Does your global payroll data have a mind of its own? Start taking control now!
Payroll is all about paying the right person the right amount at the right time. Payroll teams must be in control of their data to get all these three correct, but global payroll faces unique problems. Here’s how you can start to take control over your global payroll data.
Paying the right person the right amount at the right time..
Payroll is all about paying the right person the right amount at the right time. It sounds easy when you say it like this, but without good data the payroll team will get at least two of these three goals wrong. Payroll cannot pay the right person without accurate data on joiners and leavers. Paying the right amount is even more dependant on having accurate data for salaries and benefits.
..Means payroll have to have good control over data
As a result it is essential for all payroll teams to stay in control of their data. This means that the data which payroll uses is both correct and also consistent with the client’s source master data from HR systems.
But for global payroll this is more difficult
For global payroll managers there are specific challenges which make it more difficult to control their international payroll data. In this article I will focus on two common problem areas, namely Benefits and Compensation increases. These are not the only challenging areas for global payroll, but I hope the problems and solutions in these areas will help global payroll teams deal with the other types of data problems they face.
Multinational companies do not always offer their international employees the same benefits in each country, no matter how hard they try to standardise. This can be due to the local marketplace, country tax regulations or other country laws. Examples of benefits which multinationals offer in some countries and not others include:
- meal allowances
- company cars
Why does this matter?
When benefits vary from one country to another, this makes it more difficult for the global payroll department to keep track of all the correct data. There are a number of causes for this:
- the local benefit may not be configured on the global HR system, usually because it is not cost effective to configure data fields for non-universal benefits
- even if the benefit is configured, the data may not be kept up-to-date. Global or Regional teams may lack the country specific knowledge required to update the local benefit on a timely and accurate basis
- automated interfaces to payroll may not exist because it is not cost effective for IT to build them
What can global payroll do to stay in control of benefits data?
To stay in control of international benefits data, there are a number of practical steps a global payroll team can take, namely:
- keep a full log of all the various types of benefits that are applicable in each country they look after
- understand when and how the benefits change. For example, check whether there is an anniversary date when each benefit increases
- create a robust process to capture any changes in these benefits, such as including all local benefits on a new joiner list in each country
- include a full benefits reconciliation on their monthly checklist
- create a master data list for each of these benefits, such as a spreadsheet or sub-system.
Many HR and Finance departments believe that employee compensation only increases as part of the annual salary round, or when the company decides ad hoc to give employees mid year promotions, salary raises etc. The global payroll team knows this is not the case. There are many types of local salaries and benefits which can change at other times of the year.
Why does this happen?
There are a significant number of compensation items overseas which are not in the full control of the employer. These items are controlled by industry-wide collective bargaining agreements, or by national or union regulations. For example in Brazil there are commonly union-related inflation agreements which will result in salary increases for employers.
Any compensation item, either salary or benefits, which is linked to a national, industry or union agreement can in theory increase or change at any time of the year. In practice, these increases will tend to occur on similar anniversary dates each year.
Why is this a problem for data?
The good news is that your in-country payroll provider will normally be well aware of these increases, because they fully understand the local rules. The country payroll provider should liaise with the client and make the necessary changes required to keep international payroll compliant with local rules and regulations. When this happens, the payroll will be correct and employees will not have a problem.
Each of these local mandatory increases must also be recorded in the company HR system. If this does not happen, the international payroll data will get out-of-synch with the internal HR data. In other words, the internal HR system will be inaccurately stating the true compensation levels of international employees. Often in these cases, the actual compensation costs are higher than those in the HR system.
Why does this matter?
This data inconsistency can lead to some very negative consequences:
- at the next annual salary round, the overseas employee could receive an incorrect raise because HR are starting with the wrong compensation number
- if data is not routinely reconciled, the annual salary round can be delayed because the data is out-of-synch
- if the financial budget uses the HR system for employee salary data, the budget may underestimate the true costs of international labour
What can global payroll do to stay in control of compensation data?
In order to prevent this happening, there are a number of practical steps a global payroll team can take, namely:
- Record details of all international payroll items which are driven by external deadlines and factors
- Understand the anniversary dates when each item traditionally changes
- Conduct a regular reconciliation of all overseas compensation items between the HR system and the payroll data
Global payroll teams need to stay vigilant and continually check their overseas payroll data. They can help themselves by taking time to understand local benefits and how compensation can be changed by local agreements. Regular data reconciliations will help keep any problems under control.
This article was written for the August 2015 edition of Purely Global, published by the Global Payroll Association
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