Multi-country payroll as a strategic enabler for global expansion
The global payroll landscape is experiencing a significant transformation, with continuous legislative changes and evolving regulatory landscapes driving ever greater complexity. Organisations with multi-country payroll needs are increasingly turning towards global payroll solutions.
But it’s no longer enough to simply meet these new requirements. To leverage the opportunities that transformation presents, companies must view payroll not merely as an administrative function but as an enabler of growth.
For companies looking to expand into new markets, payroll is often a blind spot in their expansion strategy. It is one of the few functions that touches every employee, every month. During expansion, a company’s payroll strategy becomes a stress test for its operational maturity. Paying people accurately and on time in every country of operation is essential before companies can look towards growth.
So, how can businesses adapt to the rapidly evolving global payroll landscape while using their payroll strategy to expand successfully?
Payroll challenges during expansion
The greatest payroll challenge that organisations face when expanding into new markets is the lack of knowledge of local compliance requirements. The new market is an unknown landscape. Companies that try to navigate this landscape without a roadmap – ie local expertise – put themselves at risk of non-compliance penalties, which in some countries are quite severe. Additionally, expanding into a new market without the right tools can lead to costly mistakes and wasted time.
Another key challenge is the lack of infrastructure to support the new market. Companies expanding into a new jurisdiction don’t have existing local entities. They will need to register a new entity according to local regulations and set up HR and payroll operations, often with a low employee volume. The lack of resources and awareness of local processes places immense pressure on existing operations.
Tools such as our Global Business Complexity Index (GBCI) can help organisations understand the regulatory and operational challenges that come with entering new markets. However, they often need more than understanding – they need a partner with local knowledge and presence to manage the administrative processes of expansion within local laws. From establishing a legal entity to providing a temporary director to handle HR and payroll operations and accounting and tax administration, it is the most efficient way to expand securely and cost-effectively.
The risks of a disparate global payroll model
Organisations operating in multiple jurisdictions with multiple payroll vendors face several operational risks which can significantly impact the company’s ability to scale or expand.
Disparate payroll solutions – whether in-house or provided by more than one vendor – create a lack of consistency, both for employees and for the brand. Time-consuming administrative processes reduce a company’s ability to be agile in an increasingly demanding global economy, leading them to fall behind in operational efficiency. The need to communicate with multiple providers rather than through a single point of contact affects overall visibility, which can impact payroll operations and lead to mismanagement and compliance issues.
A key concern is the cost of running multiple payrolls. Many companies don't know their total payroll cost and frequently spend more money on a multitude of local solutions than they would with a single global provider.
Another risk area is how people value the company. An inconsistent payroll experience will devalue the working environment for employees, making it more difficult to attract and retain top talent.
What businesses overlook in global payroll readiness
A mistake that leadership teams often make is to view global payroll as a system solution when, in fact, it is a service model. Companies don’t always appreciate the importance of the service model versus the technology used to deliver it.
While it’s essential to have good technology to support a managed payroll model, it is only one component of global payroll. Companies looking for a global payroll solution should consider the whole package – how the payroll model works in conjunction with the people who execute it, as well as the technology that they leverage.
The strategic value of consolidated payroll
Companies that move from multiple vendors to a consolidated payroll solution gain significantly more control and visibility over their payroll offering. A more flexible payroll solution allows for easier scaling and better management of payroll and HR costs.
Harmonised international payroll management gives you a level of data analytics and intelligence that can be leveraged to enhance your payroll strategy, which in turn helps you make better business decisions.
Having the right partner to manage multi-country payroll provides a consistent global governance model that will increase employee satisfaction, as well as job satisfaction for the payroll and HR teams, leading to the retention of talent in both areas.
A best practice global payroll model should incorporate the following elements:
- A solid in-house human capital management (HCM) strategy
- A provider with a strong global account governance model
- A provider with local talent and knowledge in each country where you operate
- A provider that has innovative technology to manage data, integrations, reporting/analytics and workflow
Successful global expansion with TMF Group
Future-proofing your payroll function is crucial in order to scale your business effectively and efficiently and maintain control. We can help you turn your payroll operations into a strategic advantage.
Our experienced in-country experts have a deep knowledge of local regulations and are supported by our new, state-of-the-art technology, TMF Optix.
At TMF Group, we turn complexity into opportunity, making business expansion simple and seamless. Download our GBCI report to find out more.
