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Emerging Trends

Trends in Global Payroll—Compliance Teams

By Frank J. Mendelson and Carolyn Gould, CPP, SHRM-SCP, SPHR, GPHR

1477447918_94883How is the changing role of the global payroll professional— typified by greater interaction with the human resources department, data analysis, and strategic planning—making an impact in the field?

Payroll professionals need to be comfortable with data analytics and the ability to think strategically. It is a very exciting time for the profession. Global payroll is now more often included in decision-making and the creation of new programs. This is quite different from what we saw in the past, when payroll often was brought in after approval—and only to implement new compensation and benefits programs.

With the prevalence of outsourcing in global payroll functions, our role is also now focused more on project management skills, cultural adeptness, and the ability to quickly deal with changes in payroll rules around the world.

What are the emerging trends or issues that have your attention in global payroll?

The emerging trend that most interests me is the focus on getting compliance right. At a time when tax revenue audits continue to increase, with countries seeking more tax dollars, payroll is a prime focus for tax revenue. In the past, companies seemed more inclined to seek out the least expensive payroll provider. Now they are searching for a provider they feel is best with compliance. In addition, in the past, corporate headquarters may have assumed their local companies were being compliant and the local companies were assuming their payroll providers were keeping them compliant, but this is no longer the case. Depending on who is the payroll provider, more organizations are requesting a “health check” of their payroll to determine whether they are complying correctly, in anticipation of receiving a tax audit.

What resources do you use to stay current on the latest trends and legislation in global payroll?

I count on my colleagues across the PricewaterhouseCoopers (PwC) payroll network around the world to help me stay abreast of legislative and regulatory news. We inform one another about major changes, which enable all of us to keep our clients better informed in a timely way. I also take the time to attend the American Payroll Association’s annual conference and to stay in close touch with my clients to listen to their concerns and research how I can best guide them as circumstances change.

How did you become involved in Global Payroll?

I began my career almost 40 years ago with ORC, an HR consulting firm, calculating expatriate cost-of-living allowances and helping clients with expatriate policy development. I started with PwC in 1989 in expatriate policy consulting, adding expatriate payroll and administration to my area of expertise. You need to know a lot about home and host country local payroll when dealing with expatriates, so it was a natural progression for me to focus full time on global local national payroll. Today, I work with a variety of global payroll clients. Getting my start in expatriate payroll continues to serve me well.

How would you advise someone whose company is just beginning to expand to a global payroll with regard to risk management and compliance?

I would first advise them to make sure they are using the right resources to keep up to date. Many companies will tell me they rely on their payroll provider, but unfortunately that is not enough. The reason? Their payroll provider will only know how to report what the company has provided. It is critical for upstream parties that feed payroll (e.g., HR, benefits) to know the rules as well as the payroll provider. That doesn’t mean they need to know how to do a tax calculation, but they do need to be aware of what is reportable and what information needs to be provided to the payroll provider.

How do your clients deal with managing risk and compliance on a global basis?

This is an area that continues to evolve. I see two trends here. The first has been the increasing use of shared service centers, typically at a regional level, with an increasing number that have global oversight. The second is a much greater focus on having a global compliance team in place.

In the past, companies left it to their local offices to manage payroll and take responsibility for compliance. With today’s global workforce and the constant movement of employees, either for business trips, short-/long-term assignments, or permanent transfers, local offices cannot act alone. These reporting needs cross borders. Payroll is now responsible for documenting compliance roles and responsibilities and tracking that compliance. In the past, clients rarely tracked if, for example, payroll tax filings were completed on time. Now tracking through the use of technology and Key Performance Indicators (KPI) is common practice.

What wisdom can you share in regard to being effective, efficient, and legally compliant in the sphere of working in global payroll?

The most important lesson I’ve learned over the years is that payroll, HR, and finance cannot operate in silos and hope to be compliant. Compliance is a cross-function responsibility. There must be excellent communication among those groups for a company to avoid compliance issues.

What is different about operating globally versus dealing with a domestic-only payroll function?

The biggest differences are in culture and working hours. When dealing with global payroll, you cannot control all that is happening around the world and have to place a lot of trust in your local colleagues, and vice versa. They need to be your eyes and ears on the ground and need to feel comfortable to approach you with any issues. To do that, you need to have at least a basic understanding of the culture of the people in the country you are working with.

You need to determine how to best communicate, interact, and solicit their input when developing new programs or changing operations. Including them in your decision process is critical, as things are so different in payroll in many countries and need to be considered in any new operations model. You also have to be ready to be on phone calls in the early morning and late evening to accommodate all time zones.

Global payroll is a job with a wide range of working hours. You have to be ready to deal with that. It is not easy, but it is exciting to see how different payroll and cultures can be around the world. That is why most people who get into the global space can never imagine leaving it.