Publication 28 pages

Multi country payroll: tackling the challenge of small country populations

25 February 2015

Those running payroll across multiple jurisdictions know how difficult it can be, but when working in those regions where staff numbers are small the challenges can disproportionately increase.

A report compiled by independent market research and consulting company Webster Buchanan Research, sponsored by TMF Group, points to a wide range of challenges in managing smaller country populations, from the difficulty of ensuring compliance through to cost constraints and skills shortages. It finds that some multinationals take a risk-based approach to compliance, while others are reassessing conventional approaches to hiring.

Based on the report – there are seven key factors to consider that could help that small population, multi-country payroll a little easier to manage. 

1. Managing compliance and processes

There is a distinction between responsibly presuming compliance (for example, by appointing a reputable outsourcing provider) and proving compliance (for example, by conducting a country audit). Some concentrate their investigative efforts on countries where they have higher financial, reputational or employee-related risks, and presume that they are compliant in the other countries. This assumption of compliance is not an abdication of legal responsibility, but inevitably places heavier reliance on local system and outsourcing providers and tax advisory partners.

2. Dealing with vendors

Many global teams raise concerns about the limited vendor management skills within their small country teams, particularly around negotiating and enforcing contracts and Service Level Agreements. In some cases these problems can be eased by moving responsibility for vendor management away from local in-country teams to regional or global payroll hubs overseeing multiple countries.

3. Finding the right people

While an analyst in a regional or global centre may be capable of managing as many as a dozen small countries, they are typically not expected to have country-specific subject matter expertise in every territory they cover, and companies often look to in-country HR or outsourced partners to supplement their knowledge. In fact, some now hire primarily for communications, negotiations, vendor management and language skills, and train up agents in payroll skills, rather than the more conventional approach of seeking to hire payroll subject matter experts.

4. Getting the right system in place

Getting consistent data between HR and payroll systems is a key driver for many multi-country payroll projects in small countries, but there is much debate as to when it becomes commercially viable to build automated interfaces in smaller countries. While there are no hard and fast rules, most tend not to build interfaces for countries with fewer than 50 employees.

5. Quality control

Checks and controls around payroll accuracy and compliance vary widely. At one end of the scale, some very small countries push the bulk of responsibility for checking to an outsourced vendor; at the other, many companies either use their own service centres to implement controls, or provide an advisory role to local teams. One risk in an outsourced environment is that organisations build too many internal checks and controls and end up duplicating activity carried out by the vendor.

6. Driving efficiency

In addition to improving global payroll governance, drivers for small country projects include reducing risk, improving reporting, consolidating vendors and thereby improving the customer’s leverage with providers, and streamlining the process for setting up payroll in new countries.

7. Establishing costs

The cost equation for a multi-country payroll initiative can be complex, particularly in very small countries. Leaving aside implementation overhead, the ongoing costs for a replacement system or service can prove higher than the current costs for an incumbent in-country provider – which to some extent is logical, given that multi-country payroll services typically provide an additional payer of central management control over local payrolls.

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