Why Is Global Payroll Reporting So Hard?
For most multinational companies it is incredibly difficult to obtain reliable, timely information about all of their employees in a consistent, consolidated format. Why is it so difficult to have accurate data and consolidated global payroll reporting? Because the data typically originates from many different local HR and Payroll systems in which the employee information is maintained in different formats, with different fields, with different definitions, in different languages, in different currencies, etc. Pulling together a consolidated global report that gives a view of all employees in one consistent report tends to be incredibly cumbersome and time-consuming. Often someone in the Payroll or Finance team is tasked with copying and pasting information extracted out of lots of local systems into one consolidated spreadsheet. This kind of activity is highly manual and therefore error-prone and time-consuming, and by the time the exercise is completed, the data is often no longer up-to-date.
Why You Should Care About Global Payroll Reporting
Labour cost is in many organisations the most important cost block. In industries like Financial Services/Insurance, High Tech, Professional Services, Hospitality, Health Care, etc. the cost of labour can be as high as 70-80% of their total cost base. Not having a solid grasp of your payroll costs – how different elements are changing and what are the underlying drivers for these changes – means you are steering the ship in the dark, without a solid factual foundation to make important business decisions: How is actual payroll cost comparing against budget for different countries/BUs/ departments and what factors are contributing to the divergence? What is the impact of moving operations from one country to another? How have changes in social benefits contributions impacted our cost of employment in different parts of the company? How are variable costs for overtime, sick leave, travel expenses, etc. behaving in different parts of the organisation? Even basic questions from the executive team like “What was our employee turnover in department or country XYZ in the past 6 months?” creates a dust storm of activity in a scramble for reliable data. This kind of information is undoubtedly critical for line managers, HR managers, comp & benefits managers, financial analysts and controllers to help them manage the business in an efficient manner and make the right business decisions, so creating a consolidated, reliable database is crucially important.
But Our Global HR/Finance System Gives Us All the Answers
Often when we start talking with prospects about the need for consolidated global reporting, the initial response is: “We’ve got it covered. We’re using Workday [or replace with your favourite global HR solution] for reporting.” That’s great but does it really give you the trustworthy reporting insights your management team needs? The reality is that in many organizations the information in the HR systems is spotty at best, and line managers, HR managers and employees are remiss in updating the information in a reliable manner. In addition, the HR system may contain the plan values (i.e. contractual base salary level, bonus amounts, etc.) but actual compensation data that comes from other sources (e.g. hourly pay driven by local time tracking solutions, commission pay from CRM & sales comp solutions, sick pay, overtime pay, etc.) is not tracked in the HR system. Plus, the expenses for the employer contributions that get calculated in the payroll system will be woefully missing in the picture generated by the HR system.
Similarly, payroll information that is being collected and aggregated in most Financial Systems (i.e. SAP, Oracle, Workday, etc.) in form of General Ledge journal entries from the local payroll systems will only give a summary picture at the cost code level, but won’t allow you to understand the underlying details and drivers. Plus, the mapping from local payroll systems to the Financial System is error-prone in and of itself when not properly set up and maintained. An effort that is often left to the local entities and can be the cause of much frustration in the central Finance teams.
So What Can You Do?
Aggregating the local payroll manually – as many companies have been doing traditionally – cannot be the answer. So one option is that you hire a so-called global payroll aggregator (e.g. ADP, CloudPay, Safeguard, SD Worx, NGA, etc.). If they are half-way decent, they will give you consolidated global reporting. However, they will first insist that you need to change all your existing local payroll solution to their solutions. So you’re looking at a huge change effort and operational/organisational disruption – and cost to come with that – when all you really want is a consolidated view of all your payroll data in one place. And to make things worse, often the reporting solutions of the global payroll aggregators are rather rigid and inflexible. They will give you a few standard reports in their format (not your format) and for any additional report or query you will need to pay extra.
Enter the Open Payroll Platform Model
The good news is now you don’t have to go through the disruption that comes with the aggregator model in order to get a quick, consolidated view of all your payroll data in one place. With an open payroll platform model like Payzaar, you can readily consolidate all your payroll data while not touching your local payroll solutions at all. After every payroll run, the open platform simply pulls the local payroll data from the local system and automatically maps and translates the data into a consistent global data schema that then gives you access at all your employees’ data through one consistent report. What makes a solution like Payzaar very powerful, you get a consolidated view but you can still drill down into all the local details, so you don’t lose the underlying source information. Plus, you can map and structure the data views in a flexible manner, exactly the way you want to see the data. And reports are always up-to-date and real-time. The moment the local payroll calculation has been validated, the data shows up in your global report. Setting up this kind of global reporting is quick and easy, a matter of a couple of days. Seeing trends, benchmarks, statistics, outliers in your payroll data has never been this easy.