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How Automation has Made Global Payroll a Reality

August 31, 2016

The landscape of global payroll has evolved in the last decade as companies in Canada look beyond our borders to expand their business, either through acquisitions or organic growth. Similarly, many multinational organizations with a global reach have begun shifting away from the legacy model of working with in-country payroll providers, and are now centralizing their HR or payroll operations at company headquarters. This has been the result of cost-cutting measures and the need to achieve some level of standardization from a payroll compliance and process perspective.

Payroll practitioners are dedicated to the timely, accurate and compliant delivery of international payroll. However, how can their organizations keep pace with technology while delivering payroll in a consistent manner? According to a 2014 survey by Ernst & Young, the number of companies utilizing a fully outsourced model to deliver global payroll has more than doubled, with 12% of organizations surveyed doing so. While this figure is still low, it is clear that organizations want to find a single global solution with a scalable approach that delivers international payroll through a single platform, which will reduce human error, validate payment information, deliver payments in a timely manner and protect payroll against adverse currency fluctuation.

Mitigating foreign exchange risk

Volatility in foreign exchange markets is not a new phenomenon facing organizations. Payroll managers must navigate through currency fluctuations in a manner that protects the company, as well as employees — both local and expatriates — from being adversely impacted by a decline in their home currency. A proper risk management strategy employing the appropriate mix of spot and forward contracts that are matched with each payroll cycle can help mitigate such risk. Further, the chosen provider, through its online platform, should grant the company a bird’s eye view of positions held, affording the flexibility to roll any unused portions of the contracts to the following pay cycle.

Global footprint from mature markets to emerging markets

Most, if not all, payroll providers have the capability to deliver global payroll to mature markets such as North American and Europe. However, as multinationals branch out to emerging markets such as Latin America or Africa, organizations may no longer be able to rely on one sole provider. Typically, as organizations enter into emerging markets, they must open local bank accounts and deal with existing providers, potentially marking up their pricing on foreign exchange transactions. The ideal provider should be able to deliver payroll through a myriad of channels (SWIFT, IACH, SEPA or in-country channels) through their global banking relationships, thereby effectively reducing or eliminating intermediary fees. Similarly the provider should work with the organization to provide transparent pricing with no exurban foreign exchange (FX) fees as part of the service agreement.

Accurate delivery of payroll

To ensure the timely delivery of payments, an organization must navigate through the intricate web of payment routing rules for each country and satisfy these unique requirements before the payment can be credited to the employee. This translates into having valid supporting documentation by way of purpose of payment, tax IDs or contact information, as well as the correct International Bank Account Numbers (IBANs). A robust currency management system provides the organization with real-time country bank validation tools in collecting employee’s banking information, indicating the fields required to carry out the payment in a manner that will deliver payroll promptly and diminish time on investigations.

Payment 360 — enhanced straight-through processing

Perhaps the most significant determinant in selecting the appropriate outsourced solution is the ability to deliver a scalable solution that respects your organization’s workflow and the limitations of your Enterprise Resource Planning system or international payroll platform. Communicating with multiple international banks to manage payroll can lead to an increase in human error and complicated validation procedures. The right solution should offer the flexibility to facilitate international payroll management through different bank accounts by using a single file to incorporate multiple currencies — thereby reducing human error as manual payment entry is reduced. Equally important is the solution’s ability to maintain the integrity of your database. This can be done through a customized approvals process for payments that respects your existing workflow, along with 24/7 customer and compliance support to address impediments that may arise.

Ultimately, look for a solution provider with international payroll experience, scalability, data security and the customer service capability to help you efficiently achieve your goals. Your provider should have knowledge of different countries’ transfer requirements to ensure all payroll payments to international employees are completed accurately and on time. Utilizing a global solution with a single platform to manage payroll and vendor payments may be more cost effective than using in-country providers. Consolidating international payments allows multinational organizations to reduce manual information input, thereby minimizing human error and the need to validate payment information while ensuring timely delivery of payments and payroll protection against currency fluctuation.

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