14 common misconceptions about global payroll

There are many myths surrounding global payroll. Most of them are linked to international payroll outsourcing, but there are also misunderstandings when it comes to technological aspects like integration or standardization. Some of the blog articles you can read online even raise the question whether the idea of having a truly global payroll is a myth in itself. The problem with all the misconceptions that persist in the discussion on global payroll is that they can hold business owners and decision-makers back from taking vital decisions to drive their business forward. 

In this article, we will therefore look at and break down the most common misconceptions to get a clearer picture of what global payroll actually is, what it can deliver and what it takes for international payroll to be successful.

One common misconception about global payroll is that outsourcing payroll processing to external service partners or using cloud solutions for payroll isn’t secure. Given that these services are used to handling large sets of sensitive data, their data protection and security standards are often much higher than the ones you will find on the company’s own HCM and finance systems.

Many organizations fear that outsourcing payroll will result in a loss of control over both employee data and the process. However, this is far from being true. When deciding to have payroll run by a third party, you can choose which aspects of the payroll process you want to outsource. The aim of outsourcing is to have someone else take on tasks which you don’t have the capacity for - and not to take over. In fact, almost 30 percent of businesses opt for a hybrid approach to global payroll, combining outsourcing and in-house payroll.

This brings us to yet another misunderstanding of global payroll which is that there is only one way to handle global payroll. Given that every company operates differently and relies on different operational structures, this couldn’t be further from the truth. There are many different service delivery models when it comes to managing global payroll. Outsourcing, in-house processing and hybrid are, of course, the three basic choices you have. But in addition, there are different sub-options. For example, global payroll can be processed in-house centrally from one location, regionally (i.e. from a regional hub) or in-house for each country. The same choices apply for outsourcing solutions.

Outsourcing payroll processing in itself is not enough to increase the efficiency of your payroll operation. On the contrary! Contracting a local service provider in each country where your company has employee populations will quickly drive up complexity. In order to make the whole process efficient and achieve real transparency and peace of mind, you need a smart software solution which will consolidate data from all the different providers in one single platform - and thus solve the problem of having to enter all the information manually.

Efficiency is just one of the payroll challenges your organization is facing? Then check out our related blog article where we talk about 11 global payroll challenges - and tell you how to solve them.

Maybe it’s because running payroll and paying wages represents a big share in an organization’s overall spendings, but there seems to be a general misconception that payroll and everything related to it - be it the reporting, the decision-making or anything else - is a matter which solely concerns finance and accounting departments. Yet in recent years, there has been an important shift in the way payroll is conceived and linked to other company functions. 

As the 2020 Deloitte Global Payroll Benchmarking Survey showed, the bigger the organization, the more likely it is that payroll reports directly to HR rather than Finance. What’s more, if done properly, global payroll reporting is not only relevant for a company’s overall financial reporting but can also be a valuable point of guidance for important strategic business decisions.

Well, that definitely depends on how you approach your global payroll outsourcing project. If you decide to work with several in-country partners and have to start from zero, then it will take time to compare different service providers and find the best fit for your business. However, there are ways around it. Global payroll solutions like Lano work with large networks of local payroll partners and can quickly put you in touch with candidates whose service offerings suit your needs.

Here you can learn more about how to choose the best payroll provider for your business.

There is a slight but significant difference between reducing and eliminating risks, especially when it comes to compliance. One of the main reasons why companies with global operations decide to outsource payroll to local experts is to reduce compliance risks. However, it is wrong to assume that, by having payroll run externally, you can eliminate compliance risks completely. When it comes to compliance, it is hardly possible to be 100 percent secure. 

Read more about the compliance challenges faced by companies that are expanding internationally in our related blog article.

While it’s true that having your global payroll run by various local payroll providers - or one payroll aggregator/consolidator - will reduce administrative and transactional payroll tasks which need to be performed by your own staff, outsourcing doesn’t mean that the members of your payroll team will become redundant. You will still need in-house payroll specialists who make payroll-related decisions and monitor the fulfilment of your global payroll strategy.

Paying remote employees that are spread across many different countries around the globe can be a real pain in the neck, especially when you have hired them under a foreign employer agreement - i.e. without having set up a local legal entity. One highly appreciated service feature in the service package of payroll providers is the direct depositing of wages and salaries in your employees’ bank accounts. 

However, what many organizations ignore is the fact that this isn’t always possible. In some countries, such as the US, the transaction cannot be handed over to an external service partner. Instead, the legal employer has to open a local bank account from which payments are issued. In these cases, it is often best to hire foreign talent through an Employer of Record (EOR) solution which means that a registered local employer will hire the employee in your name, thus becoming the legal employer - and taking on all the compliance, tax and legal issues - while you remain in control of your employee’s day-to-day workflow.

Visit our global employment solutions page to find out more about Lano’s Employer of Record service.

Another aspect that becomes increasingly pronounced in the debate about payroll transformation is employee experience. Sure, the main concern of payroll - whether run in one single country or on a global scale - is to make sure that your workforce gets paid on time. But reducing employee interest in (global) payroll to just receiving a paycheck at the end of the month doesn’t quite cut it.

In fact, more and more organizations offer their employees an enhanced payroll experience by making data, paychecks and more accessible for their global team online. With Lano’s global payroll platform, your employees cannot only visualize their payslips and consult their job details online, but are also able to send direct messages to the person who is in charge of payroll in your organization or contact your in-country payroll partner for more information.

While it may be correct that English is THE language for international business communication, assuming that global payroll can be run exclusively in English is a myth. Let’s take the following example: Your organization operates with a remote team whose members are located in several countries all over the world, including countries like France, Spain and Brazil where English is not an official language. Official tax and social security reports will have to be filed to the authorities in the local language - and not in English. Sure, this hurdle can be overcome by working with a local payroll partner but the language barrier between you and the provider may still persist.

It’s safe to say that the days where processing payroll meant loads and loads of spreadsheets and numerous hours of manual data entrance are over. Despite there still being many organizations which don’t use modern technology for payroll processing yet, digital transformation has finally also reached payroll. There are many different technologies out there which you can use to standardize payroll data coming from all your different payroll partners and automate your payroll processes. By using a smart software solution like Lano to consolidate your global payroll data, you can kiss your spreadsheets good-bye once and for all.

One myth that quite often appears in the international payroll discussion is that end-to-end global payroll solutions which consolidate payroll data for all the different payroll countries in one single source of truth are only for large organizations. While it may be true that bigger companies have different financial means for high-end fully-integrated payroll software solutions, this doesn’t mean that such solutions aren’t available to smaller companies, too. Global payroll consolidation doesn’t have to be super expensive. With Lano, for instance, you can manage payroll for your entire global team starting from 15€ per month - price per team member.

Different in-country providers, different systems, different processes, different data formats… Given that the complexity of global payroll increases with each new country that gets added to your payroll list, it’s understandable that many people believe that running global payroll via one central system is not possible. While you may not be able to impose a standardized payroll process on your in-country partners or use a standardized payroll processing model in all your hiring destinations due to country variations and different regulations, it’s nevertheless possible to have all the different processes come together in one unified payroll solution. The key to this is integration. 

Software solutions like Lano allow you to integrate all your different providers into one single platform, standardize all the different data flows coming into the system and automatically consolidate data for your whole global team on one screen. What’s more, you can easily integrate the platform with the other workforce management tools you are using. Get in touch with us today to learn more about how Lano can help you make your global payroll a reality.