Global Payroll in 2023: What do the experts say?

A year of compliance for busineses

The key takeaway from speaking to other GM leaders is that 2023 is going to be the year of compliance. As assignments become increasingly varied and assignees look for increased flexibility, global shadow payroll becomes increasingly complex for businesses to manage.

With the world opening up again after the pandemic, host country governments have once again become aware of the significant revenue opportunities presented by hosting international assignees. To ensure their compliance – and most importantly the avoidance of costly penalties – businesses will need to effectively manage their shadow payroll alongside any tax obligations.

The use of digital solutions will be the second key part of the ever-changing global shadow payroll management picture this year. The use of these solutions for calculating payroll and taxes will have three major benefits.

1. They will increase the accuracy of payroll calculations, protecting employers from risk;
2. take repetitive, boring calculation-focussed tasks away from employees, freeing them up to do more valuable, interesting work;
3. and they will significantly improve the assignee experience as frustrations around delayed payments and physical paperwork become a thing of the past.

Location-based compensation

The most significant trend in payroll in 2023 is that the local vs. global pay debate is over. The obvious result of this is that companies will enforce location-based compensation. This approach allows global businesses to secure the best talent by offering competitive salaries in markets where demand for talent is high and secure savings in areas with a lower cost of living.

Additionally, significant numbers of companies will look to move away from traditional, antiquated payroll services in favour of centralised providers that are able to cover all their payroll needs with a single solution.

AI & Machine Learning to ease burden

There are two principal trends I’ve picked out for global payroll in 2023. Along the theme of digital nomads seeking increased flexibility, there will be a strong move towards pay on-demand systems.

Increasing numbers of employers are looking into paying employees as they earn, rather than waiting until a set pay date. This earning flexibility – and the increased convenience it offers – is being touted by businesses as a major benefit to provide employees.

Increasingly, payroll providers are looking at AI and machine learning (ML) as ways to ease the burden on globally mobile employees. The likely result of this is that employers will be able to provide employees with standard answers to a set of standard questions, depending on each individual’s professional situation. The crucial result of this is that payroll and HR teams will save huge amounts of administration time, releasing them to focus on more engaging areas of their roles.

Payroll technology to manage complexity of compliance

Compliance is becoming increasingly complex and, as a result, there are ever more requirements on Payroll Teams to manage tax compliantly. In the post pandemic world employees are once again mobile and governments have become increasingly aware of the potential revenue from foreign national employees as well as fines on organisations for incorrect reporting.

Due to the global recession, companies are focusing more than ever on cost minimisation. This means they will search for the most cost-effective payroll solutions. Payroll Technology providers who are equipped to offer low cost, plug and play solutions are likely to benefit from this complex landscape.

Consistently accurate reporting essential

Revenue authorities will increase their audit activity to identify payroll reporting failures. Assignees are a strong source of revenue for countries as businesses regularly struggle to input correct data into the payroll reporting cycle. Simply correcting payroll reporting gaps through the tax return process will no longer be an adequate response. Companies must focus on managing the data for an employee’s home and host payrolls, and ensure the reporting of this is working in real time.

Payroll reporting is consistently highlighted as the number one challenge for GM leaders. Payroll leaders regularly cite incorrect or unclear data as their most significant challenge. There is increasing recognition of the need for a more collaborative approach between GM and payroll departments in 2023 to tackle this challenge. The costs of correction and the impact on individual assignees are far too great to ignore. To rectify this, all businesses with international assignees must take steps to understand the root cause of their global shadow payroll reporting issues. Additionally, they need to understand exactly how this data flows between their assignees and their payroll departments. This increased level of clarity will enable businesses to find a permanent solution to this challenge.

global payroll that responds rapidly and flexibly

As employees look to work flexibly from across the globe, employers will need the ability to pay people flexibly in different countries, split between different countries, and rapidly change this to take into account various factors, such as the war in Ukraine, the results of this conflict on the Ruble, the total devaluation of the Lebanese Pound, weakening of the Euro, among others.

This is a hugely uncertain time for global politics, which creates serious complexities for globally mobile employees, and employers will need to be prepared to be flexible to accommodate the needs of their employees.

Businesses need to be on top of payroll compliance

As new global nomad-style visas become more prevalent, and employees seek to work more flexibly from remote locations, local taxing authorities will be under pressure to ensure that the correct tax and social security is withheld.

Compliance will also be front and centre this year. Given the increasing number of digital solutions available to track, manage and process global payroll, taxing authorities will likely become even more zealous in their pursuit of interest and penalties when employers fail to comply. For this reason, using technology to accurately manage shadow payroll tax obligations will be a crucial part of the equation for businesses with international operations in 2023.

If you’re interested in finding out more about any of these trends, or how Certino can help you manage your global shadow payroll, visit https://www.certino.com

This is a hugely uncertain time for global politics, which creates serious complexities for globally mobile employees, and employers will need to be prepared to be flexible to accommodate the needs of their employees.