Global Payroll Structure Design Basics
More and more companies are globalizing.
Payroll is a complex, mission-critical, component of every business and there are different ways to manage payrolls where companies operate in multiple locations.
The structure of the global payroll operation of any given entity should consider certain attributes including:
- The maturity of the global business operations of the entity
- The numbers of countries the organization is operating in
- The numbers of employees in each of those countries
- If the entity has relevant effective technology
- If the company has, a propensity to outsource or internally operate administrative functions?
- If the company has skills and competencies internally to handle a global payroll operation?
User Expectations Affect Global Payroll Model Decision
Also affecting operational construction are drivers such as an ever-increasing demand of users of payroll information for quicker access to data, better analytics, greater data protection and consistent reporting formats. Governmental authorities also have had an effect on the functional design the presumption now is that payroll administrators have the ability to compile and report data more quickly and in better form when compared to historical norms. So building a global payroll environment involves an honest look at the company’s profile and the needs of the users of payroll data.
Important Design Challenges
When considering how to initially develop a global payroll operation or to improve an existing one, there are critical challenges that industry professionals have identified in surveys, articles, presentations and anecdotally. Five that consistently appear as most important include:
- Improving compliance and keeping up with legislative changes to manage/reduce risk
- Designing stronger, more streamlined processes to operate globally more efficiently and effectively, and to reduce errors
- Reducing operational costs (headcount, vendors, technologies)
- Finding the right balance of resources internally and externally to support the operation
- Accessing fit-for-purpose technology to facilitate data capture, management, processing and reporting, and that has the capability to produce sophisticated analytics for better business management
Building with the End in Mind
So any organization’s payroll program improvement project should at least assess and design/reengineer its operations with these factors in mind.
At the program level of the operation, global regulations must be integrated into the operational frame including
- Data privacy and protection reflective of the standards of the new General Data Protection Regulation (“GDPR”)
- Global currency movement regulations
- Anti-bribery/anti-corruption legislation
Rely on governance level assistance here to help ensure these concepts are addressed adequately and within the risk tolerance of the organization.
At the country level, there are constant changes and updates to the law in each that must be tracked and followed. Here, I suggest leveraging local expertise whether through internal staff who have the right competencies or outsource to expert processors.
On that point, survey data indicates that the global payroll community now believes a single vendor solution can now effectively process payroll globally on behalf of companies that decide to outsource (see E&Y 2017 Global Payroll Survey and Global Payroll Association Annual Global Payroll Survey 2017). In addition to being staffed with resources with the requisite skills and competencies, they are already operating compliantly in any country that an organization seeks to operate, they should come with required certifications to demonstrate effectively, controlled internal processes, they should instil process discipline on the clients, and they will ensure that client organization deliver payroll in compliance with changing local legislation.
Any lingering concerns about whether vendors’ systems can efficiently integrate with company workforce management tools and whether they can report accurately, in real time, inconsistent formats, and provide analytics as expected are being put to bed with the introduction of robust technologies built on current state, secure data management platforms, such as the Immedis platform.
Matching a global payroll program operation design to the profile of the organization is important to achieve consistent, effective delivery.
There are challenges identified by those with experience in the global payroll community that should always be addressed during the design/redesign process. Outsourcing portions or all of a global payroll operation is a viable alternative for companies where strong process and controls, expert skills and competencies and/or technology are not embedded or where the company decides that it does not want to internally manage the entire payroll program.
Outsourced solutions also bring a compliant environment – both global and local (check for relevant certifications). Whatever the design, an operating model chosen by a company needs to compliantly and effectively deliver payroll anywhere and everywhere, and meet the expectation and demands of the users of payroll information.