The global pandemic made the delivery of business-critical services at multinational companies around the world much more difficult. For starters, everything shifted to a remote environment and there was a need for access to documentation along with innovative digital tools and technology to make sure these business-critical services could still be delivered from a non-office based environment.
Next up were some of the inconveniences involved in communicating and collaborating in a remote working environment-a lot of global payroll professionals and employees around the world had to quickly become used to a new normal, despite not choosing it. There was a lot of change to be handled and managed all at once, and it is only inevitable in circumstances like these, that service delivery is impacted in a negative way.
Global payroll professionals, so diligent and conscientious by nature, were successful in overcoming most of these challenges and remained committed to ensuring that a globally dispersed workforce was paid accurately and on time every pay period. But it was not easy, numerous hurdles needed to be overcome and just when global payroll teams are getting used to this new normal, a new potential risk and compliance headache for payroll processes is looming on the horizon.
In this article, we will take a look at the new trend of hybrid working models along with some other issues that present significant risks to international global payroll compliance.
Data security
Before talk of a new hybrid working model and the whole concept of work from anywhere gripped the national and business media, there are a host of other issues created by the pandemic that impacted the ability of global payroll professionals to deliver their services in the way that they wanted to.
First among them was the issue of data security - many companies still move global payroll around via excel spreadsheets and emails. This was never very secure to begin with but continuing to do so in a remote working environment only heightened the risk. Companies who are not operating in a secure cloud-based environment where authorizations could be placed on global payroll data access, are at more risk of a significant and damaging data breach. Global payroll data is highly sensitive and contains a lot of personally identifiable information about what could be thousands of global employees.
Sharing such information with people located in different parts of the world via non secured data transfer methods became a significant risk that was exacerbated by the move to remote working brought about by the global pandemic
Provider failure
Local country provider or payroll vendor performance was always something that needed to be monitored and carefully controlled by global employers. There were a range of challenges when it came to finding the right way to do this long before the pandemic arrived. When the pandemic actually hit, these concerns were heightened, and the focus became about the ability of the local country payroll providers to continue to provide the payroll services as necessary. Unfortunately, there were some stories of payroll failure as some local country service providers simply did not operate with the kind of flexible technology stacks needed to support the remote delivery of payroll services.
This was understandable if unsatisfactory-many local vendors were simply not equipped to deal with the pressures brought on by the pandemic. Remote working, business continuity plans, access to data and lack of agile technology stacks created problems that were too significant for some of them to overcome. Needless to say, this caused major headaches for global employers who then had to seek out and quickly on board, alternative local country expertise in different countries who could help them get their employees in those countries paid.
The new risk
While the above two points represented risks and compliance challenges to an extent, they're about to be overtaken by a major new risk. The new hybrid working model which will see many global organizations allow their internationally dispersed workforce to deliver their duties from a mixture of homeworking and office-based collaboration will soon come into effect.
This has major risk, regulatory and international compliance implications for global payroll, employment law, local tax and even EU law. The issue is the lack of clarity around residency for income tax purposes- if a global employee is headquartered in London but they are a Spanish national who are allowed to work for say, 75 days a year in Spain, which country do they have to pay tax in, and do they require a local country employment contract to work in this way? These are just some of the questions being figured out at present, but the likelihood is, all of this will create headaches for global payroll professionals who may need to adjust payroll processes to reflect this new hybrid working model and the associated compliance risks.
It also raises the question of how to prove a global employer is being compliant in a specific country. While there is some level of standardization across EU countries when it comes to working hours, pay and employment laws-there will always be local nuances that have to be factored in. International compliance was complicated before any of this came along and the consequences of the pandemic all point to an increase in complexity in compliance along with an additional administrative burden for human resources and global payroll professionals. It is unlikely that global payroll leaders will have been consulted in any great detail before hybrid working models were put into place, and this may prove to be a mistake.
A management solution
Complexity and risk associated with the fallout of the pandemic is just another thing that global employers need to manage. All evidence points to a technology solution being needed for the efficient management of compliance related risk. It is really about visibility and control-there can be no control without transparency and there can be no transparency without clear evidence of what is happening in each individual country within the multi country global payroll network of a multinational company. Non-compliance, be it country-specific employment law or an international issue, is not an option as the financial penalties can be severe.
Digitized processes featuring clear and transparent audit trails will become more important in the next two years. Proving international compliance will require clear audit trails that indicate where global payroll data was transferred, where it was entered and validated, who interacted with the data, when and for what reason. A digital cloud platform with fully authorized global payroll professionals following a standardized global payroll process will be required to deliver this level of transparency.
The responsibility of global payroll compliance lies with the global employer-as much as they would like to rely on the local country vendors to ensure that they meet their compliance obligations, it is ultimately up to them to make this happen. There is therefore a need for a digital technology stack or platform with strong two-way data flows between the global employer and the local payroll vendor. These data flows need to be captured in a transparent digital format that clearly identifies what happened with global payroll data at all points during the monthly pay run. This will result in the kind of transparent, digital and easily accessible data that the global employer needs to present in order to prove local country and international compliance in this new normal within the payroll function.
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