Compliance Among Biggest Issues Facing Global Payroll
The Vice President of Product at Ceridian talked with Checkpoint Payroll Update on a number of global payroll issues and solutions.
From the middle of the bustling expo at PayrollOrg’s 41st Congress conference in Denver on May 17, Lisa Weckman, VP of Product at Ceridian, talked with Checkpoint Payroll Update about global payroll challenges facing the industry.
“Compliance is the number one challenge,” Weckman said, cutting to the chase regarding a glaring concern when it comes to global payroll. “If you just look at the U.S., the complexity we have here with states and localities introducing changing legislation on a regular basis,” she began. “Now think about managing that from halfway around the world when Japan has a new regulation for tax or a Work Council in Germany is dictating some specific methods and procedures and understanding what it means for the employer and workers.”
Global payroll adds more compliance risk
According to a PayrollOrg article from 2021, the two main components of a successful global payroll are timely payments and local compliance. The latter increases the complexity when an employer begins to operate in more countries.
To Weckman’s point, there are already significant challenges in processing a timely and accurate payroll in the United States. Multi-state employers must understand income tax withholding rates, unemployment tax rates, minimum wage and labor laws, and any local payroll tax laws or regulations. Expanding these challenges internationally adds more risk regarding compliance, which can lead to costly penalties.
Technology can help with compliance
Weckman said that global businesses want to reduce their risk and rely on paying their people accurately. Regarding solutions for global payroll challenges, Weckman believes transforming a business’s technology and the way it operates can help. She noted that payroll has been in a stalemate in some ways even though the role of the payroll professional has greatly expanded.
However, Weckman believes there is an opportunity for SaaS (Software as a Service) companies to develop tools, methods and innovations to help these worldwide organizations, which is a notable reason many in the payroll industry travel to PayrollOrg’s Congress – to demo payroll solutions at the expo.
More businesses warming up to adding A.I.
A 2020 survey by Deloitte, sponsored by the American Payroll Association and the Global Payroll Management Institute (now PayrollOrg) discussed organizations that are leveraging next-generation technology, which includes artificial intelligence (A.I.). Less than 20% of respondents to the survey said they were currently using next-generation technology, but more than 40% said they were planning to use it within the next three years. Law firm Littler’s annual employer survey report for 2023 indicated that businesses are accelerating the use of A.I. in many areas, including human resources and payroll.
Remote working issues
Another area of concern for those with a multi-state and global workforce is how COVID-19 changed where people work. The post-pandemic result of a mostly remote workforce has ended up with a more hybrid landscape for businesses and their employees. On this topic, Weckman noted an example where a colleague wanted to go back to their home country and work for a period of time after some of the COVID-19 restrictions were alleviated. The individual had not seen his family in two years and wanted to have an extended stay in a particular country.
“A challenge organizations may face is that if you don’t have an entity established in that jurisdiction, you can’t pay them,” Weckman said and added that this can be a major restriction that employers are faced with, but, at the same time, can be an opportunity for SaaS companies to make sure the employee can be paid and the employer remains in compliance.
Weckman remarked that people were moving across state lines during COVID-19 and, in some cases, the employer was not registered in that state. There were temporary rules to help employers and employees in some states during COVID-19, however, the national health emergency ended on May 11, 2023 and knowing from where an employee is working for purposes of an employer paying taxes is one of the many challenges when processing payroll on a larger scale.
Understanding work visas
Among the global challenges affecting employees include understanding work visa requirements. Weckman talked about another experience where she was traveling during a more restrictive part of the COVID-19 health emergency with colleagues to India. One of the travelers is Canadian and had an issue because a visa was required for this person, whereas Weckman, as a United States citizen, did not require one for the trip.
There are several different types of work visas that may be obtained by foreigners who travel to the United States for employment. This is true for many other countries around the globe. Also, the U.S. has entered into several totalization agreements with foreign nations to address the dual taxation and coverage of citizens and residents performing services in foreign countries.
A.I. as a “gradual evolution”
To help manage the scope and complexities of global payroll, Weckman sees the use of A.I. as a tool that can save time for professionals. For example, using chatbots to address common employee paycheck questions on the many different deductions workers may see on paystubs throughout the world can cut down on calls and emails to the payroll department and get the employee answers quickly.
Although A.I. is currently trending, Weckman sees it as more of a gradual evolution. “It will be a journey for human capital management systems to adapt,” she explained. Littler’s 2023 employer survey shows that some businesses do have concerns and hesitations when it comes to using A.I. for onboarding employees and other human resource-related activities. Just over half of the respondents voiced a concern with tracking and complying with A.I.-regulating laws in various jurisdictions.
That said, a number of organizations do see benefits in using A.I. to help expedite processes and reduce workloads with more cost-efficient results. Littler’s survey for 2023 said that the adoption of A.I. is rapidly advancing, with 82% of respondents seeing at least some benefit to using A.I. in human resource activities (48% of respondents from last year’s survey said their organizations were not even using A.I. tools in workforce management).
Continuous auditing
When it comes to auditing for global payroll compliance, Weckman believes this should be a continuous process and added that there are a number of different ways “of doing that today,” including attending payroll and human resource conferences where subject matter experts and professionals impart knowledge and information to help those in the payroll department stay on top of changes.
Other tips to consider when running an audit for global payroll compliance include: determining the time period of the audit (every pay cycle, quarterly, annually), checking employee data to make sure workers are being paid correctly and taxes are being accurately withheld and submitted, validating variable payments like bonuses and commissions, and examining off-cycle payrolls and understanding why an extra cycle was run (some countries require bonuses to be paid in a separate pay cycle).
Think local and personal for a positive global employee experience
In order for businesses to keep up with the dynamic global landscape of payroll and compliance, Weckman concluded that it is important to think about how to localize and personalize the employee experience since the needs and requirements of employing someone in the United States can be very different from employing someone in Japan or the United Kingdom.
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