In today’s increasingly digital and hyperconnected world, it has become easier than ever to expand into new markets. Technology has made it possible to connect with colleagues, clients, and customers — no matter where they are located. A key component of successful international expansion is establishing an effective global payroll strategy, but processing global payroll is a challenging endeavor.
Whether your organization has been operating overseas for a while, or you’re just at the stage of exploring international recruitment, there are a myriad of complexities associated with global payroll.
One of the most important factors when it comes to processing payroll for a global workforce is choosing a global payroll model that’s right for your business.
Below, we look at the three key global payroll models to help you determine which is the best fit for your organization.
1. Local payroll vendors
With this model of global payroll, the company has multiple contracts with individual local providers, usually one for every country in which they need payroll. Before the widespread use of technology, the local vendor model was the original solution for processing payroll across multiple countries. The main drawback of this model of international payroll is that it is extremely limited in terms of process efficiency, data management, and compliance. Today, this model is most common among organizations with a single overseas location or where there is a small headcount.
2. Payroll aggregators
A company using the aggregator model of global payroll uses a single payroll vendor. In turn, this vendor partners with or acquires local providers in other countries to process all payroll for a company under a single contract. The main benefit of this model is that it allows companies to operate in multiple international locations while minimizing vendor management. Companies can view country-specific or regional payroll information using reporting tools or dashboards maintained by the aggregate provider. However, while the data may be presented by the aggregator in a standardized format, the information is pulled from multiple disparate systems used by the in-country providers – and consolidated into the dashboard for easy viewing. From a compliance perspective, this presents challenges as companies need to be confident that their aggregate provider can ensure compliance for every in-country vendor they partner with, especially in terms of data protection and security.
3. Unified payroll solution
By using a unified payroll solution an organization processes all payroll in all countries using a single, centralized payroll platform. Compliance and analytics are two of the most important benefits of using a unified global payroll solution. However, not all payroll platforms have the same features and functionality — so it’s important that organizations look at their options carefully to determine the best fit.
Choosing a payroll model for your business
Now that you are familiar with the three key models of global payroll, it’s time to choose the right one for you. To help you determine the best fit for your business we put together some questions to further help with the decision-making process. You can access those in Global Payroll: The Essential Guide. Your answers will help you choose the right payroll model for your business needs.