Have you wondered whether a global payroll solution is right for you? Over the past few years, an increasing number of multinational companies has chosen to implement integrated global payroll solutions that provide integration and aggregation of their payroll environments across countries. These solutions help to streamline and standardize payroll processes, provide better visibility and controls over local payroll execution and help to simplify the reporting and data integration with 3rd party systems.
Here are 6 key reasons and drivers for the implementation for such global payroll solutions:
1) Rollout of Shared Services Structure
Many companies have started to centralize their back-offices in shared services or center of excellence (COE) structures that typically align similar roles and functions in one central organizational structure. Under this model, previously decentralized payroll functions now all roll up under one central management structure. Often such centralization goes hand in hand with collocating the team members in global or regional hubs. However, real operational synergies are not achieved by merely redrawing organizational reporting lines or collocating the resources (that is often referred to as “pseudo” shared services). If you truly want to achieve the benefits of a shared services structure, you have to enable the shared service organization with standardized tools and processes. This calls for the rollout of a global payroll solution which gives the shared services teams a consistent way of working and consistent tools to get their work done efficiently.
2) Implementation of a Global HR Solution
8 out of 10 clients or prospects with whom we talk either have implemented are in the process of implementing or are planning to implement a global HR solution (e.g. Workday, SAP Successfactors, Oracle HCM Fusion, Ultimate, etc.) that unites all their HR processes in one central system. However, given the local complexity and the lack of a single global payroll solution, payroll sits outside of that global HR solution and continues to operate in lots of different local systems. At the same time, there is a compelling need to integrate data flows between the global HR solution and the local payroll systems – HR data needs to feed into payroll systems and vice versa. To avoid having to integrate your global HR solutions with lots of different individual local payroll solutions (which is obviously a very time-consuming and costly exercise and typically not economic especially for smaller countries), implementing an integrated global payroll solution that aggregates all the local payroll data in one central platform can tremendously simplify your life.
3) Process Automation
In how many of your countries is payroll processing still done via emails and spreadsheets with lots of data re-entry and manual intervention? Let’s face it, many payroll operations today are still painfully manual and low-tech. The fact that most local payroll providers have grown up as outsourcers or service bureaus that have historically relied on throwing people rather than smart technology at a problem is part of the reason the payroll industry works the way it does. If you operate without a central global payroll solution, you will need to rely on the local vendors to pick up the slack and invest in technology and automation. But that is guaranteed to be a slow and spotty way to introduce modern tools and efficiency into your payroll operations around the world. A much faster and more efficient way is to introduce a central global payroll solution that brings process automation tools and smart technology that can be applied to all local payroll operations in a scalable and consistent manner. For example, why roll out an employee self-service portal for e-payslips and tax documents in 40 different flavors across 40 different countries when you can introduce that functionality once with a central platform?
4) Rapid International Expansion
When your company is expanding into new countries at a rapid rate (i.e. opening up new offices around the world every month), it is a real challenge for the payroll team to stay up to speed and put in place the local support processes to run payroll for the newly hired local employees. You have to first identify reliable local payroll providers, define your service requirements (which in itself can be challenging when you don’t really know what to look for in a new country), run a vendor selection process, implement and troubleshoot the new solution and get used to the way the new provider works. A faster and more efficient way to scale your payroll back-office as part of a global expansion is to work with one global partner who helps you (a) to identify a set of pre-vetted local partners and choose the right partner for your needs, and (b) you to streamline the way you operate with the local payroll provider to align with the rest of your global payroll processing model. The idea is to create a repeatable, cookie-cutter way of adding new countries by plugging into a proven, reliable global payroll network. That global solution will also give you central visibility how your local payroll operations are performing and central reporting across all your employees and their payroll data in one central place – something that is particularly valuable when you are adding new employees every week and management needs to get a real-time view on how headcount and labor costs are evolving.
Compliance is obviously a paramount topic in any payroll environment. Especially when you are operating across lots of different countries, it is hard to keep up with changing requirements in local legislation. Local compliance obligations are constantly getting more demanding and we see increased requirements for more detailed, real-time reporting (e.g. Gender Pay Gap reporting requirements in the UK and other countries). Add to that further requirement around the protection of personal data in your payroll processes under the new GDPR rules. A global payroll solution will help you to keep track of all your local compliance obligations and to validate that you have fulfilled these obligations. It will also help pull together the data required for reporting quickly in an automated manner. Furthermore, a proper global payroll solution will enforce consistent processes and put in place technology-enabled controls to protect your employees’ data and ensure GDPR compliance.
6) Payroll Leakage
We don’t like to talk about it but irregularities and misdemeanors are unfortunately all too common in the payroll world. Whether it is the individual employee gaming the system (e.g. submitting false timesheets or expense claims) or someone in the payroll department systematically defrauding the company by forging data (e.g. a popular method is to keep leavers on the payroll and divert the funds to another bank account), payroll leakage is happening every day in many organizations and is a real industry problem. A recent study by Deloitte estimates the cost of payroll leakage to be as high as 2.5% of total labor cost. Another study by the Association of Certified Fraud Examiners has found that payroll fraud can run as high as over 20% in certain industries and on average runs for 30 months before being detected. Rolling out a global payroll solution that establishes strong central oversight and controls is absolutely critical to minimize the risk of fraud and other irregularities.
While each organization’s scenario varies and we see lots of different triggers for the implementation of a global payroll solution, these tend to be the most common drivers. Do you see other drivers or reasons for a global payroll solution? Or arguments against a global payroll solution? Let us know in the comments section or drop me a note at email@example.com.