Payroll may sound inconsequential for business expansion, but it is a critical function that needs to be optimized especially with today’s increasingly remote workforce.

Unknown to many, most SMEs with global operations have been facing payroll problems. For years, there has been a scarcity of software developed to address the needs of small and midsize businesses. Payroll software giants ADP and Paychex offer global solutions, but they are mainly designed for large multinational corporations.

Here’s where startups come in, filling the gap of providing software-as-a-service (SaaS) or cloud solutions for businesses of all sizes at different locations. They develop software that addresses the core challenges of creating payroll systems that work for global businesses regardless of the breadth and type of operations.

The challenges of global payroll for SMEs

There are many factors that make it difficult to come up with a payroll system that works for SMEs. In Gartner’s The Market Guide for Multicountry Payroll Solutions, five important points stand out.

First, many companies have problems with payroll integration as they still use two or more payroll systems. Secondly, unifying payroll and core HR functions can entail high costs. Legacy payroll systems are also inefficient and costly. The fourth point is about the reluctance of companies to adopt cloud-based human capital management (HCM) suites for payroll. Lastly, new laws, especially those pertaining to data privacy like GDPR, require greater control and oversight over payroll data and its handling.

These summarize the critical challenges that prevent software makers from developing payroll solutions that are viable and easy to adopt for businesses. Global businesses have become accustomed to the use of multiple payroll and human capital management (HCM) systems that many tend to find the adoption of a unified solution unnecessary. Many also hesitate to use cloud-based software because of unfamiliarity.

Businesses that deal with a global workforce involving different countries or even different regions within the same country have to contend with legal and regulatory idiosyncrasies especially related to worker benefits, tax withholding, and other pay concerns. Making things more complicated is the fact that laws and regulations constantly change. For example, new requirements for drug testing, marijuana in particular, are added as more states in the US legalize cannabis.

On the other hand, differences in procedures and formats create complications that make it difficult to manage payroll for businesses that operate across various locations worldwide. CyberArk senior payroll manager Sara Avital, for example, notes how local payroll providers vary in the files they send—some submit PDFs while others use Excel spreadsheets. Compiling data from these files is largely an inefficient data entry task.

It hasn’t been easy for payroll system developers to produce something that adapts to changing policies to ensure compliance. Moreover, it’s a daunting task to ensure that everyone gets paid the right amount and on time, given all the differences and inconsistencies that payroll managers have to reconcile.

Startups stepping up with innovative solutions

The good news is that there have been startups that attempted to solve the payroll software puzzle for global SMEs. In Asia, companies like Papaya Global, Payroll Panda, and Payroll Hero offer solutions that match the specific needs of global businesses of all scales.

Papaya Global, an Israel-based startup with offices in Singapore and Shanghai, offers one of the most viable solutions for automating and unifying payroll for SMEs.

The startup raised a $45 million Series A round funding from Insight Partners, Bessemer Venture Partners, New Era Capital Partners, and Dynamic Loop Capital in November 2019. This capital infusion has accelerated the four-year-old company’s growth, putting it on track to become a major provider of SaaS services for all types of employees including Employer-of-Record (EoR) and contractors.

Papaya Global’s automated system simplifies the process of hiring, onboarding, managing, and paying employees in over a hundred countries. The company’s cloud-based payroll solution helps companies become compliant with their HR and payroll records while ensuring scalability. Papaya claims to be the first payroll solution that guarantees GDPR and SOC compliance, and the first total workforce management solution that is compatible with the intricacies of handling information pertaining to all types of global workers.

Another excellent option for global payroll, Payroll Panda, provides a comprehensive approach in solving the global payroll headache. Aside from unifying systems, it also supports bank integrations, generation of statutory forms, a simplified leave management scheme, and custom reporting. It also comes with an employee self-service feature that allows employees to check their records and submit applications for leaves or other concerns.

Payroll Hero also presents itself as an effective global payroll and employee management solution. Particularly designed for restaurants, offices, and retail businesses, Payroll Hero focuses on ensuring accurate data and analytics. It comes with a facial recognition feature to ascertain that the right people are clocking in at the right time. It simplifies scheduling by allowing managers to generate interconnected schedules in a few seconds. More importantly, it is optimized for managing multiple worksites, enabling the prompt collection of the correct time and attendance information.

Unification, automation, scalability, and simplification

A global payroll system needs to unify various payroll platforms, automate data gathering and processing, enable easy scaling up (or down), and simplify processes in general. SMEs would find it easier to adopt a unified, automated, scalable, and simple payroll solution as it offers an alternative with significant advantages over their traditional setup.

Unification is a must for any global payroll system. All data sources must be unified to generate reports with consistent and accurate information. This unification, however, does not mean the total elimination of local payroll providers. Papaya Global, for instance, can be utilized alongside local payroll providers in order for companies to monitor their international employees through a unified service. It facilitates the reconciling of data and compliance with different laws and regulations. Papaya allows companies to integrate several local payroll systems in a unified system.

Automation, on the other hand, results in efficiency and speedy preparation of reports. It also takes human errors out of the picture. There are many aspects of payroll preparation that can be automated once data and file formats are unified. A global payroll system should expedite processes, not become a bottleneck that slows down the movement of information and generation of critical business documents. The self-service feature of Payroll Panda is a good demonstration of how automation can make payroll systems participative and efficient without compromising accuracy.

Scalability is also a vital attribute for a global payroll system. Companies that expand to new markets worldwide need a payroll solution that does not have limitations on the number of locations, employees, and transactions it supports. Imagine having to replace a payroll system because it can no longer handle the number of employees or sites of a rapidly expanding company. Growing global businesses inevitably encounter increasing volumes of transactions and new types of work arrangements, so a payroll system should be easily scaled up to address such developments. Conversely, a payroll system must also be scaled down without problems in times when a business needs to shut down some of its operations to deal with a crisis.

Simplification, moreover, is necessary to encourage companies to consider shifting to a new system. It would be difficult to convince managers to abandon their tried and tested payroll and human capital management systems to try an alternative that is more complicated. Simplification also entails the need to ensure compliance. A global payroll solution makes it easy to comply with different legal requirements and regulatory frameworks.

Arguably, a SaaS system is the best way to attain the aforementioned goals. Being cloud-based, scalability is a given. It does not require local installation of software, let alone the need for regular updates. Business size and scope are not a problem as new features or functions can be obtained without having to replace or reinstall the entire system.

SaaS payroll platforms eliminate delays attributed to integration, setting up, and configuration. They can onboard employees in a matter of days. They make it possible to generate real-time business intelligence that provides invaluable insights on workforce spending.

The takeaway

Effective global payroll solutions are designed to put an end to fragmentation, the use of multiple payroll systems, costly streamlining, and worries over regulations. They allow companies to focus on the more important aspects of their business instead of worrying about reconciling data, meticulously reviewing records for accuracy, and ensuring compliance to avoid penalties.

Businesses that seek to penetrate the Asian market stand to benefit from the use of a well-designed global payroll solution, due to differences in labor laws, language barriers, and other issues that prevent the seamless unification of payroll and HTMC systems, hence creating inefficiencies that drag progress. Payroll may sound inconsequential for business expansion, but it is a critical function that needs to be optimized.

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