Running global payroll for a multinational company has always been challenging. Payroll is extremely country-specific and is strictly regulated by local laws and policies. Unlike in HR or Accounting where global solutions like Workday, SAP, Oracle, Ultimate, etc. exist, in Payroll, no single global solution exists that can be deployed around the world to process payroll in compliance with local laws and regulations across many different countries. To achieve global payroll, two main global payroll models are available: Traditional Aggregator Model and the new Open Marketplace Model.
Over the past 15+ years, companies like ADP, NGA, Ceridian, CloudPay, Safeguard, and other traditional payroll vendors have developed global payroll solutions based on the so-called aggregator model. It integrates a variety of local payroll solutions under the umbrella of one global vendors. While that model promises to simplify and harmonize the payroll environment for multinational companies, it comes with significant downsides and compromises for the customers (which we will explore below). In response to the shortcomings of the traditional global payroll model, a new global payroll model has emerged over the past couple years, pioneered by companies like Payzaar, striving to bring the transparency and flexibility of open marketplace models like Amazon, TripAdvisor, Booking.com, Airbnb etc. to the world of payroll. This new model is therefore often called the open marketplace model.
For anyone considering a new payroll solution, here is a quick side-by-side comparison of these different models:
|Traditional Aggregator Model||Open Marketplace Model|
|Choice||Zero choice of local payroll solution; the local solution/service provider is dictated by the global vendor||100% choice of local payroll solution; use your existing solution or choose any new solution|
|Implementation requirements||Need to rip all the existing local solutions and replace with the solutions mandated by the global vendor||Keep the local solutions as long as you’re happy, no re-implementation required|
|Implementation time||Months and years (for 20+ countries typically > 2 years)||Days (because no reimplementation required)|
|Support of delivery models||Inflexible – Only supports complete outsourcing||Flexible – You can run your payroll outsourced or in-house or in a mix|
|Ongoing vendor relationships||Complete lock-in – can’t simply replace a local vendor when not satisfied||Complete flexibility – simply swap in a different local vendor without skipping a beat|
|Power Balance||Power sits with the vendor because of lock-in||Power sits with customer given choice|
|Transparency||Limited – self-protective of the closed network partners||100% – gives you stats how different vendors compare|
|Underlying Economics||Outsourcing mentality – still highly manual, trying to maximize revenues by upselling more services||SaaS mentality – relying on modern technology and providing self-service without incremental fees|
|Cost||High, typically 3-5 times (or more) higher than local payslip price||Very competitive, small additional fee on top of local payslip price|
The Payroll industry is at an inflection point that will drive similar transformations as we have seen in other industries. Old closed, proprietary business models (i.e. global hotel chains, regional retail chains, etc.) got surpassed by new more flexible, open, transparent models like TripAdvisor, Booking.com, Airbnb and Amazon. If you like to discuss or learn more about the new way of running global payroll, contact us at email@example.com.