The Coronavirus pandemic is already seeing many tech firms direct their employees to work from home. Alphabet Inc. (NASDAQ:GOOGL), Amazon.com. Inc (NASDAQ:AMZN),
Twitter Inc, (NYSE:TWTR), and Facebook Inc.(NASDAQ:FB) are some of the tech
firms that have recommended or mandated working from home. Improvements in communication and collaboration workplace tools such as Zoom Video Communications, Inc. (NASDAQ:ZM)
and Slack Technologies, Inc. (NYSE:WORK) has made it easier for firms to embrace remote work.
Remote work is rapidly becoming a new standard illustrated by the trading price of Zoom’s stock having gained more than 18% over the last month, whereas most stocks in the general U.S. market have posted double digit losses as seen in the decline in the
S&P 500 and NASDAQ (see chart below).
Outside of tech, many organizations are starting to explore the possibility of remote work. For instance, Federal employees may soon be asked to
start working remotely. More importantly, Coronavirus has opened the proverbial Pandora’s box about the future of work, and it could be the start of a permanent shift towards remote work.
The future of work is remote and global
Matt Mullenweg, CEO of WordPress,
observes that Coronavirus presents the world with an opportunity to experiment more with remote work. In his words, “this is not how I envisioned the distributed work revolution taking hold… but it might be a chance for a great reset in terms of how we
Interestingly, as the workplace becomes increasingly remote, firms will start to hire ‘globally instead of ‘nationally. For one, its often cheaper to hire talents in other countries. It’s also easier to scale globally by using talents in target markets
than sending someone into a new market from HQ. More importantly, diversity often provides businesses with different perspectives that could be synthesized for competitive advantages.
However, for many companies who are suddenly thrust into the era of globalized team, making the transition from a domestic payroll managed via spreadsheets to a global payroll system requires some work.
Challenges of paying workers across borders
According to a
BlueWeaveConsulting report, the global payroll and HR solutions market is growing at a CAGR of 9.45% to be worth $43 billion by 2026. However, managing a global workforce remotely throws up several complex challenges, perhaps the biggest one of which is
that of managing payroll.
Companies with cross-border employees need to consider their financial infrastructure, currency headwinds and jurisdictional regulations in managing their payroll. Below are two of the biggest challenges that employers are likely to face with an increasingly
As remote work becomes the new normal it will become increasingly harder for companies that hire global talents to classify them as independent contractors. In many jurisdictions, people who have definite opening and closing times are regarded as employees.
Therefore, companies must start thinking about how their global payroll systems will account for the mandatory and non-mandatory benefits due to employees in different countries.
Alex Margolin from Papaya Global observes that a global HR/payroll solution must include a system for “calculating costs
to the employers, which include employment taxes, a share of social security costs, and assorted monthly benefits – many of which vary from one employee to the next.”
It will also have to have checks and balances and oversight functions to spot non-compliance, payroll errors, and to optimize payroll data with business intelligence and analytics.
Optimizing for on-time salary payments
When companies hire global talent, they are typically very selective optimizing for expertise, experience, culture fit, diligence, and dependability among other characteristics. Similarly, global talents also tend to be selective, and a top criteria is the
peace of mind and security that they will receive their salary on time.
Hence, employers hiring global talents must pay special attention to the quality of their payroll data ensuring the quick settlement of their payroll cycles. The propagation of payroll data that meets the needs of a global workforce might require an organizational
overhaul in relation to data management; it is still hard to predict how well organizations will be willing to embrace such changes going forward.
Future of Workforce Report reports that demographics shift will continue to be in favor of remote work. 69% of millennial and Gen Z workers were willing to allow their teams work remotely in 2019 even before Coronavirus struck. According to the report,
by 2028, 73% of employees will have full-time remote workers on their teams.
The speed of processing payroll will be one of the critical factors that will determine how fast remote work goes mainstream with companies hiring global talents as standard practice or not. Unfortunately, many companies still rely on traditional banking
infrastructure to facilitate the process of moving money from Point A to Point B. It would be interesting to see how the digital payments industry rise to the occasion to power a globalized world with smarter payroll solutions.