in the survey who admitted lack of consistency in policies and processes:

  • 18.3% of them revealed that none of their global policies applied to all payrolls
  • another 20.4% said that less than 20% of their global policies could be applied to all payrolls, and 30.7% said that less than half of their global policies could be applied unilaterally.

Despite the resulting lack of consistency and control, just under two thirds of those surveyed revealed a similar gap.

Of those:

  • 16.8% said they had no global processes that applied to all payrolls
  • over one in five had less than 20% of global processes applicable to all
  • and almost a quarter of respondents had less than half of their processes applying to all payrolls.

To make matters worse, less than one in five were able to manage processes and schedules from inside their payroll system, with the figure rising to just under a quarter  for payroll approvals. Some 12.5% of those questioned managed such processes and schedules via email, while almost three quarters of those surveyed relied on a mix of workflow and email.

This completely demonstrates that many businesses operating global payrolls could significantly improve their processes.

The risk of non-compliance

The consequences of making a mistake, even inadvertently, can be severe, putting you at risk of investigation by the authorities.

“The last thing a business wants is for the local taxation or national insurance authorities to undertake an audit,” says Darren. “You just want to carry out your business quietly and efficiently without any disruption.”

And an issue in one country can quickly snowball: “Questions initially originating in one country can very quickly change to questions surrounding your operations in other countries.  The whole thing can escalate globally with you having to divert valuable resources to account for every action under investigation in many or all countries.”

Lagging behind

The GPA Survey showed that many organisations have yet to introduce consistent payroll policies and processes across all the jurisdictions in which they operate – a situation not helped by a lack of truly global payroll applications.

“You can of course buy local software to process local payroll in individual countries, but this will not deliver a global dashboard to give you one consolidated view across your payroll processing in every country,” explains Darren. “You need a form of middleware to be able to consolidate the data from different systems in different formats, languages and currencies - and you can’t currently buy this off the shelf. Professional support such as that provided by TMF Group with our middleware payroll software solution TMF Horizon provides full visibility of payroll processing activities, performance and consolidated reporting.”

TMF Horizon provides an interactive global payroll platform which can allow organisations to deliver both company-wide and individual notifications, roll out policies and gain employee acceptance through one single portal, secure method. It provides a centralised document library where employees can access contracts and corporate policies, ensuring global consistency and process management.

“The latest global payroll survey findings show just how many global organisations are struggling to apply global standards in payroll management across all the countries in which they operate,” concludes Darren. “Gaps in consistency pose risk. It pays to close those gaps and mitigate risk of non-compliance by consulting an expert in multi-country payroll service provision.”

Learn more about the latest trends in multi-country payroll by downloading the report: Change is coming: the annual global payroll survey 2017.

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