Multi-country payroll: tackling the challenges of small country populations

In a study commissioned by TMF Group, Webster Buchanan Research held indepth discussions with senior international HR and payroll managers from 25 multinationals with responsibility for managing small countries, to determine the issues they encounter and lessons learned. Respondents were predominantly drawn from Webster Buchanan’s Global Payroll Research Network and ranged from small multinationals with a few employees in a handful of countries to Fortune 500 companies.

Key findings include: 

• Many respondents take a pragmatic, risk-weighted approach to managing their smaller countries, particularly in terms of compliance. While all respondents strive for full legislative compliance, there is a distinction between responsibly presuming compliance (for example, by appointing a reputable outsourcing provider) and proving compliance (for example, by conducting a country audit). Some concentrate their investigative efforts on countries where they have higher financial, reputational or employee-related risks, and presume that they are compliant in the other countries. 
• Within hubs, respondents also grapple with a number of people-related challenges, reflecting the wide range of skills required for managing international payrolls. While an analyst in a regional hub or global shared service centre may have a good understanding of payroll processes and be capable of managing as many as a dozen small countries, they are typically not expected to have country-specific subject matter expertise in every territory they cover. 
• Checks and controls around payroll accuracy and compliance vary widely. At one end of the scale, some very small countries push the bulk of responsibility for checking to an outsourced vendor; at the other, many companies either use their own service centres to implement controls, or provide an advisory role to local teams. 
• In addition to improving global payroll governance, drivers for small country projects include: reducing risk, improving reporting, consolidating vendors ( thereby improving the customer’s leverage with providers), and streamlining the process for setting up payroll in new countries.
• The cost equation for a multi-country payroll initiative can be complex, particularly in very small countries. Leaving aside implementation overhead, the ongoing costs for a replacement system or service can prove higher than the current costs for an incumbent in-country provider – which to some extent is logical, given that multi-country payroll services typically provide an additional payer of central management control over local payrolls.