Taking a Proactive Approach to Payroll Compliance

The challenge of protecting company, employee, and consumer data is an evolving, ever-present factor in global business today. For large enterprises and small multinationals alike, maintaining compliance with existing and incoming legislation across operations means staying on top of changing global requirements while adapting processes as needed — a task that is much easier said than done.

While it’s true that continuing legislative changes complicate compliance activities, the evolving nature of data itself may be the biggest challenge, particularly in functions like payroll and human resources. Employee data is sensitive, valuable, and essential to payroll processing, but the specific information required for payroll can vary greatly from country to country. Add in the fact that employee data can change at any moment (if a worker moves or gets married, for example), and that information becomes one of the most dynamic unknowns in your organization.

Yet, with the right forethought and planning, companies can prepare for the uncertain compliance future. Taking a proactive approach to compliance requires examining internal and third-party processes to minimize risk going forward. Although that may sound like a major undertaking, compared to the potential penalties of non-compliance or, worse, a data breach, it is one of the best moves a company can make now.

Review Internal Processes

By this point, it should be safe to assume that any organization operating across country borders has adjusted processes around data collection and management to meet the security requirements of those countries. However, a proactive compliance strategy goes a step further.

To stay ahead of data and regulatory changes, employers must adopt systems and processes that ease data management, as well as educate employees about their role in maintaining accurate, up-to-date information. The latest cloud-based systems for human capital management (HCM) help both initiatives by using central, secure databases for sensitive employee data and providing self-service tools that enable employees to check and update their information directly. This minimizes (if not eliminates) correspondence that references or contains personal information, while ensuring only the most up-to-date information is used for HR or payroll processing.

Examine Vendor Policies

Even organizations who outsource payroll to an external provider have important obligations to meet as Data Controller and employer when it comes to protecting employee information. These must be accounted for in any service agreement with a third party, with consideration for stakeholders across multiple functions, from governance to IT.

In addition to a demonstrable track record of delivering compliant payroll services, a provider should have a robust internal control environment and detail how they will receive, process, and retain data relating to employees. This data includes their direct identifiers and dependent information, as well as details of their bank accounts, religious affiliations, medical conditions and more, as relevant for statutory entitlements and deductions. If you’re planning to integrate the payroll system with a HCM or Finance solution, the provider should be able to demonstrate accredited integration capabilities for your chosen systems.

Working with carefully selected third parties can help alleviate the challenges of navigating regulatory changes — for example, your payroll provider should be able to keep your organization well informed of relevant changes and any action needed to remain compliant. Additionally, companies should ensure their vendor has a clearly documented and embedded process for timely notification of any potential data compromise so that proactive steps can be taken to meet the organization’s legal obligations to both employees and supervisory authorities.

Minimize Data Risk

Managing the mass of employee-specific data that has been gathered and retained can pose problems for organizations aiming to comply with the European Union’s General Data Protection Regulation (GDPR) or other international legislation, such as the California Consumer Privacy Act (CCPA) and others.

Many such regulations stipulate that an employer as a data controller must hold the information for as long as it is relevant but no longer. Additionally, there may be specific protections around the manner in which data is stored, as well as differing obligations around the ‘right to be forgotten’ for both employees and consumers.

An important step in proactively managing compliance requirements is to determine which data is essential for your organization to collect and store in the first place. Here is where an experienced payroll provider can be invaluable, as local payroll information requirements can vary significantly between countries. By minimizing the employee information they collect and store in the first place to just what is required, companies can reduce the risk of sensitive data being mismanaged.

Anticipate Future Change

Regulatory requirements around the collection, storage, and processing of personal information end employee data will continue to evolve, as more countries and localities introduce and revise legislation. Consequently, ongoing compliance in global payroll is going to rely on companies’ readiness for change and ability to adapt policies and processes as needed.

By taking a proactive approach to educating employees on their rights and responsibilities, employers can set expectations and improve data management from the start. Early engagement with responsible third-party providers can help alleviate payroll challenges and meet statutory requirements, while ensuring a positive payroll experience for employees throughout their employment. Together, these steps will enable global companies to continue delivering timely, accurate, compliant payroll, whatever changes may come.


This blog was written for CloudPay, a global SaaS technology provider. View the original here.

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