Avoid These Global Payroll Pitfalls To Strengthen Your Financial Forecasting

If you’re reading this and you’re running a multinational company,? you’ve probably realised that one of the most challenging issues is also the most ubiquitous—managing payroll.?

Overseeing taxes, direct deposits, record keeping, and bank holidays is hard enough on its own. When you’re operating in multiple countries, the administrative quirks become even more complex.

So it’s never been more vital that global payroll management isn’t just relegated to a back-office function - it needs to be core to your core strategic imperative

In an increasingly interconnected world, the complexity of managing payroll across multiple jurisdictions affects not only day-to-day operations but also the reliability of financial forecasts.?

Without real-time visibility into payroll data, your ability to make informed decisions, manage risk, and allocate resources efficiently is compromised.

Think about how any of the following variables of global employment could affect your company’s ability to create accurate financial forecasting.?

• Fluctuations in bonuses, commissions, and performance-based pay can create significant variance in payroll expenses from month to month
• Different countries have unique requirements, such as 13th-month salary payments, mandatory bonuses, or overtime rules.?
• When dealing with multiple currencies, fluctuations in exchange rates can create discrepancies in payroll costs and impact overall financial projections.?
• Varying benefit requirements, such as mandatory health insurance, pension contributions, or allowances (e.g., housing, travel) in different countries can add layers of complexity to payroll calculations.

So what’s the key to successful financial forecasting?

Unsurprisingly, it’s a concept that we’ve explored in this newsletter before: proactivity.?

In a world where both financial and geopolitical instability is the norm, it’s vital to stay ahead of the regulations, operational inefficiencies and internal communication issues that can throw your best-laid plans for global expansion off course.?

So let’s take a closer look at some of these obstacles - and how you might go about overcoming them.?

Regulatory complexity

As we noted in our introduction, keeping track of payroll regulations across the globe is crucial, but tricky.?

Fail to proactively keep track of varying regulations in various jurisdictions and you could quickly find yourself facing unexpected costs and liabilities.?

For example, changes in local labour laws might suddenly increase compensation requirements, affecting your financial projections.?

This is why in-market expertise is crucial for robust financial planning. Partnering with local experts or a global payroll provider makes it easier to keep your forecasting models up to date with regulatory changes and their potential financial impact.

Here’s the catch. Working with different local vendors in multiple countries adds another layer of complexity.?

Multiple vendors may use different reporting methods, making it difficult to consolidate data for accurate global forecasting. This is where the Employer of Record model comes into its own.?

Increasingly, EORs make it easier to standardise reporting, reducing the risk of inconsistencies and improving payroll accuracy in the long-term.?

Ensuring financial accuracy

Managing multiple payroll processes for different countries can obscure the true cost of wages, taxes, and benefits.?

It’s not hard to see why. Different countries have varying tax structures, labour laws, and benefit requirements, making it challenging to compare costs directly. Currency exchange rates can fluctuate, further complicating accurate cost assessments when you’re operating across borders.?

Without a clear view of total compensation costs, you could end up with? financial forecasts that underestimate key company expenses, leading to inaccurate budget projections and potential cash flow issues.?

Here too you need a centralised global payroll system that can provide real-time visibility into all compensation costs across countries, accounting for varying tax structures, labour laws, and benefit requirements.?

Getting your internal comms right

Numerous barriers can arise as you seek to deliver a unified employee experience for your global employees.?

There’s the time zones and language differences. Any communication gaps can lead to delays in receiving crucial financial information, potentially resulting in outdated or incomplete data being used in forecasts.?

Partnering with local market experts or having them on your payroll team gives your business the tools it needs to manage payroll comms correctly across all your key markets.?

It’s also essential to remove any inconsistencies or variations in financial reporting if you're going to stand any chance of create accurate global forecasts.?

After all, it’s easier to correctly interpret payroll data when your reports all contain the same information.

This is why Omnipresent now offers interactive invoices that allow you to drill down into the granular payroll level data. Our global payroll experts provide annotations to help you understand your month to month variance, and you can compare any two invoices side.?

We’ll be releasing more updates about our latest invoice management feature soon. Stay tuned!

The Omni-Outlook

Cross border M&A trends with Ali Ramadan of Goodwin

What are the big M&A trends that are shaping 2024? In this episode of the Global Workforce Podcast,? Ali Ramadan, Technology & Life Sciences Partner at Goodwin, explores the evolving trends and regulatory challenges impacting M&A activities in the next six months.?

Listen to (or watch) the podcast here .?

Expanding into Europe: Why using an Employer of Record is not always compliant

The countdown has begun for our latest webinar with HR.com .?

If your company is expanding into Europe, don’t miss this event.?

The Employer of Record market is expanding every year. But not all solutions are built the same way. Using a non-compliant EOR can create significant long-term reputational and financial problems for your company.??

In our upcoming webinar, Stan Broome, Co-General Counsel & VP of Litigation and Risk Management at Omnipresent, will explain the key EOR compliance issues in key European markets.?

Sign up for the webcast here

In other global employment news…

• Are CFOs the new C-suite influencers ??
• Next workers win a six year battle for equal rights .?

About us

Global Team Trends is brought to you by Omnipresent, the global employment platform that allows you to employ anyone, anywhere, without having to set up an entity.??

Designed, built and supported by global employment experts, Omnipresent takes care of your international employees and contractors. You don't have to worry about payroll, HR, or compliance issues, making it easier, faster, and safer to expand your business internationally.

Get in touch if you want to know more about who we are and how we can help you .