Global Payroll and Digitization: Why is it taking so long?

May 13, 2020 | David Daly 5 Mins read

Most of the business-critical functions in a modern multinational company have benefited from some form of digitalization over the last decade. Leadership teams have deemed digital technology a worthwhile investment that is likely to bring benefits and also one that is necessary for the business as a whole to meet objectives. It was also considered important to keep pace with both competitor progress and technology advancements- nobody wants to be late to the party and considered lacking when it comes to forward planning or digital transformation.

This resulted in solid long-term investment in key business functions like IT departments, product development, sales and marketing, human resource, legal as well as research & development. The payroll department was mysteriously overlooked when it came to significant investment or digitization- legacy technology and manual processes were not updated and aside from a few cursory improvements, things generally carried on as normal. In this article, we will take a look at some of the reasons why this occurred, and why the attitudes behind it need to change rapidly.

If it ain’t broke

The processing of global payroll was always recognized as business critical yet somehow it developed a reputation as a business function that simply managed to get done on a monthly basis. For this reason, strong investment and a major overhaul of existing technology was not deemed to be a business priority by leadership executives. Many deemed the process to be working fine and therefore took the attitude that there was no need to change a winning formula. This attitude greatly overlooked many of the challenges involved in processing payroll on a monthly basis. A basic lack of understanding of the mechanics of payroll resulted in a level of complacency and a general attitude that payroll could simply take care of itself without digitization like it always had managed to do so up till now.

This department, filled with dedicated professionals who quietly and diligently went about their jobs, ensuring multinational company employees got paid every month without fail, flew under the radar for many years. If anyone took the time to look under the hood, they would have discovered that there was a great deal of room for improvement in both the manner global payroll is delivered and the level of technology support.

Cracks Appear

Payroll departments that are responsible for processing payroll for employees based in one country may have been able to continue as normal for several years to come. However, we simply don’t live in that world anymore and payroll is now global. Ambitious company growth plans means staff all over the world who require payment.

Today, payroll departments must now service a dispersed workforce located in different countries and continents across the globe. A range of new payroll elements come into play here and things have grown in complexity: time zones, different currencies, regulation and legislation along with local country nuances have a major impact on the pay elements in each monthly pay run.

Payroll became complex and challenging, with a lot of moving parts combined with a lot more people to pay. The burden on payroll professionals has increased and assistance in the form of digitization is needed. A lack of standardized data, and cumbersome manual processes resulted in everything taking longer to process. Clear visibility and an understanding of what was happening on a global level became very difficult to achieve. In the last ten years, cracks have appeared, grown more visible and are now heading towards the point where they become critical problems. The level of work required has outgrown the current process map and in-house technology. Things need to change.

Better Support. Digital Technologies.

Payroll professionals need support- they need leadership teams to invest in technology that helps them do their job. Many of the challenges can be solved with digitization and an investment in innovative technology like Payslip- the business case is clear.

Standardization needs to be introduced to help them manage the complexity that comes with having multiple payroll countries sending them data in several different formats. Automation needs to be introduced so that there is less manual input and to help manage the risk that goes with this.

A cloud environment is needed for easier file sharing, better visibility and sharper communication tools. Reporting tools are needed to provide an overview of what is happening in each payroll country. The list goes on. The Payslip platform was built to response to all these urgent requirements.

A time to recognize and digitize

This is really about recognition and understanding; recognizing that payroll has become global and therefore more complicated- and understanding that it can no longer be delivered with the limited processes and legacy technology that many payroll professionals continue to operate under today.

It is surprising that such a business-critical function has not yet received this level of recognition, but attitudes are slowly changing. There is evidence now that leadership teams at multinationals are examining their payroll models in an effort to determine which global model best suits the needs of their business today and in the future.

To come to a conclusion here, business leaders need to first get a clear picture of where their staff are located now and what is involved in paying them. To plan for the future, they need to understand what countries they are likely to have staff located it in over the next 10 years as they work on delivering a mandate to scale into new countries for business development.

As they start to ask these questions and look at current processes, they begin to see the difficulties facing payroll professionals. The team may be unable to supply this clear picture because the reporting is not readily available. They may not be in a position to scale into new countries because they don’t have ICP relationships developed. Their technology may not support rapid scaling and handling big data. The payroll team is not in a position to be agile and responsive as it hindered by legacy tech and inflexible internal processes. This can be overcome with digitization and innovative technology.

A time to act

Once a specific global payroll model is chosen, the next logical step is to ensure that the payroll professionals using this model have all the tools and resources they need at their disposal. A modern global payroll model will struggle to be successful with legacy technology and an over reliance on manual processes. Support is needed in various forms and we have identified a few key areas where digitalization and technology needs to be introduced:

File Storage:  it is essential that modern global payroll professionals operate in a cloud-based environment with remote, anytime access to the files they need.
Automation: Manual repeatable processes need to be automated where possible and technology needs to be employed to support this. Faster processing and reduced risk levels are the reward.
Provider Management: Digital processes need to be put in place to better manage ICPs and local vendors to ensure they can deliver accurate and compliant payroll services on time.
Consolidated reporting: Advanced digital technology helps professionals to create, schedule and deliver in-depth reporting that can provide essential information around global payroll costs and key trends.
Employee Access: In 2020 employees expect to be able to access and control their individual pay related data anytime they want and in any location.

A technology partner

Digitalization serves two value added purposes: firstly, it helps payroll professionals do their jobs better in the here and now and secondly it serves to futureproof global payroll for the next decade.

Digitalization does not have to be scary and in terms of investment, most cases reveal that far greater sums have been invested in digital technologies in other areas of the business. Only a fraction of the money spent in product development, or sales enablement technology is needed to make significant improvements to global payroll processing.

Payslip’s automation and integration technology was designed to deliver the 5 key points listed above. It integrates with most HCMs and onboarding new country providers can be achieved a lot quicker than you might think.

A fully digitized global payroll department is empowered to meet the demands of modern payroll while also delivering the kind of global consolidated reporting that has become so crucial to helping leadership teams make informed strategic decisions.

A digital payroll process is capable of thriving in competitive environments instead of merely surviving or falling over the line. Payroll departments in multinationals around the world deserve to be valued in the same way other business-critical functions are. The path is clear, the technology is there, now it is a question of priorities.

 

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Using Payslip, we can manage all our payrolls across nine in-country vendors on one platform. When the global Covid-19 pandemic arose, it was not an issue from a payroll perspective, and critically getting everyone paid. The Payslip platform enabled continuity for our international payroll service including the fast and seamless implementation of the Payslip Employment Self Service during this time.

Colin Smith

Payroll Manager, LogMeIn

With business and employee growth rates of above 50%, we rely on our vendors to deliver on time, every time. Payslip’s workflow automation, enables Phorest to manage our payroll provider process – data driven, real time and transparent. Payslip saves us time so we can focus on our business growth.

Ana Kelly

International Payroll Manager, Phorest