European Union: 5 Factors To Consider When Defining Your Multicountry Payroll Strategy

Last Updated: 21 October 2015
Article by Deborah Williams

While payroll isn't typically viewed as a "strategic" business unit, building a global payroll strategy for countries of all sizes becomes increasingly important as companies look to impose central control over their international payroll operations. Our Head of Global Business Services looks at some of the ways this strategy can be defined for small employee populations.

Historically, most multinationals were content to run payroll on a country-by-country basis – not least because different legislative and organisational requirements made it difficult to do anything else. Today, there is a growing acceptance of the value of improving central control over payroll through a multi-country payroll program, whether for compliance, cost, efficiency, risk management or other reasons.

In research conducted by Webster Buchanan, commissioned by TMF Group, five factors emerged as essential considerations when defining a multi-country payroll strategy that involves smaller countries and smaller payroll populations.

1. Controls and compliance

Because of limited resources, many companies take a risk-weighted approach to managing compliance in their smaller countries, assessing both the likelihood and potential impact of compliance issues.

2. Organisational design

To overcome local resource limitations, some organisations look to absorb build-to-gross and vendor management activities into existing shared services centres or regional hubs.

3. Cost equation

The cost per payslip for running smaller countries may be higher than larger countries of similar complexity, given the lack of volume and associated economies of scale.

4. Cross-functional roles

In many smaller countries, the individual responsible for managing payroll may also be responsible for other business functions such as HR administration or accounting. In these cases, outsourcing or otherwise restructuring payroll will therefore only impact parts of a role, and companies may need to take a broader, multi-function approach. For companies setting up small populations in new countries, there may be a case for sourcing a single provider offering a range of services such as accounting, HR administration, payroll, legal and company secretarial services.

5. Systems set-up

Smaller countries do not typically enjoy the same level of system sophistication as their larger counterparts. In particular, building interfaces from central HR systems to payroll may not be economically viable in some smaller countries, and an alternative means of providing the upstream data to payroll may need to be adopted.

Within this overarching business framework, a multi-country payroll strategy will encompass all aspects of an end-to-end payroll service, from organisational design decisions to global governance, and take account of a variety of factors including:

  • The nature of the multinational's business and the sector in which it operates
  • The size and type of employee populations (for example, whether they are salaried or hourly employees)
  • Payroll operational requirements, including any practical constraints on theoretical models
  • The idiosyncrasies of individual countries
  • The nature of the HR function, including the degree to which it is centralised

How can TMF Group help support small population payroll?

We have more than 1000 of our own payroll experts in more than 80 countries, as well as more than 5500 payroll clients globally. We handle more than €5bn in salary payments annually, with the flexibility to invoice in local currency when needed. The risk of hold-ups and issues along the path as members of a network hand work over to other companies is minimised; you are dealing with one company and one company only, and that company has central processes to mitigate issues quickly and compliantly.

Not only that, but we are the experts in low volume payroll populations - that is, from 1 to 3000 employees per country. We can help you to run payroll in multiple countries or in a single country - even if you only have a handful of employees. Our own people are on the ground in the countries you operate in, ensuring that not only are all regulatory needs kept up to date, but that any filings that must be done by hand in-country can be taken care of.

Importantly, by choosing TMF Group as your third-party provider, you will be working with a wholly-owned company, and not someone who outsources part of the work - like many other payroll providers. This in turn helps to minimise risk.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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