Global payroll is software that pays a company's employees in many countries from one system, following each country's tax and labour rules, with a licensed payment service that sends the salaries in local currency. It is for companies that already have their own registered company in each of those countries. A company without one uses an employer of record (EOR) instead, which employs the worker on the company's behalf.
Without global payroll, a company with staff in five countries usually has five payroll providers. Each one uses a different system, a different calendar and a different report. The finance team then spends days combining five sets of numbers into one. Global payroll replaces this with one system and one monthly calendar.
The hard part is that every country calculates pay differently. In India, payroll deducts provident fund and TDS, as a HRIS and payroll system does. In the United Kingdom, it deducts income tax through PAYE (pay as you earn) and National Insurance, and pays into a workplace pension. In the United Arab Emirates there is no personal income tax. But a company registered with the UAE's labour ministry must pay salaries through the Wage Protection System (WPS). This is an official system through which the government checks that every worker is paid on time. The global payroll provider keeps these rules up to date for each country, often with partner firms in that country.
Imagine a software company in Chennai with 210 staff in India. It also has two small subsidiaries: one in Dubai with 14 staff, and one in London with 9 staff. On the 20th of each month, HR enters every change in one place: new joiners, leavers, salary changes and unpaid leave. The system then calculates three payrolls. The Indian payroll comes to ₹1.9 crore, the UAE payroll to 320,000 dirhams and the UK payroll to £52,000. Each subsidiary pays its own payroll from its own bank account. The provider's licensed payment service collects the money and pays each employee in rupees, dirhams or pounds. In the UAE, it pays through the WPS. Each employee receives a payslip in the format that their country requires.
The company's finance team sees one report. At a rate of about ₹26 a dirham and ₹127 a pound, the month's total cost is about ₹3.39 crore. The report shows that cost split by country and by department.
The salaries are moved by a cross-border payout network or a local payouts service. The rate used to convert the money matters, because a hidden margin on the rate, called a forex markup, raises the cost every month.