Editor’s Note: Mike Volkov, CEO of The Volkov Law Group, was a federal prosecutor and veteran white-collar defense attorney for more than 25 years with extensive trial experience. He also served as the chief crime and terrorism counsel for the Senate and House Judiciary Committees. Volkov has published numerous books on ethics, compliance, and white-collar enforcement defense topics and is an invited speaker at various conferences around the globe. In addition, he has an award-winning blog and podcast on his website called “Corruption, Crime and Compliance.” Volkov has extensive experience in the design and implementation of ethics and compliance programs and internal financial controls, including detailed procedures governing payment of employees, contractors, and other persons as part of a company’s internal financial controls. The Volkov Law Group is a premier boutique law firm specializing in corporate compliance, internal investigations, and white collar defense, with more than 40 years of combined experience in government, federal prosecution, corporate monitoring, and corporate consulting.
What is the changing role of the payroll professional?
The payroll industry is becoming more complex as companies expand globally. Global payroll professionals require certain skills to be successful. Although these skills are not new, learning to adapt to a changing environment is key to their success. Here is a list of some of the skills pertinent to the payroll professional today:
- Mathematical aptitude—A focus on accurate pay and tax calculations. The laws and regulations are complex, so the data must flow timely and accurately for reporting purposes and to avoid payroll-related tax penalties.
- Compliance—A thorough working knowledge of laws and regulations affecting payroll in the geographic regions they operate in (domestic and international) to avoid enforcement actions and penalties. Payroll professionals should also collaborate with other departments such as human resources and lines of business to ensure compliance with payroll rules, such as time reporting and applicable regulations.
- Communication—The ability to explain the payroll calculations, rules, and regulations that apply in a manner that an employee can understand from clerical employee and union representative up to senior management level.
- Customer service—Interaction skills are a necessity to address questions with personnel on all levels on various topics such as pay calculations, taxes, retirement, benefits, direct deposit, time off, etc. Information should be detailed, accurate, and responded to timely.
- Timeliness—The ability to meet deadlines to file tax returns, ensure all employees are paid on time, and pay is accurately calculated with no errors.
- Confidentiality—Payroll pros have access to sensitive personal information and should always exercise discretion when interacting with the employee. Ensure the payroll professional treats all sensitive information with discretion and protects the information to avoid security breaches. Payroll pros should be familiar with privacy laws that affect all geographic locations that the company operates in to comply.
- Administration—Tasks and duties range from clerical to administrative. Flexibility is a trait that payroll professionals should have to jump from one role to another.
- Initiative—The ability to work independently and identify areas that need improvement and offer solutions to correct errors.
- Software knowledge—A working knowledge of payroll software platforms and standard software such as Microsoft Excel, Office, and QuickBooks are essential to implement payroll processing. Software and business platforms continue to become more automated that involve artificial intelligence and cloud-based applications. The payroll professional should be able to adapt and expand their skills to stay up to date on payroll accounting functions.
- Analysis—Analytical skills are required to identify problems and opportunities that arise quickly due to challenges that can occur such as system calculation errors in pay and tax reporting, as an example. The ability to foresee future challenges and identify requirements due to upcoming new regulations or when entering a new foreign country are beneficial.
What emerging trends in global payroll are demanding your attention? How will they exert impact?
The coronavirus (COVID-19) epidemic has affected all businesses and their employees who are ill, terminated, furloughed, and working remotely. Business are required to adjust to the “new normal,” which includes health and safety risks for your employees, business survival, and continuity issues. The U.S. government has expanded paid sick and family leave. The IRS, Social Security Administration (SSA), and other government agencies have also issued new and temporary guidance on issues related to COVID-19.
Global payroll professionals must ensure that they comply with the changing payroll environment. Many countries are facing the same issues, so it is in the best interest of the payroll professional to remain current on countries’ tax laws that have been implemented to address the changing workforce. Payroll operations will need to be flexible to adapt to the new and extended rules and regulations.
Items to consider are the following:
- Adjusting the payroll system to match the new rules/laws (i.e., calculations, extended days off, etc.)
- Utilizing new technology for payments such as blockchain technology for cross-border payments
- Training payroll staff to ensure they are current with rules and regulations, new processes, and how to be safe in the workplace
- Reallocating resources accordingly due to the new safety and health requirements of social distancing practices in the workplace
- Prioritizing payroll operations for any disruptions in the workplace due to the COVID-19 epidemic
- Being on alert for an increase in payroll fraud and false claims for sick and paid leave
What are the chronic challenges for companies that have moved or are moving into global expansion?
First recommendation is to do your homework. With global expansion, prepare to be surprised, flexible, and patient as you collect the requirements to establish a new business and hire employees in a foreign country. Another recommendation is to hire a payroll expert (or payroll company) from the country you will be operating from. It is helpful to have a partner on board who is familiar with local knowledge. Create a checklist to cover items to be considered, such as the following:
- Understand the foreign country’s laws as they relate to conducting business in the specific country
- Determine if the General Data Protection Regulation (GDPR) and other privacy laws apply:
- Is your program in place to understand how much personal data you collect?
- Do you understand who you collect data from?
- Who has access to the data?
- Are the employees trained to comply with GDPR?
- Determine the tax requirements to pay employees and conduct business
- Understand the country’s employee compensation and benefits:
- Benefit requirements (e.g., medical, retirement, stock options, etc.)
- Paid-time-off requirements in the foreign country
- Certain allowances to cover, such as car, meals, etc.
- Does employer pay union dues, etc.?
- Are there specific requirements to pay your employees?
- Frequency of pay (payment cycles)
- Payment options for employees (e.g., check, direct deposit, payroll debit card, cryptocurrency, etc.)
- Identify the local and state bureaucracy to register your business and employees, if required
- Register and obtain a license for a new business in person (local, state, and country level)?
- Are you required to register employees in person with the city/county of operations?
- What are the banking requirements for your new company in the foreign country?
- Understand the foreign exchange rates
- Integrate training for all payroll pros to understand the culture of the new work environment and how to integrate or be familiar with the parent company’s policies and procedures
What resources do you use to stay current on the latest trends and legislation in payroll?
We follow industry reporting through blogs, legislation monitoring services, data privacy initiatives, and other important sources, like the Global Payroll Management Institute (GPMI) for compliance information.
How can a payroll department provide support on a strategic level to corporate finance, human resources, and other departments?
Global payroll operations should have a seat at the table and be included in the strategic planning of a company to determine if there is an impact to payroll processing. This will allow the payroll team to develop a project plan to prepare for new processes by involving the appropriate stakeholders of the company (e.g., human resources, operations, accounting/finance, IT, etc.).
As an example, plans are in the works to acquire another company located in a foreign country, or the business is considering replacing the core business application program that integrates employee data with the automated payroll system. Under these circumstances, payroll should consider how an acquisition or company’s business application will impact the operations, such as:
- Increase payroll operations staffing
- Work with your existing payroll system provider to determine if there is integration experience with a specific business application program
- Requires testing data integration
- Retain acquired company’s payroll system to slowly integrate into the existing company’s payroll system
- Maintain knowledge of the payroll system in the foreign country
- Develop a strategic plan to integrate the foreign payroll system with the parent company’s payroll system
- Search for a new automated payroll system that can meet the growth of the company
- Conduct proper third-party due diligence
- Determine new payroll reports to develop
- Train payroll on new systems and processes
What strategic advice would you give to a company moving from a domestic to a global payroll?
The best strategic advice I can provide to a global payroll professional is to plan and prepare for the unexpected, be flexible, and adapt to situations.
Identify your payroll requirements and do your due diligence to gain knowledge and understanding of the laws and regulations of the foreign country to comply. Labor laws differ in other countries, and you must also factor in the culture of the country, such as the duration of personal time off allowed by the country, and religious or national holidays that you are not familiar with. Consider joining a local payroll association in the foreign country to be notified of holiday schedules and new legislation. Your best strategy is to look for an experienced and skilled payroll professional in the foreign country who can help you maneuver through the country’s payroll requirements, and deal with a payroll service provider (automated payroll platform) that can meet your global needs.
Look for a payroll service provider (PSP) with an automated platform that is scalable and can integrate additional data and processes as the company grows. Questions to consider when reviewing a payroll system might include the following:
- Can the PSP handle payroll from 10 employees to 10,000 employees?
- Can the PSP integrate with other business applications (e.g., employee benefit offerings, attendance system, accounting software, etc.)?
- Does it comply with the GDPR and other countries’ privacy laws and data security requirements?
- The PSP’s ability to issue payroll and conduct tax calculations in various countries.
- The PSP’s ability to provide updates to the system to meet changes to tax tables, laws, and regulations.
- Does the PSP offer employee self-service access (e.g., view pay stubs, retirement contributions, year-end tax forms, timecard, personal time off, etc.)?
- Tools to manage the payroll workflow and provide data analytical tools
- Does the PSP offer standard and customizable reports?
- Does the PSP have a good reputation of providing client support?
Conduct a thorough third-party due diligence of the PSP you are considering, which should include the following:
- Financial stability of the company
- Years of experience in the industry
- Client references
- Business continuity plan in place
- Experience with working in multiple countries
- Ability to conduct sanctions screening
- Conduct open source data search on the PSP to include the principals and beneficial owners of the company
- Search for adverse news
In summary, the payroll operations, when supported by an automated payroll system, should be able to provide efficiencies in a global environment that has the capability to integrate a country’s tax tables and rules, be scalable to grow, and provide reports that you can customize to meet your needs.
In Part 2 of this Professional Spotlight in an upcoming Global Payroll issue, learn about Volkov’s insights on cultural differences, his background as a federal prosecutor, his early career lessons, and more.
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Frank J. Mendelson is Acquisitions Editor for the Global Payroll Management Institute (GPMI) and the American Payroll Association (APA).