Things to consider when choosing an ICP
An In-Country-Provider or ICP is one of the key participants in the payroll eco-system. In this article, we will examine who they are, what they do and some key considerations you need to explore before entering into a partnership to deliver global payroll for your organization.
In the current business climate, a genuinely reliable ICP with strong business continuity plans is needed to navigate some of the challenges Covid-19 is presenting.
An ICP is a local payroll vendor who provides payroll services in a country that a business wants to expand into. This business needs to pay staff in this country and needs some local expertise when it comes to navigating any tax, accounting, compliance or regulatory nuances associated with that country.
The ICP will understand the local laws and have experience processing payroll in that country so partnering with them ensures employees are paid correctly and on time. They are usually capable of taking on some, or all, of the tasks associated with calculating, processing and reporting payroll. Many multinational employers choose to source individual ICPs and have direct access to the teams who are paying their staff and managing their employee data. This involves a detailed search for reputable ICPs with proven payroll management experience, local knowledge and business continuity credentials.
The employer is essentially looking to outsource payroll for a specific country and leverage the ICP’s local knowledge and expertise. This would make them a good fit for companies looking to expand into several countries where they have no current contacts or expert relationships. Companies with ambitious expansion plans need to look at their options in terms of future proofing their global payroll management. Employers also want assurances around the ICP’s ability to function in times of challenge and even emergency- expectations around global payroll continuity have increased dramatically in recent weeks due to the impact of Coronavirus.
Multinational companies may opt to enter into agreements directly with ICPs and potentially have a different provider in each country. This would give them direct access to the local expertise they require but would mean a lot of moving parts to manage and likely be a very expensive approach. Or they could look at a global payroll processor option – in this scenario, you have one outsourced solution under one contract where you use a single provider and this provider has a separate relationship with a number of in-country providers. This may reduce the management complexity but may come at a cost -you would not be able to select or have direct contact with the ICP as the global processor would choose the ICP and manage the relationship.
Getting it right
It’s a big decision and there are several factors involved. Recent global events have highlighted the need for reliability and consistency of service delivery. Here are some key questions a business needs to ask when looking for a payroll solution:
- What is the picture at present- do you have the people, processes, and technologies to implement a new global payroll strategy with an ICP or global processor?
- What are the priorities: consolidated reporting, ease of management, cost effectiveness, centralized control? What services do you need? Has business continuity become the top need all of a sudden?
- What kind of delivery model works best for your business: centralized, regional or in-country- the kind of business data requests coming from non-payroll teams may influence this decision?
- Costs- do you have the full picture around fees, training costs, local fees, disaster recovery charges etc
- Data security and compliance: can an ICP give assurances around how data is stored and managed? Can this data be accessed remotely during business continuity?
- What is their business continuity plan? Are the capable of delivering payroll remotely, replacing absent resources and keeping communication lines open?
- Can the vendor handle integrations with external or internal or third-party systems- how sophisticated or innovative is their technology?
- How tight are any Service Level Agreements- do they conform to industry best practice; do they inspire confidence, ie will they hold firm under crisis situations like Covid-19? Are roles and responsibilities clear?
Best practice when partnering with an ICP
A good ICP may process payroll in an effective and timely manner but modern payroll is about a lot more than bank transfers which keep employees paid and happy.
There are some important conversations that you can have with your provider at the outset or on an ongoing basis that can help you get the most out of this important partnership. Let’s take a look at some of the things it helps to get really clear on when choosing the ICP model.
You may gain with a country specific approach that covers essential compliance obligations but lose out on central control, clarity and consolidated reporting. Talk to your ICP about how they can help you with comprehensive reporting along with some visibility around their payroll processing. This will help you feel more in control and avoid a fragmented and disjointed payroll function where business leaders are unable to get a clear view on costs and business value. It is particularly important to get this right when several ICPs are spread across a number of different countries. Covid-19 will sharply focus the attention of C-suite leadership and they will likely demand far more comprehensive and regular reporting as they look to make decisions, adjust budgets and develop strategy on an almost daily basis.
You should always be having ongoing conversations about data and receiving it in a format that allows for easier reporting. Non-standard data will always be problematic when it comes to the kind of global consolidated reporting you want to extract from your payroll data. If you have a number of ICPs in different locations- it is almost certain that they will deliver data in different formats which will be incompatible with your central reporting system. This makes consolidated reporting time consuming and difficult to achieve – anyone looking for high level visibility and clarity around costs will struggle to get it. Talk to your ICPs to see if they have a way to deliver gross to net calculations and general ledger files in some form of standardized way so that payroll teams do not need to do additional work to ensure that the files are capable of delivering the reporting statistics required. This will help you avoid a situation in which your payroll professionals find themselves unable to respond in a timely manner to requests from leadership teams for specific data insight and reporting. Raise the issue of contingency plans and the ICP’s ability to deliver remotely in the event that dispersed staff are working from home, as is common across the world right now due to Covid-19.
Processing payroll rarely gets done quickly but adding cross border, specific currencies and time zone issues to the mix can make it even more time consuming. Get clear on SLAs and deadlines around payroll processing in order to manage expectations. Determine if they are capable of holding to these deadlines during business continuity processes. See where there is scope for greater speed and make sure you are clear on time zone differences and country holidays. All businesses understand that employees must get paid on time- however, they will always want to look at ways to introduce efficiencies that saves time and money. Leadership teams are always keen to find a happy medium that delivers efficient cost-effective payroll while also accounting for local country nuances and compliance obligations.
It is likely that a form of innovative technology will be needed to bridge the gap here, so ask about integrations or consider a technology partner who may be able to help with this. This technology partner may be crucial in the quick on-boarding of a new or replacement ICP during business continuity, should your current ICP be unable to meet requirements.
Check if the ICP offers a way to help employees access their own data such as tax information and pay slips. An already burdened payroll team at head office will appreciate it if they do not have to handle employee data requests from a range of different countries.
It’s a serious business
Covid-19 has focused minds on the here and now- businesses everywhere are thinking about survival and the reliability of their chosen partners will play a key role. It pays to get this decision right- a reputable ICP can be very useful, but a careful examination of your global payroll needs may reveal that you require the ICP to deliver a few more services than normal. Services where local compliance is met along with consolidated reporting, standardized data, security, governance and remote service delivery. It may not be easy to achieve all this but early conversations around service delivery, business continuity and technology will help give you a clearer picture. If they are unable to do this, you will find that a payroll technology partner can deliver these additional services while allowing you to maintain the relationship with the ICP. Operating global payroll under challenging circumstances requires big decisions and effective action- making the payroll business continuity function as efficient as possible should be at the top of any priority list.
Payslip partner with ICPs around the world to help multinational employers standardize their global payroll operations. If you need to urgently replace or switch provider contact our Covid-19 Emergency Set up team today.