As Organizations grow and expand geographically, various risks and challenges of managing cross borders payroll
comes into play. It is important that the risks be mitigated straight from the onboarding of new regions and also be
continuously monitored and managed.
Some of the challenges and risks of onboarding and managing multi-country payrolls includes:
Compliance with Local Laws and Legislation
Failure to understand and to correctly interpret /apply local laws pertaining to employment, payroll taxes and
statutory compliances. This has come to bite many organisations’ who got it wrong in the first place. There is
need to ensure that this risk is adequately mitigated during onboarding of new regions and also monitored
continuously due to changing nature of in-country tax laws and local regulations.
Tax Equalizations Across the Regions
Where an organisations’ has a global pay structure, there may be need for tax equalizations calculations to
ensure that employees take home remains the same even when they have been seconded to another country.
Whereas some payroll software’s are able to do this, there is need for the calculations to be correctly locally
interpreted and applied to ensure compliance with local tax laws. A good example is tax on tax which becomes
a benefit is some jurisdictions. This will need consistent monitoring.
Managing Different in-country Deadlines
In centralized HR functions, managing different in-country deadlines can pose a challenge. Missed deadlines
can cause demoralize the team, create negative energy and also result to fines, sanctions and penalties.
Roles Duplication
Some entities may be forced to hire local payroll specialist in each country which sometimes may be a
duplication of roles and an increase in the overall cost structure of the group. Keep a close tab at this spend
and evaluate the best options.
Data Privacy and Protection
Across the globe, data protection regulations and laws continue to be enforced and also enhanced. The risks
evolving in data privacy and protection can no longer be over looked. Breaches may come to hit the entire
organisations’ hard. There is need for every organization to understand the local data protection rules and
regulations in various jurisdictions and ensure compliance.
Falling into the Wrong Hands and Relying on Wrong Advice
Sounds far-fetched? Unfortunately, it is not. There is a risk of falling into wrong advice for example where an
organisation is relying on advice from an identified potential team member. Cases of false requirements like
inflated travel allowances, house allowances and other benefits may arise. Other organisations’ have lost
funds sent to fictitious consultants to manage their foreign payroll. You need to carry out a proper third party
due diligence before onboarding consultants and counter check the local advice that you receive.
Conclusion
As you expand across the borders, map the risks around payroll compliance and come up with sound mitigating
measures including the possible roles of professional expertise and advice in those jurisdictions.
Expanding to East Africa ?
At MGK consulting we have the people, the network and systems for managing and processing multi- country
payroll in East Africa and also in Ethiopia . Kindly feel free to reach out to us via bkamau@mgkconsult.co.ke for
any clarifications and advice.
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