Global payroll outsourcing - the definitive guide

As the world embraces Cloud HR which promises to genuinely transform HR service delivery and finally deliver on the promise of HR for decades, the pinnacle for many HR, Finance and Payroll professionals has now become a global payroll solution. The solution will use the best-fit payroll engine in each country, it will be fully integrated into a global personnel administration and organization management engine, featuring a single Self-Service tool with accurate reporting and analytics - and ideally all managed by a single vendor, yielding a single source of data truth, statutory compliance and process standardisation.

Today, achieving the Holy Grail has become possible with the evolution of Cloud technology, the maturing of (some) vendor global payroll solutions, enhancements and maturing of the service delivery models and staffing ratios, plus the sensible and significant investment in global payroll integration technologies.

Of course, global payroll projects are still seen by some as high-risk ventures. Get it right and the organization will reap substantial economic, process and cultural benefits; get it wrong and you may end up paying your people incorrectly or perhaps not at all, with the risk of causing substantial damage not just to business finances but also to your external reputation and employee engagement. Add to this a natural reticence among business leaders to take on payroll projects - after all, there is little glamor in global payroll, often taking several years to be deployed successfully and loaded with risks and stress. It really is the only technology project where 100% perfection is simply demanded, not rewarded!

That said, there has been a renaissance and renewed interest in exploring global payroll solutions in recent years as a result of Cloud HR technology and a maturing market. Many organizations are now recognizing the possibility that mature global payroll (outsourcing) solutions can deliver significant financial savings, with a substantial reduction in risk, a potential for process standardization and greater adherence to compliance standards. The caveat to this is that projects must be planned and executed well; plus there is much to gain from working in partnership with a proven vendor that has trodden the path before. Fundamental to this is the development of a robust business case that will highlight opportunities for global payroll.

In the experience of Alight, the development of a Business Case for a Global Payroll Outsourcing solution needs agreement on a clear set of resolute and immutable “rules of engagement”. These nonnegotiable ideals are the bedrock of a successful global payroll project, including:

• A single global Employee & Manager Self-Service portal
• Inclusion of Payroll, Personnel Administration, Organization Management and Reporting
• Acceptance that a number of small countries will seem uneconomic if reviewed individually
• Senior global executive mandate in support of the project with the willingness to enforce change
• Willingness to challenge, align and standardize business processes where required
• Acceptance that global payroll is a complex and challenging project where 100% accuracy is mandatory
• Investment in a significant Change Management program within the overall project
• Willingness to sacrifice functionality for ease of use and integration
• Delivery of a genuine, global “Single Source of Truth” for all reporting
• Defined step-increase in Employee Engagement and Satisfaction
• Defined improvement in payroll accuracy and statutory compliance
• Pre-requisites for successful global payroll require strong project management where risk mitigation and adopting the right implementation sequence is key

This guide defines the key factors driving global payroll and sets out an approach to the development of an indicative business case that will act as a starting point for any organization with an ambition to implement global payroll.

Why global payroll?

Arguably, payroll departments around the world have more in common with one another than they have differences. For example, all of them manage the capture and processing of time and pay data, deal with sickness and other forms of absence, produce statutory reports and organize payments to employees and third parties. They are generally staffed by people who are highly devoted to accuracy, achieving compliance and providing good service. However, it’s often the subtle local differences that can make a straightforward payroll seem complex - for example, local trade union agreements and policies, customs and practices in place, cultural issues attached to the role of line managers and the relationship between HR and Payroll. In many cases, only a small number of individuals in the payroll function truly understand business processes, leaving customers bewildered and confused. Adding to this complexity are the multiple vendors supporting payroll at a global level, in some cases numbering hundreds, including time recording software and reporting software vendors.

As a result, multinational corporations face the challenge of developing complex vendor management skills in order to control payroll functions at a global level. The ideal situation for successful global payroll is to cut through this complexity and reduce the number down to a point where there is only one vendor and solution to manage. This allows for the centralised development, measurement and management of detailed Service Level Agreements with appropriate (and significant) financial penalties attached. By focusing on commonalities and standard processes and managing local differences, the concept of a global payroll becomes a possibility.

The ability to deliver substantial cost savings as well as create accurate, comprehensive and up-to-date data from a single global platform has been the Holy Grail for organizations for several decades. Achieving this means having access to accurate data on headcount, turnover, cost and other metrics, allowing for genuinely informed decision-making.

Finally, a global payroll partner will have the ability to provide guidance and solutions for market entry into new geographies, headcount expansion or contraction within an existing geography or exit from current geography altogether. It is critical to partner with a vendor that can manage all of these elements with a particular focus on headcount growth. The cost of processing payroll in a country can change dramatically with a headcount change, so the vendor must have the flexibility to adapt to change.

The key ingredients of global managed payroll

Payroll is naturally enough delivered to some degree in all countries in which an organization operates, using a variety of solutions from global or regional vendors, country-specific payroll solutions and third-party organizations such as accounting firms, or even using a spreadsheet! To embark on a global payroll project, several factors or "ingredients" are key in designing and developing a robust platform that will deliver benefits for a decade or more.