As the world becomes more and more a global village organisations are having a greater presence in countries worldwide. And where there are people, there will always be a need to pay them and systems to support this.
Organisations are beginning to look for global global payroll and HR systems. But does such a thing as a global payroll system truly exist or is it all smoke and mirrors? Would such a system be appropriate, or even truly necessary?
There are a small but growing number of suppliers who state they can provide a global payroll solution, but what is it that’s provided?
Large corporations have global HR systems, but few have a global payroll solution – although several are currently looking. Usually various solutions and providers are used for payroll in an organisation, all of which need to be paid for and supported. Some of these may be products or providers that are used in more than one country, but all are operated locally.
Having a global payroll solution may well allow an organisation to rationalise its payroll operation. One system reduces the need to have a payroll service based in every country, especially ones with only a small local presence and a small number of local employees. Clearly such a radical change would require great planning and significant change management.
Global payroll will also deliver better management information, with less intervention, as the information can be taken from one source. Organisations will be able to undertake analysis based on wider and more up to date business intelligence, and derive greater value from these systems.
Payroll and HR systems are a veritable gold mine of information about an organisation; tapping into that data can reveal a wealth of intelligence about its most important commodity – its people and costs.
Alan Wigley, director of the Global Payroll Solutions consultancy says, “When looking at vendors a small number claim to provide the service but in reality none do. An organisation with a large number of employees in a number of countries will get the support from providers as is worth their while.”
To an extent this is understandable since a global solution would need to support the global tax jurisdictions and this would be a significant overhead.
“But if there are only a handful of employees, vendors are often not interested since it is simply not cost effective. Very often this is due to the demographics of a global/multinational company; several countries with larger numbers of employees and a number of countries with a small sales force.”
A large IT company recently reviewed its payroll function and started to implement a global solution. Very early on it recognised that payroll could be broken down into four key components where at least two of the components are highly transactional based.
Finding a global solution for each component was an easier mountain to climb; alongside this came the recognition that the strategy for countries with large workforces was different to small countries or greenfield sites.
Cultural considerations also come into play. One type of solution may not be appropriate for some or one of the countries even though it’s the best fit for many.
As Wigley says, “Where there are only a few employees in a country and there are a number of different locations then one sensible solution is to use a broker. They will manage the relationship with each country and ensure that each country is providing the required service and that returns etc are produced in a timely manner.
“Often this service will be provided by a small bureau or an agent in each country. Then the dialogue only takes place once with the broker and not with each discrete country.”
Another consideration is economies of scale, where a bureau solution is used there is often a minimum charge for up to say 50 employees and so the per payslip cost will be much higher unless/until the number of employees is at or around the cut off for the minimum charge.
Where an organisation is setting up an operation in a new country then it is important that the cost of running that payroll is also taken into account since this could be a greater cost than the pay of the local employee(s).
The debate on global payroll solutions goes far and wide with different perspectives from vendors, agents and employers. All agree that it should be possible and will deliver benefits to the employer few agree that it has been truly achieved already.
Yvette Lamidey, Director
Paris & Parks Consulting
