Payroll processing is a critical function for organizations of all sizes. It involves calculating employee earnings, withholding taxes, managing bonuses and benefits, and ensuring accurate and timely payment to employees. Traditionally, many companies have relied on the aggregator model for their global payroll needs. This model involves a 3rd party business that creates a network of in-country providers (ICPs) across multiple countries to handle payroll processing. They position themselves as an organisation who can limit the amount of administration and contractual obligations by offering to manage multiple local country providers for you under a single contract with one organisation.
However, with advancements in technology, a technology-driven approach to payroll can offer several advantages over the aggregator model. In this blog post, we will explore how a technology-driven approach can replace the aggregator model and provide a more efficient and streamlined payroll process.
Understanding the Aggregator Model
Before we delve into the benefits of a technology-driven approach, let's briefly understand the aggregator model. In this marketplace business model, a global payroll solution provider collects payroll data from various systems used by their network of in-country specialists. These specialists, or ICPs, are responsible for processing payroll in their respective countries. The aggregator then aggregates the data from these different sources to provide a unified view of the payroll process.
While the aggregator model has been widely used, it does have some limitations. One of the main challenges is the lack of control and visibility over the payroll process. You do not have a direct relationship with the local provider who calculates and processes your payroll in a specific country. This is handled by the aggregator who acts as an intermediary. You also surrender the ability to choose, change and manage your own selection of trusted local country providers, because you are restricted to the number of providers within the aggregator business model network.
The Benefits of a Technology-Driven Approach
A technology-driven approach to payroll leverages modern digital technologies and software solutions to streamline and automate the payroll process. Here are some key benefits of adopting a technology-driven approach:
1. Centralized and Unified Platform
A technology-driven payroll solution provides a centralized platform where organizations can manage their payroll processes across different countries. This eliminates the need for multiple systems and reduces the complexity of managing payroll data from various sources. With a unified platform, organizations can have real-time visibility into their global payroll operations, ensuring consistency and compliance across different regions. They have the freedom to choose and change their own local providers while consolidating all of the payroll data from these providers into a single location. Data and processes can be standardized and controlled from a centralised platform.
2. Automation and Efficiency
By leveraging automation, a technology-driven approach can significantly reduce manual tasks and streamline the payroll process. Payroll calculations, tax withholdings, and other repetitive tasks can be automated, saving time and reducing the risk of errors. This not only improves efficiency but also frees up HR and payroll teams to focus on more strategic initiatives. Now, AI-driven automation technology has taken this to a new level, completely eliminating manual data entry work from the process and saving hours and days in every pay run across every country. This is how payroll should be run in 2023.
3. Data Integration and Analytics
A technology-driven payroll solution enables seamless integration with other HR and finance systems, allowing for the seamless exchange of data and eliminating the need for manual data entry between systems. This integration facilitates accurate and up-to-date payroll information, ensuring that employee data, benefits, and deductions are accurately reflected in the payroll calculations.
Integrations help you consolidate all of the data for payroll in a single location and make it accessible via comprehensive and detailed reporting. This level of reporting can provide you with full visibility and control as well as deep understanding of payroll and labor costs across all of your countries. Advanced analytics capabilities can ensure organizations gain valuable insights from their payroll data, enabling better decision-making and strategic planning.
4. Compliance and Security
Compliance with local regulations is a critical aspect of payroll processing. A technology-driven approach ensures that organizations stay up to date with changing regulations and consistently meet complex local and global regulatory and compliance obligations. Additionally, robust security measures can be implemented to protect sensitive employee data, reducing the risk of data breaches and ensuring data privacy.
5. Scalability and Flexibility
As organizations grow and expand into new markets, a technology-driven approach offers scalability and flexibility. If you want to move quickly into new countries and territories to take advantage of opportunities and create new revenue streams, then you will require a digitally advanced global payroll process that can keep pace with strategic ambitions.
With a centralized platform, organizations can easily onboard new countries and adapt to changing payroll requirements. This scalability allows organizations to efficiently manage their payroll operations, regardless of their size or geographical presence.
The Future of Payroll: Technology-Driven Solutions
The traditional aggregator model is gradually being replaced by technology-driven payroll solutions. It has limitations that mean it is no longer sustainable for multi country global payroll delivery and management, especially in this new era of hybrid and remote working which has changed the way organisations hire and pay people globally.
Technology solutions such as a global payroll control platform offer a more efficient, accurate, and scalable approach to payroll processing. By leveraging automation, data integration, and advanced analytics, organizations can streamline their payroll operations, reduce costs, and improve compliance. It also enables organisations to have full choice and control over their local country vendors and see exactly what is happening with all of their payrolls across all of their countries. The aggregator model does not allow them to do this.
It is important for organizations to carefully evaluate their payroll needs and consider the benefits of a technology-driven approach. By partnering with a reputable technology provider, organizations can implement a payroll solution that meets their specific requirements and supports their global payroll strategy.
The aggregator model no longer meets the complex needs of global employers processing payroll in 2023. What they want is to have one standard way of working worldwide. They want to have useful tools to automate manual work and reduce the risk. And then, they want to have one system of record for their global payroll data so that they can be confident they're managing it in a careful and compliant manner.
Payslip meet these requirements with our global payroll control platform. Our technology helps unify the data model at a global level and then standardize the process at a global level. Payslip has a large workflow automation engine that standardizes the data across all of the countries but there's lots of flexibility to also accommodate the local nuances-- these nuances all get brought back up to a global level from a reporting and analytical perspective. We are solving both the data management and process management issue, and this is very important.