Controlling global payroll data: The good news and the bad Controlling global payroll data: The good news and the bad

Controlling global payroll data: The good news and the bad
30 Sep 2015

Following on from last month’s article on the data challenges which compensation and benefits presents for global payroll professionals, John Galvin looks at the other challenges from bank data to legal entities.

Last month, I discussed how important it is for global payroll to be based on correct data outlining the data challenges which compensation and benefits present to global payroll professionals. I highlighted that global payroll professionals have less familiarity and knowledge about their payrolls than domestic payroll teams, so global payroll places more reliance on getting system data right first time.

In this article, I will talk about other data items, which provide a different challenge for global payroll teams. The good news is that these items occur less frequently than typical compensation and benefit issues. However, the bad news is that they are harder to identify up-front and they can be more difficult to resolve should they occur.

Banking data

Every payroll professional knows the importance of bank account data. If payroll does not hold complete and accurate banking data for an employee, then quite simply, the employee will not receive their payroll payments. Even worse, if the wrong data is held, the payments may be received by an incorrect employee or even a fraudster.

What are the issues for global payroll?

Global payrolls face unique challenges in maintaining good banking data:

• International bank account data can be in a variety of formats
• International bank account data can be captured incompletely by sub-systems if they are not configured for banks in all countries
• Employees can forget to update their bank account details when they move internationally.

Why is this a problem?

Overseas payment issues are particularly difficult to diagnose and resolve. This can lead to stressful situations, particularly when an employee has not been paid and is pressing for the problem to be rectified quickly. Problems arise as:

• Bank account errors often only come to light when payment fails to arrive
• International payments can be sent in a variety of ways and involve a number of banks, which makes it difficult to diagnose where the problem lies
• Data issues are often misdiagnosed as payment failures can be caused by many other factors.

What can global payroll do to prevent bank account data issues?

There are a number of preventative measures global payroll can put in place to prevent problems from occurring:

• Review processes for collecting bank account details for international new joiners
• Check all overseas bank system data is in the correct format
• Trial runs, aka penny tests, make sure that high risk payments to new accounts do not fail
• Review international banking procedures to ensure global payroll receives early warning of any failed payments.

Global payroll should be proactive in learning about international banking procedures.

There are good banking solutions available, which make life easier for global payroll. Don’t let your in-house treasury department rest easy if they are providing a second-rate banking solution!

New starters and leavers

New joiners are an excellent example of how global payroll faces different data issues from domestic payroll. In a domestic setting, there are many indicators other than pure payroll system data which alert payroll teams to new starters and leavers, even leaving parties!

However, the global payroll team may have to rely entirely on data to identify starters and leavers, as they are physically remote from the employees

What are the unique data issues facing global payroll?

In addition to being in a remote location, global payroll faces a number of additional issues, which complicate the identification of starters and leavers:

• Varying cut off dates across countries stemming from different pay dates
• Different induction processes across countries
• Inconsistent notification procedures for leavers.
What can global payroll do to prevent problems?

The key is to have a consistent process, which is mandatory for all starters and leavers across the organisation. Also a clear calendar should be published and followed for each country so that all stakeholders are clear on the deadlines for informing payroll of employee changes.

Legal entities

Each employee needs to be assigned to the correct legal entity within the organisation. For a domestic payroll team, this may be so intuitive as to be second nature. However, overseas legal entities can be more prone to error due to:

• More than one entity per country overseas
• Payroll’s lack of familiarity with the types of entities in each country
• A confusing array of overseas entities, eg in the same country there may be branches, limited liability entities and representative offices
• Expatriate entities.

Why is this important?

Allocating each international employee to their correct legal entity is important for many reasons:

• Correct payment of taxes and social security
• Correct application of collective and local bargaining agreements
• Accurate statutory financial accounts
• Accurate internal bookkeeping and cost control

What global payroll can do to stop problems from occurring

The following steps should help you ensure that each overseas employee is assigned to the correct legal entity.

• Remember that usually it is the employee contract which ultimately determines which entity is the legal employer
• For new joiners, check the legal entity against the employee contract
• If employees move from one country to another, check that the legal entity is correctly updated for any new employee contract
• If you are newly implementing global payroll, consider a one-time check of payroll against employee contracts

Vacation allowances

Vacation allowances can cause real issues for HR, finance and payroll if they are not continuously monitored and reconciled. Vacation data can vary from one country to another due to:

• Different leave entitlements for employers in different countries
• Inconsistent tracking of actual leave taken by local staff
• Different carry-forward rules in different countries
• Lack of systematic checking of vacation carryforwards
• Ability of problems to accumulate over time.

Why is this important?

Vacation leave is highly important in particular countries and circumstances such as:

• Calculating leave entitlements for a departing employee
• Determining financial accruals needed for vacations earned but not yet taken
• Disclosing leave entitlements, which can be a legal requirement in certain countries.

What global payroll can do to mitigate these problems

If problems occur, leave data can be extremely difficult and onerous to resolve. In order to prevent vacation data getting out of synch, global payroll can:

• Ensure local rules for leave calculation and carryforward are fully understood
• Reconcile payroll leave records to underlying HR data
• Record leave carry forwards from one year to the next
• Make sure employees are aware of balances so that they can highlight issues when they occur.

Global payroll data challenges can arise in many different categories. These challenges can require additional data checks that are beyond the scope of standard global payroll implementations, as many of these issues will not be tested by parallel runs.

Global payroll teams need to design implementation data checks that reflect all their data requirements. After implementation, they need to stay vigilant and continually check their overseas payroll data for all relevant data categories.

By John Galvin, CEO of Galvin International, provides expert, independent advice for clients setting up global payroll. He also finds clients international payroll, accounting and tax partners worldwide. John heads a team of global finance experts and a worldwide network of independent payroll, accounting and tax suppliers. 

Following on from last month’s article on the data challenges which compensation and benefits presents for global payroll professionals, John Galvin looks at the other challenges from bank data to legal entities.

Last month, I discussed how important it is for global payroll to be based on correct data outlining the data challenges which compensation and benefits present to global payroll professionals. I highlighted that global payroll professionals have less familiarity and knowledge about their payrolls than domestic payroll teams, so global payroll places more reliance on getting system data right first time.

In this article, I will talk about other data items, which provide a different challenge for global payroll teams. The good news is that these items occur less frequently than typical compensation and benefit issues. However, the bad news is that they are harder to identify up-front and they can be more difficult to resolve should they occur.

Banking data

Every payroll professional knows the importance of bank account data. If payroll does not hold complete and accurate banking data for an employee, then quite simply, the employee will not receive their payroll payments. Even worse, if the wrong data is held, the payments may be received by an incorrect employee or even a fraudster.

What are the issues for global payroll?

Global payrolls face unique challenges in maintaining good banking data:

• International bank account data can be in a variety of formats
• International bank account data can be captured incompletely by sub-systems if they are not configured for banks in all countries
• Employees can forget to update their bank account details when they move internationally.

Why is this a problem?

Overseas payment issues are particularly difficult to diagnose and resolve. This can lead to stressful situations, particularly when an employee has not been paid and is pressing for the problem to be rectified quickly. Problems arise as:

• Bank account errors often only come to light when payment fails to arrive
• International payments can be sent in a variety of ways and involve a number of banks, which makes it difficult to diagnose where the problem lies
• Data issues are often misdiagnosed as payment failures can be caused by many other factors.

What can global payroll do to prevent bank account data issues?

There are a number of preventative measures global payroll can put in place to prevent problems from occurring:

• Review processes for collecting bank account details for international new joiners
• Check all overseas bank system data is in the correct format
• Trial runs, aka penny tests, make sure that high risk payments to new accounts do not fail
• Review international banking procedures to ensure global payroll receives early warning of any failed payments.

Global payroll should be proactive in learning about international banking procedures.

There are good banking solutions available, which make life easier for global payroll. Don’t let your in-house treasury department rest easy if they are providing a second-rate banking solution!

New starters and leavers

New joiners are an excellent example of how global payroll faces different data issues from domestic payroll. In a domestic setting, there are many indicators other than pure payroll system data which alert payroll teams to new starters and leavers, even leaving parties!

However, the global payroll team may have to rely entirely on data to identify starters and leavers, as they are physically remote from the employees

What are the unique data issues facing global payroll?

In addition to being in a remote location, global payroll faces a number of additional issues, which complicate the identification of starters and leavers:

• Varying cut off dates across countries stemming from different pay dates
• Different induction processes across countries
• Inconsistent notification procedures for leavers.
What can global payroll do to prevent problems?

The key is to have a consistent process, which is mandatory for all starters and leavers across the organisation. Also a clear calendar should be published and followed for each country so that all stakeholders are clear on the deadlines for informing payroll of employee changes.

Legal entities

Each employee needs to be assigned to the correct legal entity within the organisation. For a domestic payroll team, this may be so intuitive as to be second nature. However, overseas legal entities can be more prone to error due to:

• More than one entity per country overseas
• Payroll’s lack of familiarity with the types of entities in each country
• A confusing array of overseas entities, eg in the same country there may be branches, limited liability entities and representative offices
• Expatriate entities.

Why is this important?

Allocating each international employee to their correct legal entity is important for many reasons:

• Correct payment of taxes and social security
• Correct application of collective and local bargaining agreements
• Accurate statutory financial accounts
• Accurate internal bookkeeping and cost control

What global payroll can do to stop problems from occurring

The following steps should help you ensure that each overseas employee is assigned to the correct legal entity.

• Remember that usually it is the employee contract which ultimately determines which entity is the legal employer
• For new joiners, check the legal entity against the employee contract
• If employees move from one country to another, check that the legal entity is correctly updated for any new employee contract
• If you are newly implementing global payroll, consider a one-time check of payroll against employee contracts

Vacation allowances

Vacation allowances can cause real issues for HR, finance and payroll if they are not continuously monitored and reconciled. Vacation data can vary from one country to another due to:

• Different leave entitlements for employers in different countries
• Inconsistent tracking of actual leave taken by local staff
• Different carry-forward rules in different countries
• Lack of systematic checking of vacation carryforwards
• Ability of problems to accumulate over time.

Why is this important?

Vacation leave is highly important in particular countries and circumstances such as:

• Calculating leave entitlements for a departing employee
• Determining financial accruals needed for vacations earned but not yet taken
• Disclosing leave entitlements, which can be a legal requirement in certain countries.

What global payroll can do to mitigate these problems

If problems occur, leave data can be extremely difficult and onerous to resolve. In order to prevent vacation data getting out of synch, global payroll can:

• Ensure local rules for leave calculation and carryforward are fully understood
• Reconcile payroll leave records to underlying HR data
• Record leave carry forwards from one year to the next
• Make sure employees are aware of balances so that they can highlight issues when they occur.

Global payroll data challenges can arise in many different categories. These challenges can require additional data checks that are beyond the scope of standard global payroll implementations, as many of these issues will not be tested by parallel runs.

Global payroll teams need to design implementation data checks that reflect all their data requirements. After implementation, they need to stay vigilant and continually check their overseas payroll data for all relevant data categories.

By John Galvin, CEO of Galvin International, provides expert, independent advice for clients setting up global payroll. He also finds clients international payroll, accounting and tax partners worldwide. John heads a team of global finance experts and a worldwide network of independent payroll, accounting and tax suppliers.