Global compliance is getting more complicated, particularly for international businesses up against changing legislation and the long-term consequences of Covid-19. As the business landscape evolves, keeping track of tax and payroll legislation in numerous jurisdictions can often stop business operations in their tracks if not dealt with timely and accurately.
Yet, compliance can become an opportunity rather than a threat by viewing it as an integral element of good business practice. Mairéad Divilly, lead partner outsourcing and compliance services at Mazars, agrees that complexity is a major issue but suggests several steps that companies can take to shift the dial so that compliance becomes a value creator.
Divilly suggests the first step is for companies to assess both the level of resources and skills which is dedicated to their compliance activities, as well as the quality of deliverables and ease of access to external professional support.
“How a company is supported on its global journey is vital. Having the one point of contact who becomes a trusted partner that understands the company strategy and can act as a sounding board on compliance issues across various jurisdictions is extremely beneficial. In this regard, access to a global network of compliance experts strengthens the compliance function. This approach can add more value and less administrative burden than having multiple tax and payroll compliance providers without necessarily the assurance of being totally compliant,” she says.
Jennifer O’Neill, director of payroll and outsourcing services at Mazars, also points to the changing shape of the post-Covid workplace. She explains that the success of working from home has identified an opportunity for some people to see ‘home’ as anywhere in the world. From a company perspective, it also opens up a whole new pool of talent.
“The post-Covid employment landscape has opened up an opportunity for companies to have access to a global employment pool of employees working from their home country or indeed any country from which they wish to work. While this is good from a talent acquisition perspective, it does require a thorough knowledge of global payroll tax issues and a compliance system that is built to cope with multiple tax and residency regimes,” warns O’Neill.
Divilly agrees that widening the global talent pool has attractions but that the cost also needs to be considered. “Employer contributions can differ substantially between jurisdictions. For example, in Ireland, the employer social security contribution levied on gross salaries is 11.05 per cent, whereas, in other jurisdictions, the employer contribution level for various benefits can be significantly higher. So, companies need to have this information at their fingertips, particularly during a global expansion phase,” she explains.
Technology and innovation are other areas that can help shift compliance from threat to opportunity. In the past, managing a global workforce meant receiving payroll reports from every country each in different formats. While some companies still operate this way, O’Neill believes that technology is a game-changer for reporting.
“Companies struggle with international payroll reporting and compliance, so we provide our international clients with a global payroll platform which allows full visibility of payroll across all jurisdictions. The system also facilitates a drill down by country, by cost centre with analysis across all salary elements and deductions. Clients find the system very easy to navigate and, compliance is assured, and the administrative burden is significantly reduced,” explains O’Neill.
Divilly also believes that new accounting and tax compliance technology will drive global compliance in the next five years but expertise and knowledge in global compliance are critical components in the engine room of business expansion. “Our global reporting system has a compliance dashboard which acts as a traffic light system to monitor compliance deadlines. It also tracks key performance indicators and provides uniformity of reporting for accounting and management purposes, so it is an information sharing and communications tool as well as a platform for compliance management and tracking and data analytics. But the technology tool cannot function without the input of global expert knowledge across jurisdictions. That international knowledge and expertise in payroll, tax and accounting compliance requirements are the jewels in the global reporting system’s crown,” she says.
There are also reputational considerations that make good compliance hygiene an integral element of business growth plans. In various jurisdictions, greater scrutiny from tax authorities can trigger fines, non-compliance can lead to internal disciplinary actions and possibly criminal proceedings. Plus, negative media coverage particularly through social media can significantly impair a company’s reputation. According to the Mazars report on Global Compliance, compliance leaders know the significant risks of falling short: 77 per cent say their business has faced accounting and tax compliance-related challenges somewhere in the world during the last five years.
“There’s the obvious financial cost of non-compliance, but the blow to a company’s reputation can exacerbate any financial losses. As well as loss of confidence from consumers, there are now stakeholders who use compliance as a key investment metric to meet their sustainability targets as well as the United Nation’s Social Development Goals (SDGs) relating to good business practice,” says Divilly.
O’Neill echoes the idea that compliance can be a force for good. “Employees are a company’s biggest asset and paying salaries and filing taxes on time and correctly shows you care as a company. Compliance can be a vital way of enhancing staff loyalty and satisfaction, yet it’s often overlooked,” she explains.
Juggling too many compliance balls in the air does not have to be a feature of international business growth
Another long-term financial benefit of a clean compliance record is the ability to command a premium price for the business on its disposal. It is also beneficial in terms of attracting investment into the business.
“Without doubt, a poor compliance record can negatively impact the value of a business, and even cause a deal to collapse at a late stage when significant costs have been incurred,” explains Divilly.
These are points not lost on company compliance leaders. The opportunity to create trust, improve confidence and build a good reputation is a significant compliance win for 58 per cent of compliance leaders, according to the Mazars report. While this still leaves over 40 per cent of companies treating compliance as an obligation rather than an opportunity, it does suggest that the perception of compliance’s impact on the business model is beginning to change.
At the same time, companies need to ensure that perception doesn’t stray too far from reality, says Divilly. “Our report also says that 82 per cent of compliance leaders not only thought they were currently compliant, but that they were confident they would still be compliant in five years. Unfortunately, in our experience, consistency is not a known attribute of global compliance: the compliance landscape is fast-moving and ever-changing, requiring an army of experts to keep abreast of legislation,” she says.
“Juggling too many compliance balls in the air does not have to be a feature of international business growth. It’s all about forging partnerships with the right expertise and knowledge to meet your future business goals and help turn compliance into an opportunity,” concludes Divilly.
Unlocking trust: why global compliance is on the business agenda
Compliance has long been a cornerstone of good business practice, but it can still be viewed as an obligation to be met rather than a driver of value. Mazars 2021 global compliance study 'Unlocking trust: why global compliance is on the business agenda' contains our survey findings and includes specialist insight from Mazars partners.
The study reveals that when global compliance is done well, it builds investor confidence, increases client and customer trust, and shapes a positive reputation with the outside world. Far more than ticking a box, compliance is treated as a source of opportunity.
At the same time, compliance is getting harder to manage; compliance is becoming more complex, legislation is changing fast, and Covid-19 continues to cause disruption. To keep up with developments, leaders are planning to boost investment in technology and the skills of their team.
[ ‘Unlocking trust: why global compliance is on the business agenda’Opens in new window ]