Business process outsourcing has been a norm in businesses for decades now. However, transferring non-core processes to an external provider has since grown in popularity, with payroll being one of the most commonly outsourced tasks.
The revenue for the business process outsourcing industry is expected to be up to $330 billion in 2022. Since many businesses have adopted the idea of hiring overseas employees, outsourcing payroll services has become more critical than ever.
By following global payroll best practices, businesses can ensure compliance with regulations, minimize risks, and improve efficiency. That's what Skuad offers - helping you build your international team without the hassle of setting up a legal entity in the country. This article highlights everything you need to know about global payroll best practices for efficient business expansion.
What is global payroll?
Global payroll is the process of paying employees who work in different countries. It includes managing employee data, calculating taxes and social security contributions, and making cross-border payments.
Different countries have unique tax laws and social security systems, making it challenging to comply with all the regulations. There are also cross-border payment issues, such as currency exchange rates, transfer fees, and different banking systems.
A global payroll platform can help you manage these complexities and automate the process. Skuad is an all-in-one solution that enables you to onboard talent, manage payroll, and pay employees in different countries.
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What are the benefits of global payroll?
Payroll software ranks second in the HR applications market, generating a revenue of $4.7 billion. This shows the emphasis companies place on ensuring they get payroll right.
When you hire employees from across the globe, payroll becomes even more critical. For one, your reputation is on the line, but more importantly, so are your profits. If you don't adhere to the laws and regulations of each country, you could face heavy fines.
Even worse, your employees could come after you for back pay, damaging your relationships with them and your brand. A global payroll solution can free you of these problems.
Here are the top benefits of working with a global payroll platform.
When you expand your business to a new country, there's already too much on your plate. It's impossible to keep up with the ever-changing compliance landscape of each nation. Fortunately, global payroll providers stay on top of these issues for you.
Asana's Anatomy of Work Index report found that employees spend 60% of their time on non-administrative work. It includes duplicating efforts, waiting for approvals, and searching for documents. Taking the same approach to payroll can quickly lead to errors. Instead, it's best to let a global payroll service automate as much of the process as possible.
You get a data-rich platform with a global payroll solution, which is critical for understanding your business's financial picture. After all, payroll is often a company's most significant expense. The insights you glean can help you make informed decisions about other areas of your business.
Nothing frustrates employees more than feeling like their employer doesn't care about them. If they regularly have to chase down their paychecks, they'll start to look for new jobs. A global payroll solution ensures your employees get paid on time.
Global payroll best practices
Any company planning to make it big in the international space must have a streamlined global payroll process. Here are some global payroll best practices to follow.
Create a payroll policy
A payroll policy spells out how often organizations will pay employees, what types of deductions will be taken from their paychecks, and other vital aspects of the payroll process.
Having a payroll policy is essential so there is no confusion about how your organization will handle payroll. Make sure to include the following in the policy:
- Payroll frequency (weekly, bi-weekly, monthly)
- Direct deposit or paper check
- Electronic timekeeping
- The approval process for time off
- What types of deductions will be taken from paychecks (federal, state, and local taxes, health insurance, 401(k) contributions, etc.)
The policy should also include a section on what to do if discrepancies occur in an employee's paycheck.
Collect real-time attendance data
Instead of relying on employees to report their time worked, collect real-time attendance data. It will save time at the end of the month.
Plus, it will ensure that employees are paid for their actual hours. There are several ways to collect real-time data, including:
- Using an electronic time clock
- Installing an app on employees' smartphones
- Tracking employee login times on company computers
Ensure correct employee classification
When you hire international employees, it's imperative to classify them correctly. Unfortunately, the National Employment Law Project reports that 10 to 30% of employers misclassify their employees.
Often, they classify their employees as independent contractors, stripping them of fundamental employment rights and benefits. While saving money and resources may seem like a gimmick, no company should risk breaking the law.
Incorrect employee classification leads to penalties and fines. You risk tarnishing your reputation in the country you're hiring employees from.
Therefore, one of the most notable global payroll best practices is to ensure your employees are correctly classified.
Implement a scalable payroll solution
As your company grows, your payroll solution should be able to scale with you. Otherwise, you'll be stuck using a manual process or an inadequate solution.
A scalable payroll solution will save you time and money in the long run. In addition, it will automate repetitive tasks and make it easier to comply with regulations.
Some things to look for in a scalable payroll solution include:
- Support for multiple languages
- Integration with other HR systems
- Real-time reporting
- Flexible user permissions
- Compliance with global payroll regulations
Use a global payroll platform
McKinsey reports that large enterprises have automated at least one primary task in the organizations. As automation becomes more commonplace, small and mid-sized businesses must follow suit.
A global payroll platform is a perfect solution to your payroll woes. For one, it will automate repetitive tasks.
Plus, a global payroll platform will make it easier to comply with regulations. It will also provide you with real-time insights into your payroll data.
Why is it essential to follow global payroll best practices?
Following global payroll best practices is vital for several reasons. First, it helps ensure compliance with local laws and regulations. Thus, it is critical to avoid penalties and fines.
Second, it helps ensure that employees are paid correctly and on time. That leads to higher employee satisfaction and a lower turnover rate.
You must also consider the country's labor laws when hiring employees from a new country. By following best practices, you can ensure your employees are getting the treatment mandated by law.
What to look for in a global payroll platform
When searching for a global payroll platform, you must have selection criteria. Here are some factors to put into it.
Suppose you hire employees from eight countries, each with its currency. Paying them all can be challenging without a multi-currency global payroll system.
Instead, you must opt for a platform that lets you pay employees in their preferred currency. It will help avoid currency exchange fees and make it easier for your employees to receive their payments.
With support for over 100 currencies, Skuad lets you make accurate and prompt employee payments in their preferred currencies.
Compliance with local regulations
Every country has its employment laws that you must comply with. For example, the U.S. has the Fair Labor Standards Act (FLSA), which establishes a minimum wage and overtime pay.
The global payroll platform should account for these regulations to ensure you comply. Skuad offers built-in payroll compliance for more than 160 countries, allowing you to work with talent from around the globe.
Automated invoice generation
Calculating, managing, and processing payroll can be time-consuming. You have to consider employee data, tax deductions, and more.
An excellent global payroll platform will automate the entire process so that you can focus on other aspects of your business. Most importantly, it should be able to generate invoices for employees and contractors automatically.
Reports and analytics
Let's say your employees are spread across the continent. Instead of having a separate spreadsheet for each country, it's more cohesive to view the reports in a single dashboard.
This will give you an overview of your global payroll at a glance. In addition, the platform should offer insightful reports and analytics to help you make informed decisions about your payroll.
The global payroll platform should allow you to configure and administer employee benefits. For example, you should be able to set up 401(k) deductions and offer health insurance plans.
You should also be able to manage other benefits, such as paid time off (PTO), vacation days, and sick days.
Start following global payroll best practices today
A global payroll platform like Skuad can enable you to keep up with the best payroll practices and ensure your employees receive prompt and accurate payments.
With Skuad, you can compliantly hire employees and contractors, seamlessly manage payroll, and onboard talent in over 160 countries without setting up a subsidiary or an entity.
To know more about Skuad, book a demo today.