The demand for outsourced payroll administration has remained steady despite the global economic crisis.
By Julie Fernandez
While payroll is perhaps the least glamorous of all human resource functions, it has remained abuzz with activity—specifically an increasing interest in global payroll strategy—with clients and service providers both fueling the growth.
Several activities in the market indicate sustained interest and progress in global payroll strategy:
Expansion of payroll services. Payroll providers have contributed to these trends by evolving their service offerings beyond traditional gross-to-net processing to fully managed payroll services that include source-to-gross, data management, timekeeping, and related HR outsourcing services. Broad payroll scope becomes particularly attractive where there is sufficient scale to warrant replacing the client’s in-house administrative effort and driving cost efficiencies.
Building out of “global” templates. To leverage payroll operations across countries, payroll providers are building out their systems with payroll templates for additional countries. By focusing efforts on a system’s functionality to centralize interfaces, manage touch points, and consolidate reporting, service providers have captured the interest of global clients seeking to simplify, automate, and ensure appropriate oversight.
Creation of third-party networks for in-country delivery. Where there is insufficient scale to build out systems, service providers are establishing broad networks of in-country payroll providers to “cover the globe.” This strategy is prevalent where clients have a great number of countries with small employee populations. Managing a broad geography with an aggregated payroll model balances the centralized coordination and control required by global clients with the localized payroll requirements and legislative nuances from country to country.
Achieving global HR information systems (HRIS). Clients are increasingly advancing their core HR technology strategies to deploy a single global instance HRIS for employee data management. While data elements for outlying countries might be minimal, there is a strong desire to ensure that the global HRIS is used as the primary source for employee data and is enforced with greater interfaces and feeds to payroll, time, and other HR point solutions. Consolidation of payroll systems and vendors makes it easier and more cost effective to provide automated employee data from the central “source” HRIS.
Growing into sophisticated sourcing. Client sourcing organizations have become more savvy with each significant procurement experience. Having successfully sourced first-generation HR and payroll relationships, clients now have a greater appetite to pursue service contracts leveraged across business units and across countries.
While there is no such thing as a single “global payroll” system or provider in today’s market, plenty of opportunity exists for multinational companies to formulate a global payroll strategy. Rather than seeking order by issuing global vendor RFPs or country-by-country enterprise resource planning (ERP) build-outs, more and more global companies are starting with a purposeful global payroll strategy and governance model.
Visions of a single provider or system are replaced with a global framework designed to identify optimal payroll delivery models and the service providers best suited to the client’s scale, complexity, and regional footprint. Specific goals of this approach often include consolidated data and interfaces, harmonized processes, leveraged payroll relationships, and reduced risk—all with greater corporate visibility and control.
Is a Global Payroll Strategy Right for You?
The burning question for many organizations is whether instituting a global payroll strategy will create savings, and the candid answer is, “it depends.” Savings at the individual country level are difficult to realize—unless the strategy displaces costly processes or systems, or unless the global organization taps into its greater purchasing power. Savings from consolidating interfaces, vendors, and reporting are often easier to value, followed by the “softer” savings of increased compliance, greater visibility, reduced risk and leakage, and enhanced decision-making.
Whether you ultimately advance in bold, giant leaps toward a defined strategy and quick transition, or you take baby steps to gradually navigate the payroll landscape, now is the time to explore whether your organization could benefit from a global payroll strategy.
If the necessary deep-dive examination of payroll operations around the globe makes you queasy, consider an iterative approach. That begins with high-level design and a principle-based structure to engage your own regional and country payroll leads. An advisor with experience in global payroll strategy and governance can help you bring order to what can feel like chaos, whether in a region or across the globe.
Julie Fernandez is a director in the CHRO practice with TPI. She can be reached at email@example.com.