Expense Management and Payments

When companies have a global reach, whether dealing with assignees, local employees or international business travellers, sending monies around the world is unavoidable. So, for those involved in expense management, payment or payroll processes, delivery of payments must be accurate and timely, but at the same time, it is vital that organisations are compliant, cost-effective, and in control of their funds. And while payroll is usually the substantial part of company costs, within the Global Mobility Environment, the assignment package, benefit-in-kind (BIK), taxes, allowances and expenses often equal or even surpass this. For assignees and business travellers, what is paid, how, and when is of the greatest interest.

That payments have multiple parts and draw from different areas of expertise such as tax, systems and policy constraints and payment methodology, becomes significant in this context. Within the marketplace, companies are challenged by multiple coordinators and suppliers using separate companies for tax, and different payment organisations or the company finance team for a multitude of payments.

In trying to make sense of this, there is often little in the way of tailored systems to support the company or employees. Similarly, expenses are often carried out by a separate part of the organisation, or outsourced, and seldom fully integrated with Payroll.

Behind the Curtain Providers

The issue here is that many operate using what we term ‘behind the curtain’ providers. We all remember the famous scene from The Wizard of Oz (1939), in which the spectacle and grandeur of the all-powerful wizard is revealed to be the work of one quite normal man, frantically pulling levers and pressing buttons while hidden away behind a curtain nearby. Many providers operate like this: pulling levers involving tax organisations, expense policy, and manual reporting processes which aren’t linked to payment systems, which are, in turn, run by money transfer organisations.

But the complexity of the data required, the breadth and diversity of country rules, and the requirement for a fast turnaround leads to high error rates and increased monetary costs, let alone the compliance risks. Some organisations outsource payroll while retaining expense management, without connecting the two, leading to compliance issues. Others have added this to payroll, grossing up and paying unnecessary tax in countries where they are unlikely to get that tax back. Pull back the curtain and things are far less effective or impressive than they first appear.

Considerations for All Companies

But it is easy to find fault, especially in a complex and multi-layered world. Therefore, we offer the following key considerations to all companies that have, or move, people around the world. They are designed to ensure your processes are compliant and cost-effective, while reducing error-rates:

1

Define a global process which includes: compliance in the different countries involved, taxation, and protected systems and data in line with the company’s and individual’s status.


2

Ensure that the process is simple for all: transparent, fully-auditable (with non-repudiation protocols), and tailored to your company strategy.


3

Integrate the BIK data with payroll. The payments can be made separately but monthly payroll should include the calculation of all taxes.


4

Confirm the most cost-effective tax treatment of the expenses and method of payment. For example, if payments are made directly rather than through payroll, they may not incur tax in some countries. Also, remember that money transfer companies make their money through FX.


5

Record and track all your international employees and payments into a singular, consolidated system of record.


6

Capture Taxable Benefit Information into a policy, so that assignees are aware of any taxation and there are no ‘surprises’.


7

Produce a feedback loop to provide information to both Finance and HR and update their respective systems.


8

Create a simple manual, ideally displayed within the Company Intranet or Web Portal, so all the contributing parties are aware of their responsibilities, the approach, and the importance of this process.

If you have found this information useful and would like to know more, or feel that EMS can help you with your Expense Management, Global Payroll, or Global Mobility systems and processes, contact us today, and remember to subscribe to our newsletter.