A guide to different service provider models A guide to different service provider models

A guide to different service provider models
30 Nov 2017

As a global payroll manager, a key decision that you need to make is around which tasks to perform inhouse and which to outsource. Most of you will need to research thirdparty service providers at some stage in your career. But when you do, it can be difficult to understand what types of outsourcing services are available to you.

To illustrate the point, consider the recent Global Payroll Awards. There were no fewer than 10 different awards for outsourcers, a fact that illustrates the growing sophistication and complexity of the global payroll outsourcing industry.

How this article will help

This article aims to provide a clear and straightforward guide to the various kinds of service provider you are likely to encounter. It is not intended to promote any particular business. The goal is to help you understand the options available, which will hopefully make it easier to pick the right service provider for your needs.

In this article, we will discuss:
- global payroll
- in-country payroll (ICP)
- international accounting firms
- professional employment organisations (PEOs)
- international expansion firms
- payment providers
- independent advisers.

Global payroll

A global payroll company is one that meets payroll requirements for all your international employees, no matter where they are in the world. The usual components of their offerings include:

- centralised contracting and invoicing
- common payroll-related data transfer from your HR systems
- common reporting across countries
- centralised service models.

There are many different global providers on the market, each with their own strengths and niches.

For example, some specialise in companies that are new to operating overseas. There are also regional providers that specialise in payroll for particular areas eg Central America.

It is important to note that most global payroll companies outsource all or part of their in-country payroll to local specialists.

In-country payroll providers

An ICP is a country expert. So a Malaysian ICP is a Malaysian firm that will deliver your Malaysian payroll requirements. Many ICPs around the world contract directly with international customers.

ICPs have the local expertise to provide specialist services related to their own particular country. But they can often meet other needs that you may have such as offering virtual offices, payment, legal compliance, accounting and tax services.

International accounting firms

Many of you will already have an overseas relationship with your accounting firm. These firms frequently provide payroll services in international locations too. Although it is usually fair to say that payroll is not their core business, they can be a convenient choice. They are often also a relatively easy option to have internal colleagues approve as their brand names are widely recognised.

Professional employment organisations

PEOs are sometimes known under other names, including employers of record, but what they have in common is their ability to be the legal employer of your staff overseas. A PEO will perform all payroll-related tasks on your behalf. This means that you do not have to worry about arranging payroll as it is all done for you.

A word of caution: PEOs do not usually cover any corporate or sales taxes that your business may need to pay overseas. Nor are they required to tell you if your business has other compliance obligations such as setting up a legal entity. If you have any concerns about being non-compliant, seek independent advice.

International expansion firms

Specialist international expansion firms aim to provide a fuller range of back-office services, which includes payroll, than other options.

They typically offer accounting, tax, legal, HR and payment services and suit clients that would like to outsource their entire international back office. Typically they use a combination of central in-house staff and local in-country providers to deliver these services.

Payment providers

It is important to check that your chosen payroll supplier pays salaries, payroll taxes and related deductions and does so accurately and on time, as many charge separately for such activity. Some countries have specific rules governing how such payments can be made so also check if these apply to you.

There are a range of ways to arrange payments. Most banks can provide this service, but there are also specialist foreign currency dealers that can offer foreign currency solutions at what they claim are preferential exchange rates.

Independent advisors

One thing that all of the above service providers have in common is that they give their staff incentives to sell you their services. This means that the onus is on you to choose the service that best meets your needs and compliance requirements.

With any form of overseas expansion, it is important to get the set up right first time as there can be major compliance issues with changing course at a later date. This situation is a particular risk if you are new to overseas payroll or worried about meeting compliance requirements.

But consultancy services exist to provide independent, objective advice, should you require it. These services range from relatively inexpensive one-stop-shop advice, which leaves you free to choose your own next steps, to full implementation support services.

 

John Galvin is CEO of award-winning Galvin International, which provides independent, cost-effective and compliant advice for clients setting up global payroll. John was awarded Global Consultant of the Year at the inaugural Global Payroll Awards. He and his team provide straightforward, fast advice and set-up support for a fixed price in over 70 countries. If you have any queries about the information in this article, or would like to know more, please contact John at john.galvin@galvininternational.com.

As a global payroll manager, a key decision that you need to make is around which tasks to perform inhouse and which to outsource. Most of you will need to research thirdparty service providers at some stage in your career. But when you do, it can be difficult to understand what types of outsourcing services are available to you.

To illustrate the point, consider the recent Global Payroll Awards. There were no fewer than 10 different awards for outsourcers, a fact that illustrates the growing sophistication and complexity of the global payroll outsourcing industry.

How this article will help

This article aims to provide a clear and straightforward guide to the various kinds of service provider you are likely to encounter. It is not intended to promote any particular business. The goal is to help you understand the options available, which will hopefully make it easier to pick the right service provider for your needs.

In this article, we will discuss:
- global payroll
- in-country payroll (ICP)
- international accounting firms
- professional employment organisations (PEOs)
- international expansion firms
- payment providers
- independent advisers.

Global payroll

A global payroll company is one that meets payroll requirements for all your international employees, no matter where they are in the world. The usual components of their offerings include:

- centralised contracting and invoicing
- common payroll-related data transfer from your HR systems
- common reporting across countries
- centralised service models.

There are many different global providers on the market, each with their own strengths and niches.

For example, some specialise in companies that are new to operating overseas. There are also regional providers that specialise in payroll for particular areas eg Central America.

It is important to note that most global payroll companies outsource all or part of their in-country payroll to local specialists.

In-country payroll providers

An ICP is a country expert. So a Malaysian ICP is a Malaysian firm that will deliver your Malaysian payroll requirements. Many ICPs around the world contract directly with international customers.

ICPs have the local expertise to provide specialist services related to their own particular country. But they can often meet other needs that you may have such as offering virtual offices, payment, legal compliance, accounting and tax services.

International accounting firms

Many of you will already have an overseas relationship with your accounting firm. These firms frequently provide payroll services in international locations too. Although it is usually fair to say that payroll is not their core business, they can be a convenient choice. They are often also a relatively easy option to have internal colleagues approve as their brand names are widely recognised.

Professional employment organisations

PEOs are sometimes known under other names, including employers of record, but what they have in common is their ability to be the legal employer of your staff overseas. A PEO will perform all payroll-related tasks on your behalf. This means that you do not have to worry about arranging payroll as it is all done for you.

A word of caution: PEOs do not usually cover any corporate or sales taxes that your business may need to pay overseas. Nor are they required to tell you if your business has other compliance obligations such as setting up a legal entity. If you have any concerns about being non-compliant, seek independent advice.

International expansion firms

Specialist international expansion firms aim to provide a fuller range of back-office services, which includes payroll, than other options.

They typically offer accounting, tax, legal, HR and payment services and suit clients that would like to outsource their entire international back office. Typically they use a combination of central in-house staff and local in-country providers to deliver these services.

Payment providers

It is important to check that your chosen payroll supplier pays salaries, payroll taxes and related deductions and does so accurately and on time, as many charge separately for such activity. Some countries have specific rules governing how such payments can be made so also check if these apply to you.

There are a range of ways to arrange payments. Most banks can provide this service, but there are also specialist foreign currency dealers that can offer foreign currency solutions at what they claim are preferential exchange rates.

Independent advisors

One thing that all of the above service providers have in common is that they give their staff incentives to sell you their services. This means that the onus is on you to choose the service that best meets your needs and compliance requirements.

With any form of overseas expansion, it is important to get the set up right first time as there can be major compliance issues with changing course at a later date. This situation is a particular risk if you are new to overseas payroll or worried about meeting compliance requirements.

But consultancy services exist to provide independent, objective advice, should you require it. These services range from relatively inexpensive one-stop-shop advice, which leaves you free to choose your own next steps, to full implementation support services.

 

John Galvin is CEO of award-winning Galvin International, which provides independent, cost-effective and compliant advice for clients setting up global payroll. John was awarded Global Consultant of the Year at the inaugural Global Payroll Awards. He and his team provide straightforward, fast advice and set-up support for a fixed price in over 70 countries. If you have any queries about the information in this article, or would like to know more, please contact John at john.galvin@galvininternational.com.

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