How multinational organisations can avoid making scary payroll mistakes

Jean-Luc Barbier, VP Global Solutions at SD Worx

Payroll is a crucial part of any multinational organisation. When payroll is done right, it truly unlocks the power of payroll within the business, but when operating in multiple regions and localities, the risks of something going wrong increase, as do their consequences.

You only need to look at the example of social media giant Facebook to see how the mishandling of data can have a disastrous effect on an organisation’s brand image and to understand the risks involved when it comes to responsibly managing employee data. Ensuring efficient running of payroll can be a daunting task to confront.

So, what are the risks involved with international payroll, and how can payroll professionals avoid these costly mistakes?

Time-Consuming Manual Processes

Beyond running monthly payroll and handling vast amounts of data, there is also a lot of admin associated with payroll, which can become incredibly time-consuming for the department. To avoid this mundane distraction, organisations must look to HR technology such as artificial intelligence (AI) and automation.

With the current hype in the media, many fear that AI will replace the jobs of humans, but instead the development and introduction of AI has the potential to amplify the human workforce. It’s best to leave the robots and AI to what they do best, and let humans continue the human roles. HR tech has the potential to free up the HR and payroll professional from their never-ending admin so they can efficiently and more accurately handle the tasks.

Rather than wasting time scheduling meetings, booking holidays and setting up ‘Out of Office’ notifications, turning to technologies like AI-powered Digital Assistants eliminates this part of the role. It reduces the chance of human error and the associated risks, and then allows the human workforce to focus on putting the ‘human’ in Human Resources.

Incoherent Payroll Data

As organisations expand into new regions, running payroll naturally becomes more complex. Operating on a local scale with multiple providers can be a headache for payroll teams, with a disparate collection of data that seems impossible to collate.

So, when an organisation becomes multinational, the payroll must too. Turning to a global payroll provider eliminates the stress of managing a host of local providers on a global scale, instead striking the perfect balance between detailed local payroll with the ease of a single global operation.

With one global provider, one contract and one partnership, data is presented on a single, easy to understand dashboard. Not only does this minimise the stress involved for the payroll professionals, but it also unlocks the power of payroll within the organisation as it becomes much easier to gain insight.

In a recent SD Worx survey, it was revealed that 40% of HR and payroll professionals found it ‘difficult’ or ‘very difficult’ to provide data to business leaders. But with a unified and global payroll model the data can be introduced into the boardroom, aiding executive business decisions such as international expansion, as well as providing insight into employee engagement in various locations.

Damaging Non-Compliance Fines

The payroll industry never stands still, with new legislations and laws constantly being introduced around the globe. Non-compliance is one of the greatest mistakes an organisation can make when it comes to payroll. And, when operating on a global scale, this risk only increases. For example, the recent introduction of GDPR in the EU means organisations face potential fines of up to €20m or 4% of their global revenue.

For HR and payroll professionals to understand how local legislations affect their data handling in every locality is a huge undertaking – experts are required for every location. Working with a global payroll provider means the HR and payroll department can rest assured that they are compliant around the world without having to worry about understanding the ever-changing laws that affect their business. Additionally, with service providers using automation and other HR tech, the risk of non-compliance due human error is significantly minimised.

—

Payroll can certainly be a risky business in today’s international world. However, working with global payroll providers can minimise the risk, increase the efficiency and ensure that the humans remain a valuable part of the payroll process within multinational organisations.

European organisations and the power of payroll

A recent survey by HR and payroll service provider, SD Worx, revealed that out of 1,500 respondents from nine European countries, 87% of business leaders are now asking for employee data to inform business decisions. Whereas payroll data has previously been seen as only an administrative function, HR and payroll data is now being regularly used by business leaders.

This is great news for HR and payroll teams, and for the business as a whole. By using payroll insights in the boardroom, organisations can gain a better understanding of employee engagement, retention, and churn. Payroll data can undoubtedly be more than just static data, as it can be used to provide useful, strategic insights that can affect the progression of the business and its employees.

Out of the surveyed countries (the UK, Ireland, France, Germany, Switzerland, the Netherlands, Austria, Luxembourg and Belgium), business leaders in the Netherlands are most likely to use payroll data to inform business decisions (94%), with Ireland (93%) and the UK (89%) close behind. It’s reassuring that business leaders and payroll departments seem to be taking a more collaborative approach when it comes to payroll, rather than working in silos.

In terms of the frequency that payroll data is being used by business leaders, over half of surveyed organisations had used payroll data within the last month, and a quarter in the last seven days. By collating and analysing payroll data frequently, organisations can stay up to date with the trends and requirements of the organisation, and will consequently have a better insight into the business.

However, how easy is it for HR and payroll teams to provide data to business leaders? The survey found that 40% of HR and payroll professionals find it ‘difficult’ or ‘very difficult’ to provide the data. This difficulty can be due to a variety of reasons, whether due to problems with internal communication, or whether collating the data into a report is challenging.

The survey also revealed that the biggest challenges in international payroll are multiple systems (45%) and compliance (40%), followed by confusing data (31%). With so much valuable and sensitive data in the HR and payroll department, it is unsurprising that challenges are still present in organisations, but this needs to be addressed to allow the collaboration to continue and flourish.

Although these challenges still exist, technology will likely be used to minimise them. The survey found that 61% of respondents think that blockchain will be either important or critical in the HR and payroll industry, and 63% predict that artificial intelligence and automation will also be either important or critical. The advancement of technology will only continue to grow in coming years, and the HR and payroll department will be ready to embrace it.

It’s encouraging to see that the power of payroll is being understood and embraced in businesses around Europe. Rather than dismissing payroll data as useless and static data, business leaders need to continue to see the value of payroll, and ensure that the challenges in the HR and payroll department are minimised and addressed.

No employee left in the dark: Data Transparency under GDPR

By Gert Beecksman, Chief Security & Risk Officer, SD Worx

On 25^th May 2018, General Data Regulation Protection (GDPR) laws will come into effect, with the objective to refine the data privacy rights of all EU citizens. Naturally, this is triggering a massive restructuring in the way companies organise their data. New storage regulations state that employers should not retain personal employee data for longer than is necessary, and while the idea of simply discarding unnecessary employee data is simple enough, this process has the potential to be far more complex in practice.

To provide more context, GDPR will add new requirements that will make the storage limitation principle considerably stricter and will make it illegal to excessively process and store data. GDPR will also demand that HR managers are extremely careful with exactly what they ask from their colleagues, as specific time limits will be set for both the processing and reviewing of data.

The amount of time that data is allowed to be retained by employers will consequently become much clearer with the time limit logged in a registry. If a HR department fails to comply with this, then they’re left exposed to the risk of sanction. Furthermore, if employees feel that their HR department is holding personal data for an excessive duration, co-workers have the right to request erasure.

But while GDPR’s new retention policies may initially evoke daunting prospects for HR managers, the solutions are in fact simple, helping to drive long-term benefits such as increased productivity for companies. First and foremost, HR managers need to identify the exact challenges they’ll encounter, and how different forms of data will be affected.

Identifying and tackling challenges

There is currently very limited guidance as to how to manage sensitive employee documents and information. This means that the idea of a strict minimum period for certain documents—that don’t necessarily fit into a set category—can be subjective and open to interpretation.

To combat this, HR managers should research and document the specific legal requirements and ask the following questions: Is there a legal obligation to keep a document, and for how long? Do I need this information to make future business decisions for the company?

To overcome these challenges, organisations can set up an internal company HR retention period. All documents pertaining to employees should be re-archived here in clearly defined categories according to the dates when the company is required to expose of them. Employees should also be made aware of this new reorganisation of files via the company intranet. On top of this, there should be a periodical review of all your archived documents to delete all data that is no longer needed.

Know which data is useless

Some data that the HR team may think it useless may, in fact, be important to retain, and vice versa. For example, an individual who was unsuccessful in the application process may ask for their data to be deleted. In this case, the employer should not keep the documents for unsuccessful applicants beyond the statutory period in which a claim arising from the recruitment may be brought. However, under GDPR, employers can keep a limited record for a longer period than data retention authorities advise, providing that (a) the HR department has a valid reason, such as a talent pool, and (b) as long as the applicant consents.

Another request may concern ‘the right to be forgotten’ from a former member of staff. Ex-employees do have the right to submit requests to be forgotten, but an employer can still refuse to erase their data if the information will be necessary for the defence of legal claims that the ex-employee may later file against the business.

If data was collected to comply with legal obligations, or for the exercise of official authority, it cannot be erased. Additionally, if an employee is dismissed for performance reasons, then there is always the risk that they will challenge the company. The best advice in this case is to keep the contract for as long as statutory limitation periods are applicable under criminal law.

---

In preparation for GDPR, HR teams will need to develop internal policies of retaining or discarding employee, or ex-employee, data. If HR managers create policies that take all possible employee concerns into account, and even offer their employees a stronger role in company policy-making, they will create the most flexible intranet and avoid both legal action and GDPR infringement.

The HR GDPR Divide: SD Worx survey reveals GDPR has polarised HR

Today SD Worx, the global HR and payroll service provider, revealed that out of 1,800 HR and payroll professionals, 44% do not know what the General Data Protection Regulation (GDPR) is. However, of the 56% that are aware of the impending GDPR, 81% feel they will be ready by the May 2018 deadline.

The findings, conducted among nine European markets, show surprisingly polarised views when it comes to the new legislation.

Of the 56% of HR and payroll professionals that are aware of GDPR, the majority are collaborating with other departments or outsourcing providers. 84% of respondents revealed that they are getting help from other departments in the organisation, yet 73% believe that GDPR compliance would be easier if HR and payroll was outsourced. In addition, the survey found that 91% are likely to look for additional skills outside the organisation to help with GDPR preparation.

Of those that are aware of GDPR, 55% of respondents believe GDPR is a risk to the HR industry, leading them to implement various preparations. 68% of respondents are absorbing as much as possible on the subject and reviewing and updating all existing policies and processes related to data protection, and 49% are assessing the need for changes to current business relationships (including with data contractors).

Jean-Luc Barbier, International Managing Director at SD Worx, commented, “This survey has revealed the clear divide in the HR industry. Even though those who have heard of GDPR are preparing for GDPR and think they are likely to be ready by the deadline, the other half of the industry has not heard of GDPR. Therefore, you would assume that the ones who aren’t aware aren’t making the necessary changes to their department. It’s great to see that those who are aware are seeking skills to help them from a variety of sources, both internal and external. What this survey tells us though is that a significant amount of education still needs to be done.”

When it comes to GDPR-readiness in the nine markets, the survey also highlighted various differences between countries. For example, only 67% of respondents in Austria believe their HR team will be fully GDPR compliant by the deadline, whereas in Ireland the rate was 90%. In addition, when asked if outsourcing for the HR and payroll department will make becoming GDPR compliant easier, 56% of Swiss respondents said yes, whereas Belgium (85%) and the United Kingdom (73%) were much higher.

Although the HR industry seems to be polarised, for those who have heard of GDPR, the benefits are recognised. When asked what the key benefit of GDPR is in the HR and payroll industry, 71% believe improved data security will be the biggest benefit, whereas only 3% believe that GDPR will bring no benefits at all.

How can an outsourced payroll provider reduce the strain of GDPR?

The General Data Protection Regulation (GDPR) will apply not only to any company based in the EU, but also to any business that processes the personal data of EU citizens regardless of where they are situated. With GDPR less than seven months away, we all know it’s coming – but what does it mean for payroll departments?  Businesses need to carefully consider this question ahead of the May deadline, and look at ways to ease the strain on their organisations overall.

Here’s four key GDPR payroll challenges, and how an outsourced provider can help:

Soothing the compliance headache

Payroll is driven by local legislation, and businesses need to ensure these laws (for example those under GDPR) are followed in whichever regions they operate in, to ensure peace of mind. With an outsourced payroll provider, you don’t have to become an expert in each region in terms of governance and compliance. Instead, you can rely on that provider to ensure you remain compliant, whatever the legislation and in whichever region – GDPR or otherwise.

Outsourced payroll providers understand that achieving the right balance between the local and global aspects involved in payroll, in terms of ensuring compliance with all local market legislation—including GDPR—while optimising the efficiency benefits that a global offering can deliver, can be done by building systems with a global outlook and local knowledge in mind: a modern-day, bottom up payroll services approach.

Improving Accuracy and Reliability

Payroll mistakes can be extremely detrimental to any organisation. The pressure to avoid such mistakes increases with the strain of GDPR. Unless you have an automated system and fully trained, capable payroll staff, who are more than adept to deal with complex regulations in place, your payroll department will probably end up making the occasional mistake.

By making the mistake of failing to comply with GDPR, you risk angering not only the government but your employees too, who will be far from impressed to know you are handling their data incorrectly. In addition, you could be looking at fines of up to 4% of your total annual revenue. With a reputable outsourced payroll service provider, you are far less likely to become the victim of an error, including one related to GDPR non-compliance, than handling payroll processes in-house.

While your staff may be highly skilled, there is always the chance that one of them will fall sick or be on holiday. Even the slightest change to routine can cause problems for payroll departments: it’s essential to ensure that organisational output remains unaffected. Outsourcing payroll is a guaranteed way to ensure nothing changes, regardless of time off. It also saves huge amounts of time and provides peace of mind, simply because you won’t have to help new members of staff get to grips with your payroll system, or go through the processes of helping them to understand how GDPR affects payroll processes.

Staying secure

Organisations hold the details of personnel online in all offices, potentially all over the world, thus potentially exposing themselves to all sorts of sophisticated cyber-attacks. With financial data being a core part of payroll department records, it’s essential that every element of your business is prepared and able to robustly defend itself against attacks. To do so, your business needs to implement the right infrastructure: some companies simply don’t have the resources to ensure details are kept safe. Outsourcing to a payroll service means you’ll be benefitting from industry specific technologies which are able to prevent such attacks from occurring. When it comes to GDPR, organisations will have a 72-hour window in which to notify authorities of a breach: but with an outsourced payroll provider, you stand a much better chance of avoiding them happening in your payroll department altogether.

Minimising costs

It goes without saying that organisations look to save costs wherever they can, particularly if they are looking to expand globally (globalisation is expensive). With the risk of paying out hefty fines if they fail to comply with new GDPR laws, companies can’t afford to make unnecessary costs elsewhere, or make mistakes. By outsourcing, businesses can allow for the appropriate level to be paid in a lower cost location. Combined with the savings which come from consolidation and automation, a company will be much better placed to move forward with expansion, in addition to ensuring compliance with GDPR.

---

Organisations need to recognise payroll services as a key part of their journey to GDPR compliance: the regulation can appear daunting and complex; therefore, outsourcing can be a beneficial option to any organisation that is preparing for GDPR, and looking to improve overall processes. By relying on the expertise of a reputable payroll provider, businesses can ease the overall strain of GDPR by soothing the compliance headache and improving payroll accuracy, reliability and security. With the right provider, you can relax in the knowledge that you are in safe hands when it comes to achieving total GDPR compliance in your payroll department.

An employee in Spain contributes less to social security than the same profile in France, Germany and the United Kingdom

• Seresco and SD Worx, two leading experts in payroll outsourcing and members of the biggest international alliance of payroll solutions, the Payroll Services Alliance, has analysed the payslip of managers in Spain, France, the United Kingdom and Germany, with gross annual pay of 60,000€ and data from their partners.
• Among the main conclusions, the comparison highlights that the employee in France only pays their personal income tax once per year. Thus, each month they receive a higher net pay, up to 86% more than in Spain.
• In the same scenario, employees in Spain have a larger number of deductions (8) than in Germany and the United Kingdom, which is surpassed only by the employee in France (15).

Understanding the payroll we receive each month is a somewhat complex task due to all the concepts that are included. Seresco, a Spanish leading payroll service company, and SD Worx, the leading international payroll provider, have analysed, in collaboration with its global payroll network, the Payroll Services Alliance (PSA), the payslip of an employee in different countries across Europe. The results have revealed key differences between countries.

To develop the comparison, Seresco and SD Worx under the Payroll Services Alliance have marked the same scenario for four countries (Spain, France, the United Kingdom and Germany): an employee in a management position, with a gross annual pay of 60.000€, which includes payment in kind for a car, restaurant tickets and medical insurance. For each of these countries, Seresco and the PSA have carried out real payslip simulations, with the following conclusions.

Gross pay:

• The employee in Spain is the only one, along with the one in Germany, that receives two extra annual payments. In the UK and France, the employee receives 12 payments per year.
• Therefore, the monthly gross pay is higher in Spain and Germany than in the UK and France (4.285,70€ in contrast to 5.000€).

Deductions:

• The employee in Spain contributes less to social security, 6.35% over the basic pay. The total amount for social security (238.20€) is less than half that of the employee in the United Kingdom, and even less in Germany and France.
• The employee in France is the only one that does not have a personal income tax in his monthly payslip. This deduction is applied once a year and changes the employee’s perception over his salary. Even though the gross pay is the same in all the countries, the employee in France receives a higher net pay each month. In fact, they make up to 86% more than the employee in Spain.
• The payslip in Spain has thee second most deductions (8). Only France has more, with 15. Germany is far below, with six, followed by the UK, with five.
• In Germany, the employee has an extra mandatory tax: Solidaritätszuschlag or solidarity tax. This is a deduction that was established after the German reunification and is still in force. The goal of this tax was to provide support to the old East German Länder (GDR) from the West German Länder (FRG).

Deductions for the employer:

• In both Spain and France the employee can check the deductions for the employer in his payslip, thus knowing the cost that the company assumes for the employee. However, this is not shown in the UK, and in Germany the employer does not pay any takes for the employee. Instead, he collects the taxes from the employee and gives them to the tax authority.

Payment in kind:

• The payslip in Spain is the only one in which the payment in kind (medical insurance and restaurant tickets) isn’t included in the total gross pay and, therefore, doesn’t count in the personal income tax and social security. However, the payment in kind for the car does count in the income tax.
• The deduction for social security of the employee in France includes payment in kind for the car. He also pays an extra tax for restaurant tickets.
• Medical insurance isn’t included as a payment in kind in the payroll of Germany and France, since it is part of the social security system.

Net pay:

• Based on the same scenario, although he has more deductions, the employee in France gets the highest net pay each month, with 3.762,29€.
• Germany, Spain and the UK fall behind with 2.107,97€ (Germany), 2.061,83€ (Spain) and £1.849,90 (UK). Spain and the UK get a similar net pay due to the currency exchange.

Global payroll management with local knowledge and expertise

For global companies or organisations with expatriate employees, managing and processing payrolls face an extra challenge: integrating different payroll systems according to the legislation in each country. Given this fact, companies often rely on a payroll internationalisation. This allows them to save costs and, above all, work on the added value tasks for the business.