Global Payroll - Industry Insight Series

 Today, global payroll leaders are responsible for managing payroll operations across the globe and developing a business model that meets today’s needs and is scalable for the future.

As companies grow internationally, Global Payroll needs to be an

(a) Enabler for company growth and expansion, and a

(b) Strategic Contributor to the Leadership Team for resource cost data points, trends and insights.

To meet these Leadership and Strategic needs, Global payroll leaders need to have a global payroll system that is consolidated and global in nature. Realistically, most international payroll teams are faced with a number of challenges from using a multitude of payroll vendors, lack of standard processes, not having a single system of record, lack of visibility and consolidated reporting.

Traditionally, for many international businesses, there has only been one primary goal – to deliver timely and accurate payroll while ensuring compliance with employment and taxation agencies. Over recent years, this global objective has grown. Global payroll departments are under continuing pressure to manage and reduce their costs and find it difficult to truly understand what their global payroll looks like and what it costs their organization due to lack of consolidated reporting.

In this article, we consider the additional requirements that Global Payroll Leaders have in the digital global environment in which we operate. These enhanced requirements from consolidated reporting to governance to data protection is over and beyond country payroll delivery and has progressed into strategic global payroll management.

To deliver this, global payroll leaders standardize global payroll processes to build out a cohesive global payroll system. The delivery of a truly Global Payroll System can serve current operational and strategic needs and offer increased value by the Global Payroll Team to deliver the future growth business plan.

 

What does it mean to standardize global payroll processes?

 

Payroll has similar data exchange and authorization steps across most companies around the world. Each month, year after year, global payroll teams and their outsourcing partners perform very similar processes. These processes can vary due to the provider or the country-by-country level requirements. Notwithstanding variations by provider or country, repeatable actions and common parts can be automated.

A standardized global payroll is possible and can unlock the great value of payroll data. The key is to standardize processes not just at the country level, but across the entire global footprint.

 

Benefits of standardizing practices

 

Standardizing processes at a global level is not a simple, short-term initiative, and requires specific review and planning. With that planning, standardization delivers many benefits across the business. Optimizing and automating payroll increases efficiency, reduces costs and make the company’s regional or local teams more efficient.

Some benefits of standardization are as follows:

  • Improves clarity
  • Guarantees quality
  • Promotes productivity
  • Boosts employee morale
  • Perfects customer service

Global payroll leaders often find that their teams are spending time on tasks that can be delivered in a different and easier way. With global payroll standardization, best practices can be easily identified and applied across all countries. Standardization of process provides for back up support when needed.

Employees’ frustration from providing information over and over again to individual local offices can be easily avoided.

Visibility of global payroll is critical for a successful global payroll function. Standardized reporting provides audit trails, detailed lists of action completed by whom and when, ability for comparisons and management of work delivery for multiple pay runs at a given time. Comprehensive payroll reports can provide the necessary overview of the entire global payroll process and provide valuable data to help the senior management to make decisions and plan for future growth and expansion.

To deliver standardized global payroll processes across payroll providers and countries, global payroll leaders usually choose between two Global Payroll Models:

1) Vendor Led Models – Aggregator / BPO / The Managed Services Provider – The first option chosen is where they outsource the global payroll process, including in-country payroll processing and compliance to a single payroll services provider. External providers have invested in some levels of technology in recent years to provide data exchange tool or some limited reporting. When adopting a Vendor Led Model, the employer has to adopt the Vendor Led Global Payroll Process. The services provider designs the data set and reporting and dictates the standardized process to be adopted – more on this later. The advantage of having one central contract is offset often by limited flexibility for employer in system design.

2) Employer Centric Model – The global employer decides and designs the global payroll processes and system that suits its corporate structure and growth plan. It chooses a payroll provider network to deliver its payroll services by region/ country and a global payroll technology that can integrate all internal resources, payroll providers and data into a cohesive standardized Global Payroll Eco-System that is aligned exactly to its current and future corporate strategy. This model involves more planning by the employer and therewith offers maximum customization and flexibility to meet their own corporate preferences and business process and integration needs.

As the Vendor Led Model is the more traditional established model in the last 20+ years, more research has been conducted on it. Specifically research on payroll services available and Managed Services take-up and the actual drivers and objectives underpinning Global Payroll Leaders actions have been conducted by Gartner and Nelson Hall respectively.

The recently published Market Guide for Multi-Country Payroll Solutions by Gartner concludes that ‘most large global enterprises still need a combination of different vendors and methods to run a truly payroll operation‘.

Therefore while we can learn from the Managed Services research about the Vendor Led Model, we can also extrapolate that the drivers for standardization toward a single cohesive Global Payroll System do not always lead to a single Vendor Led Model. Indeed we see increased reporting and governance requirements, therewith feeding the increasing demand and adoption by global employers of the Employer Centric Model.

 

Global Payroll System & Standardization Drivers – Key Learnings

According to Nelson Hall Market trends report, GPMI Webinar – Exclusive Overview of the Global Payroll Services Marketplace, 29th April 2019 mid market organizations are the highest adopter of external managed payroll services.

While we can take it that in-country payroll calculation and compliance services are required as a given, we see from our Payslip conversations with the market, an increasing and consistent need for technology enabled delivery of global payroll and management of the data, stakeholders and governance. This market voice was echoed strongly in the Nelson-Hall research as they list the evolving needs Global Payroll Teams now have:

  • The demand for Payroll Transformation in line with broader digital transformation priorities – Payroll transformation has become a priority as many buyers have moved to (or selected) a cloud HCM solution (like Workday, SAP, Oracle and NetSuite) and now seek to futureproof payroll by consolidating to a single global platform and vendor governance model.
  • Need for greater visibility over their increasing global workforceThe lack of skilled payroll expertise in the workforce, and an underestimation for the skills required to maintain modern cloud platforms has led many to seek 3rd party support for ensuring accurate, timely, and compliant payroll execution.
  • Efficiently managing the compliance of Global payroll
  • Introduction of data privacy laws and heightened data reporting demands has prompted application leaders to seek more control over their data and the processes involved in payroll.
  • Modern cloud platforms
  • Globally consolidated solutionsAccessing reliable, globally consolidated payroll reporting remains a challenge for many organizations.
  • Global ExpansionOrganizations of all sizes are commonly expanding operations to new international locations and require payroll solutions that can support growth and scale in emerging geographies.
  • Digital transformation – modern, scalable, flexibleDigital enablers are in high demand as organizations of all sizes seek to leverage intelligent technologies to transform operations through RPA, AI, predictive analytics, and advanced API’s etc.

 

In summary, we see that global payroll departments are adopting external services which can help futureproof payroll solutions globally. The top five requirements are:

1.  Demand for modern cloud payroll platforms with seamless integration across the HCM technology landscape

2.  Consolidation of payroll vendors and systems globally, to a single platform and vendor governance model

3.  Improved compliance to control and manage risk of payroll operations globally

4.  Visibility into the global workforce and payroll landscape through real time reporting and predictive analytics

5.  Reliability of payroll accuracy, timeliness and consistent results

What’s clear from this research is that Global Payroll Leaders’ needs have moved beyond the payroll services calculations and compliance filing in-country. These are almost country specific needs. The corporate needs, outlined above, all relate to the management of data flows, data protection, efficiency, reporting and insights and overall corporate governance and visibility of Global Payroll. These needs are at a global level. To meet these needs centrally for the Leadership team, the Global Payroll System needs to have Global Standardization as a design concept. All data, people and providers processes and technology needs to align to this global payroll standardization that meets the corporate goals.

This research underpins the market need for the Employer Centric Model – where the Global Payroll company can design its own global payroll processes and system and choose a technology that will harness the stakeholders and data and integrate them to meet the global corporate standardization requirement in both its current and future scaled form.

As our Payslip technology is deployed as a core pillar in the Employer Centric Model mix, we live through the digitization and standardization lifecycle with our clients.

Payslip’s platform provides visibility and reporting for global regional and local management while allowing for local country expertise. The platform is specifically designed to enable quick scaling of companies’ international payroll. New countries can be added at any time, while the process and user experience remain the same. The main challenge we find with clients is the transition from a manual country driven process to a digital global process. Their feedback is the adoption of our global platform structures that transition and saves crucial time in the change management.

There are key steps to standardizing processes which we will discuss in our next piece. For now, as an employer begins to standardize the key question is how to marry a global level system with the in-country flexibility needed to ensure business readiness for new markets and compliance with different country requirements.

When choosing the right solution for your organization, you need to make sure that all payroll operations will be managed in the same way at a global level, creating a unified global process, while enabling local country operations nuances.

 

In summary

 

Standardization of processes is essential for world class global payroll operations. As companies expand globally, the need for greater compliance and standardization across jurisdictions becomes a must-have and not a nice-to-have.

While the Vendor Led Model is well established in the market, we see, in Payslip, an increasing preference by Global Employers to have a direct relationship with their in-country payroll provider and to standardize at a global level. This is supported also by the Gartner conclusion that enterprises still need a combination of different payroll providers and methods. Global Employers choose the Employer Centric Model as they feel it gives them more ownership of their Global Payroll System and that it is designed to meet their own corporate strategy. It increases their flexibility internally and in payroll provider changes / growth.

 

Payslip Global Payroll Management Technology delivers to the key global payroll needs and enable the effective governance of the payroll accuracy.

1.  Demand for modern cloud payroll platforms with seamless integration across the HCM technology landscape

2.  Consolidation of payroll vendors and systems globally, to a single platform and vendor governance model

3.  Improved compliance to control and manage risk of payroll operations globally

4.  Visibility into the global workforce and payroll landscape through real time reporting and predictive analytics

5.  Reliability of payroll accuracy, timeliness and consistent results

Contact us today to futureproof your global payroll operations and learn more how Payslip can help standardize your global operations and support your future organizational goals.

 

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