1. Why PEOs are Important in a Global Payroll
Strategy?
The COVID-19 pandemic has brought virtual teams and remote working at the
front and center of almost every outward looking organization’s employment
strategy, especially in the case of startups and SMEs planning international
market expansion. In their endeavor of spreading their geographical reach to
newer territories, it can become increasingly overwhelming for companies to
manage the complexities of employment laws, salaries, union negotiations,
employee benefits, taxes, and other necessary compliances across different
regions all by themselves. This is because every nation has its own set of
unique labor laws and regulations which need to be complied with and failure
to do so could potentially lead to heavy penalties which can be a significant
setback for a growing company.
2. Adding a Professional Employment Organization (PEO) to the global mix can
significantly help foreign companies in consolidating and maintaining a Global
Payroll Strategy. A PEO essentially provides value added services such as
recruiting, local tax and compliance, payroll processing, benefits
management, salary requirements, work permits, etc. and takes over all non-
core activities thereby taking over the burden of managing these aspects from
the foreign company. Moreover, while the remote teams would be hired on the
PEO’s payroll, the foreign company would still maintain control over the
employees’ deliverables and daily activities. In short, hiring a PEO would give
a foreign company direct control over a dedicated remote workforce without
the hassles of managing local compliances in the various regions in which the
workforce is physically located.
For a global payroll strategy to be successful, it needs two main components
– timely computation and payments as well as 100% local compliance. While
the former is relatively easier to manage, compliance management becomes
a complex task because different countries have different rules and
regulations which exposes payroll professionals to higher risks because of the
increasing regulatory complexities being laid out by different governments
across the world.
For instance, some countries in the European Union require salaried
employees to keep track of their time spent at work. If these salaried
employees work more than the required hours, they may be entitled to
overtime pay and non compliance to these local labor and payroll laws can
expose the company to heavy penalties.
Here are some examples of country-specific fines and penalties:
Hong Kong: Any company that has not set up a Mandatory Provident
Fund (MPF) plan may be liable for criminal prosecution with possible
fines of up to HK$100,000 and six months imprisonment; persistent
offenders risk a penalty of HK$200,000 and one year in prison.
Australia: Misclassifying workers as independent contractors in
circumstances where they are employees could make a company
3. liable for a penalty of up to A$54,000 and A$10,800 per occasion for
any individual involved in the infringement such as a director or
relevant manager.
Mexico: Companies must provide and record skills and competency
training for employees. Failure to do so will result in significant fines.
Running a business across different geographies can be a challenging task
especially for a startup or an SME which is on a rapid growth path. In most
cases, companies struggle to find a single vendor for all their global payroll
requirements and end up hiring multiple vendors across different geographies
for their different needs. As companies grow in size and enter newer markets,
it becomes increasingly tedious and cumbersome to manage multiple vendors
across multiple time zones. Moreover, while these vendors would be very
efficient in delivering the specific results in terms of filing returns or processing
payroll, they don’t assume any of the risks associated with non-compliance, if
at all any.
Consolidating all these different vendors via a PEO not only takes away the
stress of managing these non-core activities and related compliances, it also
gives the company more bandwidth to focus on business growth. Moreover,
the PEO agency would assume the majority of the compliance related risks
and bear this burden on behalf of the foreign company which can be a real
game changer for rapidly growing startups and SMEs.
In a nutshell, PEOs help companies successfully navigate the complexities of
global payroll by providing the following services:
Payroll compliance: Fully managing payroll across various
jurisdictions. This typically includes producing payslips, submission of
statutory filings and payments, and generating year-end reports
Payroll funding: End-to-end delivery of global payroll funding
services across multiple geographies
Expatriate payroll: Access to support such as hypothetical tax
estimation and withholding, tax equalization, shadow payroll, tax
planning, etc
4. Global business support: Additional services that go hand in hand
with payroll and help companies leverage other solutions for global
business expansion
Ongoing compliance: Access to competent research teams that
keep track of regulatory changes as they occur so that companies can
mitigate any risks
By bringing a PEO on board, companies can hire and onboard employees
quickly with 100% legally compliant employment contracts, gain access to
comprehensive employee health insurance benefits and ensure that payroll is
timely and accurate irrespective of the geographical location of the employee.
So, if you’re a startup or SME looking to expand your business to India,
Remunance, regarded as one of the best Indian PEOs, has all the right
solutions to help you consolidate and efficiently manage your global payroll
strategy. Unlike a regular PEO, Remunance not only takes care of cost-
effective services for HR, payroll, insurance, benefits, and risk management, it
goes one step further to provide extended services like leave management,
recruiting, employee training, office infrastructure, and HR support. The
competent team of experts at Remunance essentially take overall
administrative activities so that clients can focus their attention on core
business activities instead of worrying about compliances, regulations or
payroll management!
