5 Ways To Simplify Global Payroll Compliance with AI

Companies gain several advantages by entering new markets, including access to a larger consumer base, the chance to tap into a more diverse talent pool, and the resources needed to build a global presence. 

Companies also experience significant revenue gains and foster sustained success by expanding operations into different regions. However, companies may face challenges throughout the expansion process. Setting up an efficient and compliant global payroll system is a primary concern for companies building global teams. 

Navigating global payroll isn’t always easy. Compliance with international labor laws, legal and financial employer obligations, and emerging data protection requirements are factors scaling organizations need to consider. 

Fortunately, companies have various options that help streamline the global payroll process. For example, partnering with an Employer of Record (EOR) allows companies to legally engage with international workers without setting up a local entity and will handle important HR functions, including onboarding new hires, payroll, and tax responsibilities. This gives companies a method to tap into new markets with reduced risk throughout the expansion process. 

Technological advancements like artificial intelligence have increasingly impacted payroll operations. Leveraging this technology helps improve efficiency while maintaining compliance with all relevant rules and regulations. 

Global Payroll Overview

Companies that want to grow in new markets need to hire local employees, which carries various legal and financial obligations. Global payroll refers to a centralized process that involves providing payments and other benefits to a company’s employees or contractors across multiple jurisdictions. 

Global payroll processes vary between countries but usually include:

• Calculating employee wages
• Administering locally compliant benefits packages
• Providing any relevant bonuses or additional payments
• Delivering payments in the correct currency
• Distributing pay slips and keeping accurate records
• Withholding taxes and all relevant social security contributions
• Tracking employees’ working hours and leave entitlements

Generally speaking, a company’s human resources department will handle payroll duties, but certain aspects may be spread across different departments, such as finance. Payroll is one of the most significant expenses of a company, with labor-related costs being responsible for 68% of a company’s total overhead costs on average. Whether your company is hiring an employee in the United States, United Kingdom, or elsewhere, payroll is a major cost associated with hiring employees that must be considered.  

How to Set Up Payroll When Hiring Global Talent

Companies that want to enter global markets must set up a proper payroll process to pay employees and obey all relevant taxation and payroll-related requirements. Organizations have a few different options for implementing international payroll operations. 

Employer of Record

Companies can partner with an Employer of Record to outsource all HR-related functions, including payroll, drafting employment contracts, and more. An EOR is an organization that acts as the legal employer for international workers on behalf of a company and takes on full liability for all employment-related issues. 

An EOR streamlines the payroll process and ensures taxes and other payroll expenses are withheld from each paycheck. An Employer of Record will also provide support throughout the hiring process, draft employment contracts, and ensure all terminations are processed compliantly. 

Leveraging a global payroll provider like an EOR allows companies to hire and manage international staff without registering a local entity within that country while providing a flexible method to scale operations. 

Legal Entity

Companies that want to establish global payroll operations may also opt to set up a local entity in the country of hire. A legal entity is a company, individual, or organization that has legal rights and responsibilities, meaning the company can enter into binding contracts, sue or be sued, purchase or hold assets, and more. 

Before legally hiring employees, businesses must engage in several activities like registering their entity with the local authorities, opening a bank account, and finding office space. Once complete, organizations with a local entity can legally hire and manage employees and are responsible for administering and meeting all payroll requirements. 

Companies with a local entity maintain greater control, as CEOs and business leaders can alter payroll practices as needed. However, in this case, the organization will need a dedicated team of HR experts to compliantly run global payroll or face risks. 

Alternative Human Resource Outsourcing

Alternatively, instead of partnering with an EOR, companies can engage other types of employment services, such as a Professional Employer Organization. 

A PEO acts as a co-employer for international employees and will be responsible for certain HR functions such as processing payroll. However, unlike an Employer of Record, the company and PEO share certain employment-related responsibilities and legal liabilities, meaning the company may be culpable if the PEO makes a mistake.

Companies with an existing local entity may also choose to have a PEO handle important HR functions. Using PEO services ultimately helps growing companies save long-term administrative costs and mitigate risks throughout the hiring process. 

What are the Main Challenges with Global Payroll Processing?

Global payroll is a major requirement for any successful business, but there are also key challenges that companies should be aware of for efficient wage management. 

For example, global payroll compliance and cybersecurity are significant considerations for growing companies. Ignoring these could result in interest charges, audits from governmental agencies, and potentially decreased trust with the organization’s employees. 

Understanding the main risks associated with global payroll helps international organizations mitigate the risks associated with scaling in new markets. 

Regulatory Compliance

One of the most significant challenges companies face when processing global payroll is following all the rules and regulations regarding payroll compliance. Companies with employees in multiple countries must be aware of various international labor laws and ensure that all entitlements are provided, including the regional minimum wage, statutory benefits, and other mandated employment rights. Additionally, each country has different rules and policies governing taxation remittance and reporting, and its own deadlines for these requirements. 

Differences in legislation make following all relevant employment policies challenging and increase the organization’s legal risk. Failure to comply with payroll regulations in one region may result in financial penalties or fines and even reputational damage. 

Companies will also need to be aware of other non-compliance risks, like not paying employees the proper amount stipulated in the employment contract, employee misclassification, failure to meet health and safety requirements, and more. 

Data Accuracy

Maintaining accurate global payroll data is another significant challenge growing companies face. For example, companies that handle payroll in-house must consider additional potential costs such as currency exchange rates and international banking fees. 

Payroll teams will also need to monitor fluctuations in currency values across borders, which have significant impacts on a company’s labor costs. These differences across regions also make it difficult to track various payroll expenses.  

Additionally, companies may find it difficult to standardize payroll practices for dispersed teams. Time zones significantly impact the payroll process, as different regions have different payroll cycles, cut-off dates, or holiday requirements. 

Issues with data accuracy also arise from a company’s payroll process in general. In this case, team members from different departments may be required to submit important information, such as employee earnings, tax rates, and more, which can impact efficiency and data availability. 

Data Protection and Management

In addition to ensuring all data is accurate and up to date, companies must consider several cybersecurity requirements to remain compliant with all global labor laws. Various countries and regions have guidelines regarding data privacy and protection, while countries like India are currently formalizing data privacy laws. These laws regulate how companies utilize, store, process, and collect important personal information. 

This means that it is the responsibility of the company to meet all requirements for global payroll compliance and ensure that proper cybersecurity protocols are implemented to mitigate risks. 

Preventing issues such as data breaches and eliminating cyber threats is also important because payroll systems contain sensitive personal data, such as employee bank account numbers, employment records, salary amounts, contact information, and more. 

Artificial Intelligence and Global Payroll

Over the last few years, artificial intelligence has played an increasingly important role in the modern workplace. AI technology allows companies to complete monotonous or repetitive tasks much faster than traditional employees while improving accuracy and reducing human error. 

Implementing AI technology brings companies several advantages, including:

• Improved organizational efficiency by streamlining operational processes
• Increased productivity
• More informed decision-making based on data analysis
• Stronger cybersecurity protections
• Reduced operational costs

AI also streamlines the payment process. AI in payroll systems will flag potential risks, analyze information in real time, and more. 

Five Ways to Simplify Global Payroll Management with AI

#1: Compliance Support

Regulatory compliance is a major hurdle associated with global payroll, but leveraging AI algorithms provides companies with valuable support and insights to abide by all relevant international labor laws. 

Instead of relying on a human touch, companies can utilize AI tools to monitor changing local labor regulations, tax laws, and other employment-related policies, allowing you to stay ahead of the curve and reduce the chance of non-compliance. 

AI tools are used to analyze large quantities of data, identifying financial and legal risks, in seconds. This enables companies to develop better compliance practices and ensure that payroll processes align with all legal requirements. 

For example, AI can generate auditing trails and detect patterns for improvements, making it easy to monitor and report all aspects of global payroll. 

#2: Employee Benefits Management

Administering benefits packages, which include both statutory and supplementary benefits, can be simplified by AI. These tools automatically calculate deductions and other necessary contributions for employer-provided benefits. AI also makes it significantly easier to enroll employees in programs, as these algorithms guide employees through the enrollment process, explain eligibility requirements, and provide reminders for appointments or renewals. 

Another major benefit of leveraging AI technology in employee benefits management is that AI provides a more personalized employee experience by analyzing demographics, health records, and more. This means companies can offer tailored benefits packages, which boost employee satisfaction while enabling employees to compare or evaluate plans to find the right fit.

#3: Automated Payroll Data Processing

Artificial intelligence efficiently automates traditional HR functions, such as onboarding new hires, tracking performance, and data entry and collection. This helps companies simplify processes while maintaining accuracy. 

According to the American Payroll Association, roughly 72% of American workers would experience financial strain if paychecks were delayed by even one week, and around 94% of Canadians would seek new employment if they experienced regular pay delays or inconsistencies. Automating these protocols ensures consistency and accuracy when paying international employees, preventing financial penalties and issues with retaining talent. 

#4: Payroll Forecasting and Predictive Analytics

Using AI tools to analyze current trends and examine historical data helps organizations predict future payroll expenses more accurately, allowing for more optimal resource allocation.

Artificial intelligence tools will also help an organization analyze its current workforce. This enables business leaders to identify and address potential skills gaps or workforce needs before they impact operations. 

Ultimately, leveraging AI technology allows companies to efficiently predict staffing requirements and address shortages to support the business’s growth. 

#5: Improved Customer and Employee Support

Another significant way AI simplifies HR functions is by providing a quick and efficient method to receive valuable insights into any payroll-related questions. 

Leveraging AI-powered tools such as chatbots provides fast and efficient support for customers, employers, and employees alike. These tools allow companies to get a better understanding of any deductions or legal requirements. With the click of a button, clients can gain the information needed to pay international employees efficiently. 

Implementing this technology also provides greater transparency to employees, as workers can access payroll information such as payslips and tax forms with minimal hassle. This also streamlines the workflow of HR professionals.  

Borderless AI - Experience the Future of Global HR

Borderless AI is an Employer of Record platform and a global payroll solution that leverages the power of generative AI to automate and speed up the process of onboarding, managing, and paying international team members. An EOR is a third-party organization that acts as the legal employer of your company’s international workforce, while the client company maintains control over day-to-day processes such as refining the business’s core competencies. Borderless AI enables businesses to compliantly hire and manage talent worldwide without establishing a foreign entity. We alleviate the complexities and risks of hiring global employees with zero deposits, dedicated in-house support, and AI-powered global employment law resources. 

Alberni - Your HR Agent: Ask. Create. Analyze.

Alberni is the first AI agent for global employment. Leveraging cutting-edge technology, Alberni will answer global employment questions and compliance queries, generate employment contracts in over 170 countries, and analyze your current employment agreements in seconds. 

Our agent, Alberni, also helps mitigate risks within new and existing contracts by reviewing important legal frameworks, such as non-solicitation, confidentiality, and intellectual property. 

With an AI-powered Employer of Record, growing businesses can quickly and compliantly pay global employees and explore new markets. 

Contact us today to see how Alberni, the first-ever AI agent for global HR, streamlines the global payroll process and how our platform helps you manage your workforce. 

_Disclaimer

_{Borderless does not provide legal services or legal advice to customers, contractors, employees, partners, or the general public. We are not lawyers or paralegals. Please read our full disclaimer here.}