Top 10 payroll challenges for global enterprises

Global enterprises often have a very complex multi-country payroll to manage. After years and years of expanding into new markets and going through various mergers and acquisitions, businesses have typically acquired a large number of different payroll vendors, systems, and payroll countries that need to be managed.

The more complex the international payroll infrastructure, the more difficult it becomes to maintain visibility across global payroll operations and manage payroll processes effectively. In fact, many multinationals face the same challenges that result from a fragmented global payroll infrastructure that comprises a multitude of payroll providers, entities, and systems.

Read on as we take a look at the main payroll challenges faced by global enterprises and explain how they can be overcome. We’ll also share some insightful tips from our podcast episode with Denis Barnard, HRIS & payroll expert, author, and director at HRmeansbusiness.

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Despite the “global” in global payroll, there is always a certain local element in payroll. Payroll calculations for each country need to follow local rules and consider different tax rates and payroll components. This typically requires different payroll software solutions.

“There is no one piece of software that does all the world’s payroll. So by necessity, you have to have payroll providers or payroll information coming from the various places you’re operating in,” Barnard explains.

Working with multiple payroll softwares, however, poses problems for global enterprises. They include having to consolidate different data formats, managing several sets of login and authorization information, and the lack of a global view of payroll calculations and processes.

Solution: centralizing global payroll

The most effective way to combat fragmented global payroll data and multi-system management issues is to centralize global payroll operations. In other words, global enterprises should opt for an advanced global payroll solution that allows them to unify their payroll infrastructures and connect different local systems and providers to a central payroll system that provides a holistic view of all international payroll operations.

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Multi-vendor management is a commonly cited payroll challenge among global enterprises. In fact, managing different payroll vendors and providers came third in the top global payroll operations challenges ranking in a recent global payroll survey published in 2023.

Reasons why multi-vendor management is challenging include lack of standardization, process inefficiencies, and security risks due to frequent data transfers between systems.

Solution: using a global payroll provider

Working with a global payroll provider helps enterprises overcome multi-vendor management problems and move to a unified global payroll system that provides transparency and simplifies payroll management for multiple geographies. Depending on the global payroll solution, it might be possible to keep existing local payroll vendors and connect them to the new centralized payroll system.

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Multi-vendor management is a key payroll challenge for global enterprises. But there is another challenge multinationals need to overcome before, and that is to find suitable payroll providers.

“The essence of any payroll is really about timeliness, accuracy, speed, and compliance. And to find somebody in some, what one might consider, far off land who’s going to do all that for you is not so easy,” Barnard comments.

In addition to meeting the agreed payroll SLAs regarding timeliness, accuracy, and compliance, in-country payroll providers also need to have the necessary expertise in working with large-scale international organizations.

Solution: using effective payroll RFPs

In order to simplify the selection of local payroll partners, multinational organizations can use a global payroll RFP template that they can send out to different payroll vendors. A payroll RFP is a detailed questionnaire that collects details from potential payroll partners and serves as a basis for creating a shortlist of the most promising payroll services in a new target market. Alternatively, global enterprises can contract the services of a global payroll aggregator that works with a network of prevetted ICPs.

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The laws, rules, and regulations surrounding payroll differ between countries. This makes it difficult for global enterprises to ensure payroll compliance across all geographies—especially in countries like the United States that have a multi-layered tax and legal system that requires businesses to adhere to federal, state, and sometimes even local rules when processing payroll. Also, keeping up to date with legislative changes is much more challenging when operating in a range of different countries.

Solution: global payroll outsourcing

Payroll outsourcing minimizes compliance risks in global payroll management. Externalizing payroll to experienced payroll experts who have a proven track record in their field of work allows large-scale businesses to benefit from in-country expertise and gain peace of mind. A full-scale global payroll solution can help balance local compliance requirements and a global view of the business’s payroll operations.

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Global enterprises that outsource their payroll to a global payroll provider or several local providers still need an in-house team to monitor global payroll operations and pull the strings wherever needed. Payroll management tasks that need to remain in-house include payroll data input validation and payroll results approval.

Other key payroll areas that need to remain in-house include payroll operations monitoring to ensure that the global payroll strategy aligns with the overall corporate strategy. The challenge for global enterprises is to find qualified payroll professionals that have a strong background in global payroll management.

Solution: building a global payroll talent pipeline

In order to meet their staffing needs in the payroll function, multinational businesses need to build a robust global payroll talent pipeline. There are different strategies for sourcing payroll talent. Getting help from specialist recruiters, advertising on social media, and re-engaging candidates from the company’s ATS are just some examples.

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Lack of standardization is generally considered a major payroll challenge for global enterprises, but especially so with regard to payroll data. Low data visibility across countries is typically a result of a legacy multi-vendor set-up with payroll data from different locations coming into the central system in different formats, showing different pay elements and currencies.

Harmonizing these sets of data is a time-consuming, error-prone process because it requires manual intervention. Manual data consolidation costs businesses valuable time and resources.

Solution: automated payroll data consolidation

Automation allows businesses to simplify many aspects of payroll management, including data management issues. Modern global payroll solutions leverage the power of automation to standardize and consolidate payroll data for different countries to make it available for analysis and reporting purposes.

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Different time zones, cultural differences, and language barriers are three aspects that can cause a disconnect between global enterprises and local payroll providers which, in turn, can lead to slip-ups in local payroll processes and delayed response times to urgent payroll enquiries.

Another factor that can increase the disconnect between local payroll agents and multinational enterprises is a lack of experience on the provider side when it comes to handling special requests from international enterprise clients regarding data format, reporting standards, and more.

Solution: investing in a centralized global payroll solution

Centralizing global payroll can help overcome existing disconnects between local payroll vendors and the in-house payroll team. A centralized platform can help streamline payroll management processes and reduce the number of contact points and necessary interactions between in-house teams and external providers thanks to process automation.

Another major challenge faced by global enterprises is to maintain control across their entire global payroll operation. With multiple different systems, locations, and providers, global payroll operations can resemble a giant board of moving pieces. Continuously adding new payroll locations over the course of global expansion often leads to complex payroll infrastructures that make it hard to maintain global oversight.

Solution: actively reducing global payroll complexity

Monitoring and controlling global payroll operations is easier when the global payroll set-up is less complex. There are several ways how enterprises can reduce the complexity of their global payroll. For instance, multinationals can streamline and standardize their payroll processes, simplify their global payroll delivery model, and change their global payroll strategy.

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Working with globally distributed teams means having to pay different team members in different currencies. This leads to several problems. First, different currencies make it difficult to compare payroll expenses in different markets. Second, foreign transaction fees can quickly add up when paying large employee populations overseas on a monthly basis. Third, currency conversion requires special attention to ensure that employees receive the correct amount of money in their bank accounts after the transaction has been processed.

Solution: implementing alternative payment methods for global teams

Traditional payment methods fall short when working with a global workforce. Not only because of the difficulties related to multi-currency management, but also because they are too slow and expensive for cross-border payments. Enterprises with employee populations in different countries need to either set up a local payment infrastructure for salary payments or invest in an international payment solution that facilitates global mass payments.

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Cost control is another major payroll challenge faced by multinational organizations. With payroll operations and infrastructures being spread across a variety of countries, it can be hard for CFOs and global payroll managers to keep track of global payroll costs. Yet knowing how much money the organization spends on its global payroll is vital for making informed business decisions and for improving financial planning.

Solution: standardized global payroll reporting

The best way to control global payroll costs is to implement standardized global payroll reporting that provides accurate, up-to-date insights into global payroll data for all geographies. The data insights should be in a standardized format and allow for easy comparison between different countries to enable strategic decision-making.

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Global enterprises face unique challenges in payroll management, including managing multiple vendors and systems and balancing the need for local expertise and a holistic global view of payroll operations across all geographies. A unified global payroll solution like Lano can help enterprises overcome all of these challenges with one single platform.

Lano’s global payroll solution combines an advanced payroll consolidation platform with global payroll services across a wide range of countries. Compliantly manage all your local payrolls and providers through a single platform and unify your payroll infrastructure across locations.

Advanced global payroll reporting features allow you to slice and dice your global payroll data and get strategic insights. Easily add new payroll providers from our partner network to the platform to get your next local payroll up and running. Or bring your existing payroll vendors to the platform to standardize and consolidate your data and get a holistic view of your global payroll. Book a demo with one of our payroll experts today.