Strategies of Payroll Globalization
What is payroll globalization, and how do you achieve it? This is a question that many payroll practitioners are asked regularly. Payroll globalization is a journey that cannot be achieved overnight, and one that is continuously changing. It requires a strategy that is consistent yet flexible to meet local needs, policies that are harmonized as much as possible, and technology that supports the infrastructure of the company and the requirements of the country.
Strategies of Payroll Globalization
Strategy is the most important planning piece of the payroll globalization process and can be broken down into four sections, which include the following:
Payroll strategy—This involves asking a lot of questions to gain a proper understanding of the strategies your organization needs to consider. Some of the questions you should ask include:
Both have pros and cons. One global provider would be able to provide reporting and analytics for all the countries they cover and should be able to accept data from your human capital management (HCM) system for all countries. A local provider may have more expertise in-country and potentially better insight into the governmental needs for payroll but will require its own data and will only report on their country. This means you will have to figure out how to report your global payroll financial data and your metrics as you will receive data in multiple forms and from multiple providers.
- What is your current model, and is it changing?
- Are you going to go with a global provider that can meet the needs of the majority of your country’s population?
- Are you going to use several different providers and then gather the data from each or use just one?
Business strategy—In order to make a good decision on your payroll strategy, you need to thoroughly understand the coming business strategy by asking the following questions:
These are the types of questions that need to be part of the conversation related to your payroll strategy decisions and potential vendor negotiations.
- What countries are on the horizon for expansion?
- What will the footprint look like in each country?
- Is the business also exiting any countries?
Technology strategy—You must have an understanding of your organization’s HCM needs. Ask the following questions:
The integration will eliminate manual work but requires upfront investment and resources. If you choose to have multiple HCMs and/or multiple payroll providers, the integration will be more difficult.
- Do you have one global HCM or are you in the process of exploring HCM globalization?
- Will you plan to integrate from HCM to your payroll provider(s)?
Employee support strategy—This is where the rubber meets the road, so it’s important to clearly define how your organization will support the employees, whether that support will be local support or regional, and if your organization currently has an HR support model that you need to take into consideration. I think a “follow the sun” support model is important to cover all regions and take advantage of shared services or regional support structure, which allows you to gain economy of scale. Don’t leave this to the last minute while putting your plan together. The employee support model is one of the key factors to success.
Knowing the Risks
As you think about the strategy for your globalization project, keep in mind that any payroll project has inherent risk, including the risk that pay will be impacted at the employee level; data is not secured adequately; country requirements for taxation, benefits, and pension may not be met; and employees will not be supportive. Spend the time documenting your risks and creating a mitigation plan as part of your strategy. You will be glad you did.
The next step in the process is readiness, which not only includes knowing how prepared your company is for payroll globalization, but how to assess your company’s readiness.
For instance, do you have multiple policies per country due to acquisitions or local changes? What is your ability to harmonize those policies? Although difficult, you can operate a global payroll with multiple country policies but the more you harmonize items such as benefits, time away, absence, etc., the easier it will be to set up your payroll. Creating a document for each country with each policy you have will help determine how to move forward. Your legal team should also be engaged to help where there may be a statutory reason to have multiple policies for certain countries or populations of employees within a country.
Process of Payroll Globalization
What is the current state of your processes? If you are currently in a localized and decentralized model and plan to change, you will need all local processes to be documented so that you can standardize as much as possible. How mature is your process in each country? The longer you have done payroll in a country the more mature the process should be.
Having the right people on your team and the technology in place will help ensure your organization can successfully navigate the payroll globalization process. Your staff may have to meet certain language requirements or maybe you’re staffed to support multiple countries. It’s important to assess your team and determine where you need to add skills and what level will be needed. You may find that you lack skills to cover particular countries, so as you build your team, make sure to incorporate the business strategy requirements for new countries and potentially add new languages.
What is your current payroll technology and HCM technology? Is your globalization journey driven by a technology change or are you trying to retrofit your current platform? Globalization began as a technology play but has since transitioned to include payroll services. Technology and how you use it will become a major driver in your planning and ability to execute your vision. As you think about your readiness for change, be sure to review your technical ability to change your current process, add additional elements to your system, and potentially add more complex calculations.
Doing the Right Thing
The most important part of payroll globalization is doing what is right for your company. There isn’t a one-size-fits-all strategy for payroll or services. What works for a company of 300,000 employees may not work for one that has 30,000 employees. Lastly, understand that it’s a journey, not a destination.
Deveri Stines is Executive Director of Payroll & Time Operations at JP Morgan Chase & Co.