Today's global mobility (GM) landscape is rapidly evolving from the one we once knew. To keep up with this new landscape, especially when it comes to international payroll, organisations are looking for new, automated capabilities that enable smarter, safer and more employee-friendly processes than ever before. The global shadow payroll picture is continually changing alongside these developments. We asked several experts for their predictions on this fascinating space.
Richard McBride - CEO - Certino
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. They will increase the accuracy of payroll calculations, protecting employers from risk; take repetitive, boring calculation-focussed tasks away from employees, freeing them up to do more valuable, interesting work; and they will significantly improve the assignee experience as frustrations around delayed payments and physical paperwork become a thing of the past.
Matt Monette - Country Lead & Head of Expansion UK&I - Deel
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.
Separately, the ways payments are made to global employees will continue to evolve. The US Dollar (USD) will be increasingly attractive to freelancers and contractors as their preferred payment currency as budgets tighten during the potential economic uncertainty. My strongest prediction in this area is that cryptocurrency adoption will continue to grow as a payment option for global employer contracts. The flexibility crypto offers to professionals working across multiple territories - which would normally each have their own currencies - will only add to its popularity as a payment option.
Finally, 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.
Wojciech Kupny & Lisa Orton - Global Compensation and Payroll Services Leaders - Vialto Partners
There are three principal trends we’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.
We also expect to see a widespread migration towards fully managed shadow payroll services rather than the standard outsourced model. This will mean payroll technology providers will need to be able to offer the full suite of services - including advisory - rather than simply providing payroll management.
Mike Hibberd - Founder & CEO - Global Expat Pay
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. We regularly find that payroll leaders cite incorrect or unclear data as their most significant payroll 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.
2023 will also see businesses strive to to deliver better assignee experiences. A critical component of how assignees experience their time abroad is the first 2-3 months of each new assignment. As increasing numbers of employees become globally mobile, their experience needs to become frictionless, to allow them the freedom to move internationally. The key to this frictionless experience is to ensure payroll accuracy in both the home and host location from day one. It sounds simple but if the assignee gets what they expect in first payroll, their trust in the assignment process is established. Fewer payroll escalations or workarounds also reduces any internal time commitment for payroll and HR teams. If businesses can review the flow of data to ensure an exceptional process from the start of any assignment, they will be able to significantly improve the quality of any assignee experience.
Siobhan Cummins - Strategic Global Mobility Advisor
The key to global shadow payroll in 2023 will be the ability of payroll teams to manage multiple assignment types. Although the number of mobile employees organisations have working for them internationally may not have changed significantly, the types of moves may well have done. With new ways of working - hybrid, virtual, remote, etc. - managing GM assignments has become increasingly complex. This complexity presents significant challenges for HR and payroll teams who need to ensure payments are accurate and timely as well as correctly reporting tax to avoid any potential risks and fines.
Post Covid, managing multiple move types is creating significant challenges for the GM function. Compliance is becoming increasingly complex and governments have become increasingly aware of the potential revenue from foreign national employees as well as fines on organisations for incorrect reporting. As a result, there are ever more requirements on Payroll Teams to manage tax effectively to ensure they are compliant.
Due to the global recession companies are focusing more than ever on cost minimisation. However, they need to invest in the right payroll technology to support their programme and this means they will be looking at available solutions on the market at the most cost-effective price. Payroll Technology providers who are equipped to offer low cost, plug and play solutions are likely to benefit from this complex landscape.
Chantel Rowe - VP of Product - Topia
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.
Compliance will also be a major area of focus for businesses in 2023. As employees travel for business and work remotely, the most successful businesses will be those who have the tools available to effortlessly track when employees are crossing thresholds for having to pay taxes in a new location, easily apportion compensation between workdays spent in different locations and withhold as needed without putting the employee in a negative net situation.
Clive Fathers - Independent Global Mobility tax expert
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, get in touch with us at: enquiries@certino.com
