Payroll has always been a complex business process.

There have always been labor laws that payroll must meet, payments to be reconciled and pressures to ensure payments get made on time every time. In many organizations, the global payroll manager handles those responsibilities via siloed processes.

But several factors are converging right now that make payroll an executive-level concern. Those factors include:

• • Digital transformation. As more and more business units integrate, the data their processes generate have cross-departmental applications. Payroll, most companies’ biggest cost, produces useful data for several other business units.
  • Employee remote work preferences. Most workers want the flexibility to work from home because they know, empirically, that they can still be productive outside of the office. And if their employers don’t provide that option, workers can find an employer who will.
  • The transformation of global organizational charts. International businesses don’t have clear hierarchies of employees. They have ecosystems of employees and contractors in various modes of work.

Here’s how the C-suite can create strategies for managing this complexity — then harness that complexity to drive future business goals.

What a global company’s talent ecosystem looks like

Very few companies today have workforces that map cleanly onto a traditional top-down org chart. Instead, their workforces are a mix of:

• • Permanent staff. These are full-time employees who work remotely, on-site and/or in a hybrid environment.
  • Contractors and contingent workers. These are often fully remote workers who get treated differently from a payroll perspective.
  • Employers of record. These are the legal entities that hire and pay local employees when an organization wants to hire workers in another country. These folks might work remotely, or they could report to a company office at least some of the time.

The specific composition of each workforce will vary from company to company, but it’s clear that contingent workers and overseas employees are growing in their representation. In August 2022, for example, McKinsey reported that roughly one-third of working Americans did some kind of contract work. In other parts of the world, contingent workforces are even larger.

This suggests that it would be unsustainable to treat payroll as a matter for permanent staff, and to handle contractors and overseas teams as exceptions or special cases. Instead, global companies need a unified approach to payroll that accounts for all types of talent.

That complexity creates many risks at the payroll level

Creating that unified approach takes work.

After all, salaried employees and contract workers have different protections from country to country. There are mandatory tax filings to consider, too, not to mention currency conversions, different definitions of the fiscal year, and what constitutes a competitive total reward package in each country. Then there are the protections in place to safeguard employee data in each country, such as the GDPR in the European Union.

That means hiring across borders exposes an organization to potential compliance risks, financial risks, cybersecurity risks and operational inefficiency risks.

Most global employers with payroll obligations in 10-plus countries protect against these risks by cobbling together sometimes-overlapping payroll services. They will use a mix of payroll services providers and in-country vendors as needed.

But cobbled-together payroll processes are too hard to manage and therefore too hard to optimize. Doing this puts the payroll team in a position of just barely covering their responsibilities in time for payday, then starting all over again the next month.

This is why we advise global businesses to adopt a global payroll control framework. This lets businesses move beyond just-in-time payroll, manage disparate payroll processes effectively and gain a wider perspective that drives executive decision-making.

Beyond payroll risk management: 3 tips for executive teams

The future of work will involve managing mixes of worker types — permanent, contingent, employers of record — and being prepared to hire any and all types during moments of growth.

This is where payroll begins to overlap significantly with workforce planning, talent management, IT and the overall company mission. These begin to become inseparable issues.

Here are three things executive teams can do to plan for that future:

Understand changing attitudes about where and how people work

Mercer’s Global Talent Trends 2022–2023 study underscores an important point about post-pandemic work: People are choosing what organizations they want to work with, not for.

This is a key distinction because:

• • It reflects the ecosystem design of most companies’ talent networks.
  • It hints at the freedom people feel they have to change jobs if they’re unsatisfied with the one they have.

Organizations that understand this “treat everyone in their talent ecosystem as a potential partner, either now or in the future,” Mercer’s team writes. “As a result, they are embracing different work contracts (gig, variable/seasonal, shared, parttime, full-time) and work models (onsite, hybrid, remote) to their advantage.”

Mercer warns that some organizations might feel compelled to cut corners and turn their remote employees into contingent workers. Their data suggests workers in certain regions — Europe specifically — will balk at that idea.

Instead, it’s worth considering what the Mercer study found about high-growth companies and how they treated employees in the last few years:

• • More than one-third offered a four-day workweek.
  • 51 percent “asked employees where they want to work and how they work best.”
  • Even more, 54 percent, made flexibility a part of the company’s culture norms.

In other words, there’s a strong correlation between high growth and recognition of the new social contract that employees are creating with their employers.

Those companies could ensure an advantage into the future by retaining top performers, too. “These days candidates are looking for companies that will value their whole selves and provide support in achieving work-life balance,” says Jennifer Shappley, VP of global talent acquisition at LinkedIn.

“As talent leaders, we need to be prepared to speak to candidates about what our organizations value and how we support our employees. And this isn’t just a hiring strategy – it’s key to ensuring we retain our best talent, as well.”

Embrace the opportunities that global workforces offer

As companies take steps to shore up the talent they have, they’re also able to reach new talent pools around the world.

The team at Globalization-Partners cites this as a top trend in hiring right now. Specifically, they point to emerging talent hubs such as India, South Africa, Indonesia and Colombia — all places “likely [to] experience a talent surplus and significant economic growth in the next decade” — as sources of talent.

Whether that means hiring permanent staff or building out networks of contingent workers is a strategy question for company executives. The tools are in place to do either, but payroll can only keep pace if the right tech is in place to support it.

Align executives to a shared vision of company growth

This is where cross-departmental collaboration becomes important.

David Jones, technology portfolio VP at IDA Ireland, gives an example in Forbes of how a CFO and CTO can work together to tap into global talent pools.

“A reflective CFO—one who brings a worldly disposition and the emotional intelligence to strike an effective talent partnership with the CTO—can help to enthuse the best international technology candidates,” Jones writes.

In this case, the CFO would support a clear need from the CTO (i.e. “We need the best tech talent we can find”) not by saying, “OK, but how do we afford that?” but by asking “OK, where can we find that talent?”

Payroll data powers those conversations

In the example above, the CFO and CTO could go to the global payroll manager and ask for a report on country-by-country labor costs. That would give them an idea of where to focus talent acquisition, which would then loop in HR.

From there, those teams could collaborate on a strategy for expanding the company’s tech talent according to:

• • Where the best talent can be found.
  • What the company can do to attract that talent.
  • What an optimal mix of employment types (full-time or part-time salary, remote or hybrid, freelance, etc.) might look like.
  • What future talent gaps the company might need to fill.

We built the Payslip global payroll control platform to give payroll managers instant access to the payroll data that can help support such decision-making. Our platform was built with the complexity described above in mind. It helps executives turn complexity and risk into clarity and foresight.

To learn more, take a look at our Payslip Global Reporter’s capabilities.

For more information about our Global Payroll Control Platform contact us today.