From Multinationals to Remotely-Staffed SMBs, Payroll Compliance Has Never Been More Pressing

Payday means different things to different people. For employees, it’s the certainty that their money will appear in their banks. For employers, it’s as much about honoring that contract with staff while also remaining compliant with a range of rules and regulations.

But now, at a time when businesses have been expanding internationally into new markets, while also taking on remote employees in news cities and countries at an unprecedented pace, a payroll problem of sorts has emerged that carries a mix of compliance and complexity that many companies have never faced before.

“So, what we’re seeing is a big catch-up mode at the moment in all sizes of companies — small, medium and multinational — trying to catch up to make sure that all their global payroll systems are standardized and that they can pay people on time, compliantly and with a good user experience,” Fidelma McGuirk, founder and CEO of Payslip, told PYMNTS.

While most multinational companies or growing operations generally already have some level of online tooling for their staff to work with and a unified payroll and payment experience, they don’t necessarily have that in all the countries in which they are based, and they rarely offer a unified experience in every country.

In addition, some hyper-growth companies are hiring people so quickly that they’re more focused on finding the best people, without always having had the time to set up a system through which to standardize how those people get paid.

Local Country Complexity

Payroll is always a country-specific or local piece of business to be done, McGuirk said. Every country has its own rules and regulations on taxes, social insurances, what has to be deducted, where it should be remitted, what kind of reporting needs to happen on behalf of the employer or the employee, and what a pay slip or a paycheck should look like.

“If you’re a French company only in France, there is a local system to do that,” McGuirk noted. “But when you’re the fast-growing multinationals, whether you’re a small company or a really large, mature one, you’re looking at payroll across loads of countries, and that local country complexity can be really hard to elevate to some global viewpoint.”

Payslip, a global payroll control platform, has customers that have already automated their HR processes. The company helps them standardize how they manage the process and the data flow at a global level.

A Single Viewpoint

It provides different portals that allow managers to manage it, standardize it, and have good insights and reporting and a single, unified view; employees to access their pay slips and tax documentation, and payroll providers in each country to access the automated workflow, the documents and the data.

“That way, we bring all the different actors together in a unified way,” McGuirk said. “Any customers of ours, they all actually manage all the payroll in the same way globally. Whether it’s Indonesia, China or Canada, they have the single viewpoint that’s the same.”

This can help customers avoid fines. McGuirk gave the example of a Payslip customer that had acquired a company in Israel just before the pandemic hit in March 2020. The customer had planned to bring that company onto the Payslip system in July, within their own project planning. Toward the end of March, they learned that the local payroll provider of the company they had acquired delivered all the pay slips by mail and the postal service was closed because of the pandemic.

“They knew then that they were going to get hit by this large compliance fine of thousands of dollars just because they weren’t going to deliver the pay slip on time on the Friday, so they contacted us on Wednesday,” McGuirk said. “Because the customer was already in our system, they knew how to use our system, and we had all of the employees in Israel, all hundreds of them, live on the self-service platform with the pay slip online on the Friday morning. So, they saved that compliance.”

Intangible Costs of Noncompliance

In addition to tangible costs of noncompliance, there are intangible ones. For example, if a company is late to pay employees or pays them the wrong amount, their trust in the company begins to erode. Noncompliance also leads to complications in terms of internal reporting and financial management. This lack of visibility can lead to mistakes and fraud.

In addition to avoiding those costs, Payslip saves time for those who run payroll. It automates the collection of data, transfer of data and validation of data. If there are any anomalies, it shows them to the payroll analysts so they can look at the detail.

“If you hadn’t done that right, of course you could have compliance fallout because there could be a mistake that someone personally had missed and then you could have a reputational damage for the employer,” McGuirk said.

Because of benefits like these, customers normally declare they have achieved the return on investement (ROI) within about two months of each country going live.

A Global Payroll Payments Solution

McGuirk gave the example of a customer that went live two years ago with three people in their team for seven countries. It now has 19 countries but still has three people on the team because the system gave them scalability.

“None of our customers will ever cut their team or reduce their headcount — they don’t need to do that — but actually grow in an extraordinary way and the system is scaled instead of the people,” McGuirk said. “So, you’re not throwing more manhours at it and you’re not throwing more dollar bills at it.”

Payslip’s next step that is to be done by the end of the year is integrating payments. This will help companies that have grown quickly into other countries, chosen local payroll providers and ended up with a patchwork solution. Over the coming four months, Payslip will partner with a FinTech company to provide a solution.

“That means that last-mile friction will totally disappear,” McGuirk noted, “and we’ll be a global payroll payments solution at that point.”