At this year’s APA Congress, CloudPay's CEO and one of our customers presented a case-study on how the Cloud can drive better compliance. Here are a few items that we covered during the session.
The typical employee perception of the payroll function is simple: It serves to pay people the right amount at the right time - and not much more than that. In reality, payroll plays a critical role across all business functions. It’s involved in all your hiring and firing, annual leave considerations, benefits and bonus systems, and it can provide a wealth of data to inform boardroom decisions on resourcing.
It’s also directly linked to your business’s tax accounting - and those tax associations mean payroll is governed by a raft of legislation. Every time you expand operations into a new country (or sometimes even just a new state), that minefield of legislation gets ever trickier to navigate.
It’s not just tax laws either - payroll compliance comes in multiple forms. As well as abiding by the statutory employment laws in every country in which you operate, you also need to adhere to financial regulations imposed by the banking system and honor the terms of your private contracts and agreements.
Given the wealth of personal data stored in the payroll function, you’re obligated to deliver against data laws and system security guidelines too.
In short, payroll is covered by laws every step of the way - and ensuring compliance across the board, right across your global footprint, can be an uphill battle.
In this blog post, we’ll look at the challenge in more detail - and see how global payroll platforms hosted in the Cloud can help you overcome the complexities of compliance.
clarity is the key
A thorough understanding of the country-specific employment laws affecting your business is fundamental, even before you expand into a new territory. But knowing the law inside out, doesn’t guarantee you’ll meet it.
For many companies, the real problem is monitoring compliance - with global organizations often unsure of how they’re performing, and even who within their business is in charge of managing compliance.
More specifically, the challenge lies in being able to monitor your compliance in real-time. After all, a better-late-than-never approach to compliance doesn’t really cut it and normally results in some form of punishment heading your way by the time you discover your errors.
Continuing to work with disparate systems, where nothing happens quickly, is therefore fraught with risk. With a lack of visibility into global payroll and payment delivery comes frequent failure to track down the specific documents that confirm your compliance status.
What’s more, continued reliance on fragmented data systems makes it difficult for companies to detect instances of fraud, such as excess payments or ghost employees.
Getting compliance wrong in this way - in any way - comes at a cost. There are global anti-bribery bodies (FCPA and UK Bribery ACT) and global money movement compliance agencies (OFAC and WPS) waiting to punish slip-ups - not to mention the Automated Compliance regulations to keep on top of (RTI, DSN, eSocial, SuperStream, E-Billing, e-Gov and more).
Fines and financial punishments handed out for compliance failures not only drain the coffers, but also bring about serious repercussions in the form of reputational damage and internal pressure.
how the cloud drives stronger compliance
With transparency and timeliness two key elements in keeping compliance on track, more and more businesses are turning to the Cloud to power payroll.
Indeed, 93% of businesses now use the Cloud 'in some form or another', according to Rightscale’s 2015 State of the Cloud report. And Constellation Research suggest that more than 40% of businesses looking to invest in payroll technology would be seeking to leverage Cloud platforms.
For most, cost-efficiencies are a key driver in that decision, but the potential for data insights and process improvements feature highly on the agenda too.
From a purely compliance perspective, the opportunities afforded by Cloud technology are vast. SaaS (Software-as-a-Service) helps to consolidate global data from multiple country payrolls into one single system, providing real-time information on both global and local compliance, while enabling you to monitor and measure the performance of your payroll and payments processes.
That increased visibility means easier access to statutory filings, the ability to maintain records more easily online, and make legislative updates country-by-country right across the globe.
Here are some other compliance-focused features you can expect from a Cloud solution:
- Compliance calendar: Actionable due dates can vary greatly by country and region, so an accurate, accessible compliance calendar is essential.
- Legislation monitoring: News feeds of in-country legislation changes help to keep you ahead of the game.
- Issue tracking: Benefit from statutory filing issue tracking and management, with an auditable process for SOX compliance and internal risk management.
THE data security question answered
For some businesses, lingering data security concerns are all that stands between them and the switch to the Cloud. And nobody would argue against the importance of ensuring global data privacy laws don’t get forgotten, in the quest for statutory and financial global compliance.
The reality is that SaaS providers excel in security measures - delivering against the ISO 27001 data standard as a minimum, and including access controls, backup and recovery facilities and defenses against many other potential vulnerability points in their solutions.
Cloud payroll providers also take responsibility for ensuring all legal and regulatory changes are applied, tested and available.
And where on-premise payroll may lack a certain level of compliance motivation, it’s worth remembering that Cloud providers have hundreds or even thousands of customers utilizing their platforms - ensuring both the continued determination of the vendor to get things right, and a rapid response to any rare slip-up that would be spotted and reported by a number of clients.
THE quicker route to compliance
The benefits of Cloud payroll are well documented - with cost savings, process efficiencies, boardroom insights and payment accuracy among the primary reasons for more and more businesses making the switch.
But purely from a compliance perspective, the argument is compelling too. Greater visibility and real-time tracking of your compliance status, coupled with built-in local knowledge that takes local country technicalities into full consideration. It all adds up to massively reduced risk of the potential for costly compliance failures.
And with SaaS solutions being quick to deploy, moving towards better company compliance right across your global footprint can happen faster than you think.