What the Tumultuous International Landscape Means for Global Payroll

Dec 8, 2016  | Topic: Change Management

A major key to successful global payroll is consistency: Statutory guidelines and employee details may change often, but the expectations of payroll – accurate payments, timely compliance filings, routine reporting, and so on – remain the same.

The stability of the payroll function is crucial to the stability of the enterprise at large. So what happens when a business function that demands consistency faces down widespread global uncertainty? We’re about to find out.

Nations around the globe have experienced an upwelling of populist unrest in 2016, leading to unexpected leadership changes and economic uncertainties. With 2017 poised for more of the same, there are more questions permeating the international landscape than there are answers – especially for the payroll function.

Without a holistic global payroll strategy, the changes that result from today’s volatility could easily become unmanageable for multinational organizations. As the current tumult extends into 2017, multinational executives and other payroll stakeholders are wise to consider how well their current approach can manage the uncertainties that lie ahead. 

Unrest Creates Uncertainty in Payroll

At the outset of 2016, few could have predicted just how many countries around the globe – including many traditionally stable Western nations – would be experiencing unrest and upheaval. Especially in the countries discussed below, political turbulence is sending strong headwinds straight for the global payroll function.

  • In the U.S., businesses are bracing for the policies of a new presidential administration that has promised to eliminate the Affordable Care Act, shift existing overtime rules, dismantle many Dodd-Frank provisions, and roll back a multitude of reporting requirements. While it’s difficult to know what to expect from President-elect Donald Trump, his first-100-days action plan already included a proposal to reduce the number of income tax brackets from seven to three – potentially leading to mid-year withholding changes.
  • In the UK, voters’ decision to vacate the European Union is still playing out. The full repercussions of the ‘Brexit’ – including potential changes to employee mobility, social insurance liability, income tax withholding, and more – may not be known or implemented for as many as five to ten years. (Read more on the Brexit’s impact on payroll here.)
  • In Italy, voters recently said ‘no’ to a referendum designed to streamline a variety of notoriously tedious government processes. The decision is poised to have a Brexit-style impact as Italian Prime Minister Matteo Renzi, who spearheaded the reform measures, has already resigned. In addition to placing Italy’s debt-saddled banks in further peril, Renzi’s resignation means the legislative changes he implemented in 2015 – including €35 billion ($37.1 billion) in payroll tax cuts – are headed for an uncertain future.
  • Germany, France, the Netherlands, and possibly Italy all have elections in 2017. With those elections may come a further wave of “popular fury,” keeping the future of the European Union – and all related reporting – in flux for years to come.

Such fundamental government shifts are hardly the only ones making the management of international payroll more complex. There also remain a variety of complicated in-country adjustments already poised to impact payroll in early 2017:

  • France is consolidating two parallel-running payroll reporting systems into one as of January 1, 2017 and is awaiting legislative approval of a financial bill that would change income tax withholding requirements;
  • Canada has released new formulas for calculating payroll withholding and contribution amounts in the coming year;
  • Minimum wages in Vietnam are increasing by 7.3 percent on January 1;
  • A new “apprenticeship levy” payroll tax takes effect in the UK on April 1… and the list goes on and on and on.

Calling for Compliance at a Global Scale

As we mentioned earlier, the payroll function must remain constant – and more importantly, compliant – in the face of so many changes. Yet many organizations lack a cohesive strategy for monitoring country-by-country requirements in an end-to-end way.

Even some of the world’s largest multinational companies rely exclusively on the specialized knowledge of local payroll providers to understand and satisfy their regional or country-specific requirements, creating costly compliance risks should their third-party vendors experience employee turnover.

But are organizations finally wising up to that unnecessary risk exposure? After all, not all of 2016 has been tumultuous. Inside the payroll industry, for example, this has been a tremendous year of advancement, as cloud adoption in global payroll increased at an impressive pace: 53 percent of organizations planned software-as-a-service (aka ‘SaaS’ or ‘cloud’) payroll deployments in 2016, marking a 12 percent increase over the year prior.

Now that cloud innovation is infiltrating payroll in a substantive way, multinational enterprises are beginning to enjoy certain benefits of cloud transformation – namely, more automated, standardized processes and higher quality data. Adopting cloud technology is also the first step to establishing an end-to-end payroll strategy that can manage the complexity of ever-changing global requirements.

Why so? Because launching a global strategy requires achieving a single version of the truth across an organization’s entire enterprise. The ideal resource for managing global compliance is a unified platform where stakeholders can:

  • review and understand all rules and regulations affecting the payroll function across all locations they operate;
  • search and access all of the data they need to meet obligations, with confidence in the accuracy and timeliness of that data; and
  • track and monitor compliance deadlines and submission requirements.

Only a cloud-based global payroll solution can make all of those possible through a single, end-to-end platform. By coupling an end-to-end solution with expert managed services around the globe, organizations can continue to rely on the support and knowledge of local experts as the coming year’s changes come to pass… knowing they also have always-up-date compliance tracking tools and local payroll information (LPI) available to support them, as well.

Knowledgeable support also helps protect organizations from costly disruptions and compliance consequences, driving stronger stability in payroll for the benefit of the enterprise. Amid economic and political uncertainties around the world, investing in a holistic global solution may be the best way to prepare an organization’s payroll function for a potentially volatile 2017.