Tracing Payroll’s Evolution Across Departments, Borders

The face of payroll is changing at a dizzying pace.

Employees have greater expectations over how they receive compensation, while new employment models are adding pressure on the payroll function to move funds quickly and accurately — even if that means across borders.

The international expansion of the payroll function isn’t new, but there are signs it’s accelerating. While the ability to hire talent overseas may be easier than ever, getting them paid is not — and it’s not simply the issue of moving funds globally that can give HR managers a headache.

KarbonPay Founder Brad Price spoke to PYMNTS about why data is often at the heart of international payroll friction. Plus, he discussed other ways payroll is expanding, not only across national borders, but across the borders that have historically siloed various departments within the enterprise, too.

An International Data Inconvenience

While the act of actually moving funds across borders is often considered the most challenging aspect of global payroll, there is another element to this administrative headache that Price said can be particularly disruptive.

Considering the complexity and nuances of each jurisdiction’s labor laws, the biggest pain points often come down to the data that leads up to initiating that international transaction.

“The issue of varied rules in the tax codes for different countries, that’s really the crux of global payroll,” he said.

Typically, major payroll service providers will act as “nothing more than a repository or a database,” he said, requiring business clients to manually enter data into their platforms in various formats. That payroll service provider then sends that information to a partner overseas in a local jurisdiction, which then will process that information based on national tax rules, when finally, the information will return to the employer.

It can take days or weeks for this information to move around, Price noted, adding that because local rules change so often, variations can force employers to have to go back and correct payroll data from months ago.

“You end up with a lack of standardization across the board in terms of reliability and the accuracy and the speed with which you get your data back,” he noted. “You’ve wasted a bunch of time, and there is a huge impact on the accuracy of payroll data because things change frequently… Companies get stuck, running months of historical payrolls, just to correct them.”

When it comes to the actual movement of funds, Price said that while it can be frustrating and hampering to navigate the limitations of various payment corridors that may not support bi-directionality of transactions, the cost and reliability of cross-border payments is actually on the rise. It’s the movement and integration of regulatory, tax and other payroll-related data that can be the roadblock.

Across Department Lines

With a focus on overcoming the cross-border burdens of payroll, KarbonPay is also looking to tackle another kind of barrier that can create a disjoined and inefficient payroll process.

The company’s platform integrates with expense management portal Expensify, bridging the gap that has historically separated the two intrinsically related processes of paying wages to employees and compensating them for their work-related expenses.

“It almost boggles my mind why it hasn’t happened,” Price said of the ability to connect payroll and expense management. “When you have more and more people in your business, and there are expenses that need to come through, keeping a process in pace to get those approvals and verifications done can be difficult enough.”

By allowing payroll to cross over into expense management territory, ensuring the seamless and accurate movement of data can also help mitigate the friction of employee reimbursements that can land with talent at the same time their wages do. It’s yet another opportunity for the payroll sector to evolve as professionals become less willing to accept payment delays or errors, whether they’re waiting on payday or the processing of an expense report.

According to Price, at the heart of achieving a favorable payroll experience for all workers at home and abroad, data and automation have become critical.

“What we’ve consistently found is the more you remove human touch in terms of all the little details of payroll, the more accurate results you get,” he noted.