How to effectively manage payroll of international assignees.
By Sue Wines
When organizations send assignees around the world, global payroll processing can become challenging.
Effective payroll administration requires maintaining assignment balance sheets, organizing local payroll delivery, coordinating data collection, complying with local tax and reporting requirements, and communicating to assignees when compensation elements change.
How can you administer these assignments successfully? Is there a way to simplify the process? The following 10 steps can help—whether you outsource payroll administration to a third party or manage it yourself.
1. Establish global oversight. A team should possess a considerable amount of subject-matter expertise and be able to communicate requirements to every stakeholder in the process, including local HR, payroll, finance, and tax teams. These executives should have a good grasp of the big picture and drive the changes needed to standardize processes as much as possible.
2. Create a global data repository. By capturing all international payroll information in one central location you can generate global compensation reports. Because local payroll codes aren’t consistent, your database should include a mapping tool to link local payroll codes to a common corporate code. Being able to break down codes into separate elements will make reporting more precise and measurable.
3. Define processes. Create a manual that details each deliverable involved in maintaining assignment balance sheets, local payroll processing, global payroll reconciliation, and global compensation collection. Be sure to define a process for global training, change management, reporting deadlines, and quarterly reviews, so there is no confusion on expectations.
4. Communicate. It’s critical to foster effective communication between all stakeholders in the international payroll process so everyone is aware of policy changes as they occur. It’s also important to establish a reliable point of contact to alert assignees of any changes and to answer policy questions assignees may have.
5. Establish a centralized control point. An executive in your organization needs to be the point person who maintains global payroll processing requirements. This includes maintaining contact information for all global payroll contacts, a single payroll calendar that outlines local deadlines and other important dates, reconciliation and audit schedules, and reporting guidelines.
6. Create an audit process. Developing a sound audit process is essential to identify any variances between what should be paid to assignees and what is actually paid to assignees. Use your audit process to confirm that plan maximums aren’t exceeded, any one-off payment requests are processed, payroll split deliveries are accurate, and any additional hypothetical withholding was deducted, if appropriate. When errors are identified, it’s important to correct them and adjust payroll systems prior to the next pay period.
7. Simplify split payrolls. To make payroll splits as simple as possible, define split payroll delivery methods based on company policy, not employee request. Another best practice is to avoid percentage splits, as you’ll need to add a step in your local payroll process to calculate that split each pay period.
8. Monitor supplemental pay. Be sure to keep an account of supplemental pay like bonuses or commissions. If such payments are made, submit this information to your tax provider so they can calculate the withholding amount due. You should also have a process in place to calculate these taxes on an ad-hoc basis should you learn of supplemental payments just prior to your payment deadline.
9. Establish a shadow payroll policy. A shadow payroll calculates local tax withholding for an assignee that remains on the home-country payroll system. Be sure to work with your tax provider to confirm shadow payroll requirements in the assignee’s home and host country and confirm which compensation elements are reportable. You should also establish an auditing process to confirm you do not create any net pay for the shadow payroll when recording income and withholding taxes.
10. Collect compensation. Besides monthly payroll results, you’ll need to collect imputed income —such as in-kind payments or expense reimbursements—for recording purposes. It’s important to have a process to collect gross-to-net global payroll results in a single database so you can generate comprehensive reports for HR, payroll, finance, or tax providers.
By following these key steps, you can increase assignee satisfaction, achieve your global business goals, better comply with home and host country regulations, and even reduce your administrative costs.
Sue Wines is vice president of global compensation and payroll services for SIRVA.