How does a changing business world affect payroll compliance? 

It’s been a fascinating few years for global businesses as they’ve come to terms with a very different world of work that has emerged post-pandemic.

Millions of people have come to like flexible, remote working from home and want to be able to continue doing so long-term. The initial impact of this for businesses was operational, in terms of how employees would continue to be productive and collaborate when working across different locations and shift patterns. As these new arrangements have become embedded, organizations have gone on to explore the new talent opportunities that a global remote workforce enables, and also how technology can support these opportunities.

Payroll, and compliance with payroll regulations, probably weren’t top of the list of priorities in the new world of work. But now that a global workforce and flexible working models are here to stay, and employee demands are changing fast, it’s becoming a hot topic of conversation in payroll departments and beyond.

What are the big new influences on payroll compliance?

All of the changes that the global business world is experiencing are having knock-on effects on payroll management and compliance, and what payroll is expected to do. Three shifts in particular stand out:

  • The changing ways of the workforce: every employee naturally expects to get paid accurately and on time. But the turbulence in the job market in recent years – such as the ‘Great Resignation’ – has increased the work of payroll teams as they have to process new hires and leavers more frequently. Updating information like salaries and benefits data, and adding and removing staff from payroll runs, can also be time-consuming and prone to error.
  • A globalized talent pool: flexible working has broken down many of the geographical barriers to talent acquisition. In many industries, it’s never been easier to hire employees all over the world, while simultaneously expanding the skill base and lowering employment costs. However, this comes with complications for payroll: every country has its own currency, tax laws and regulatory compliance considerations. Managing many sets of these at the same time can be challenging, and lead to mistakes and inaccuracies in payroll which can not only disrupt employees’ lives and impact their job satisfaction, but also incur hefty fines.
  • The rise of the ‘gig economy’: alongside the growth of flexible working has come an acceleration of the ‘gig economy’ of contractors, freelancers, and short-term staff. These workers are often more difficult to classify and process from a payroll perspective, as their employment status, tax remittances and benefits entitlements can be complex and highly variable.

To address these issues, many organizations have attempted to consolidate payroll processes globally, but have found that standard processes work better in some countries than others. At the other end of the scale, decentralizing processes on a country-by-country basis reduces global visibility into payroll performance. The correct answer, therefore, is somewhere in the middle.

Why technology is vital for global payroll compliance

However you look at it, global payroll compliance is a major and very important undertaking for any international enterprise. As the challenges above ably demonstrate, maintaining compliance with existing systems and processes can be difficult and time-consuming and, if you get it wrong, very expensive.

It’s increasingly clear that the best way forward is to invest in a global payroll solution, particularly one that combines leading technology with country-specific expertise. This is ideal for getting the best of both worlds in terms of balancing global visibility with efficient compliance in each country of operations. 

Ideally, the solution will combine three essential functions:

  • Integrated systems: unified pay solutions across human resources, global payroll, payments and financial wellness, to maximize the accuracy of payroll processes and data, and to allow for greater visibility and tracking. These systems improve compliance both from operational and audit perspectives.
  • Further standardization: ensuring consistency of payroll data formats and workflows worldwide makes it much easier to view and follow data and track payroll performance. This can also help improve payroll accuracy, reduce cycle times, and enable easier identification of errors and compliance issues.
  • Use of automation: applying automated technology for certain tasks, such as robotic data validation, can drastically reduce human errors which are common causes of non-compliance. It also frees up valuable time for the payroll team to add value, address problems elsewhere, and further drive performance and ensure compliance.

In summary

The global payroll compliance landscape isn’t going to get any simpler any time soon. Regulations from one country to another will continue to get more complicated and more diverse – as will the demands and expectations of the workforce. The need for modern solutions for managing compliance risk, if not already considered a business essential, will become so for almost all international organizations very soon.

Consistency, accuracy, and standardization are the keys to compliance, both now and in the future, which is why the technology and expertise of a global payroll partner are instrumental.

Find out more about avoiding global compliance traps in this report, and then explore the CloudPay approach to addressing your payroll compliance challenges.

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