A few years ago, what was then Ernst and Young (now EY) reported in its paper Global Payroll: Myth or Reality? that 55% of multinational firms believed that single provider global payroll vendors didn’t exist.
Writing a year later, management consulting firm ScottMadden Inc was slightly more optimistic in its paper, Global Payroll? A Few Planning Considerations. It stated: “Despite significant improvements, the global payroll solution landscape appears fragmented to many buyers…The national influences on payroll at both the corporate and regulatory level ensure requirements are as diverse and waning as economics and politics can engender, necessitating local knowledge and constant system changes to meet these requirements. These external complexities, as well as internal challenges like global technology and global staffing has slowed and limited the number of viable global solutions. Therefore, organisations looking for a global solution often find a patchwork of options.”
There’s nothing like a challenge and these reports threw down the gauntlet. SD Worx carried out its own research at the end of last year which showed that almost two-thirds (65%) of global organisations were using multiple payroll systems across different geographic markets. More than 5% of those polled admitted to having no automated payroll system in place and rely solely on manual processes. Only 29% had one single system of record in place, offering all-encompassing payroll services.
So why is the harmonising, centralising and reporting on payroll and HR globally proving so complex and expensive? When we put this questions to delegates of HR Tech World in Paris last year they told us that one of the main problems was maintaining compliancy with legislation in each country coupled by the threat of potentially huge corporate fines. According to PWC, payroll errors cost the average FTSE 100 company between £10 million and £30 million per year, so we’re not talking small change here.
Also, having multiple providers across different geographic regions is obviously not cost-effective or consistent. These issues combined to create a stressful situation for those involved who would, no doubt, much rather be focusing on HR strategy rather than time-consuming processing.
In our survey, we asked our sample about the key issues faced as a payroll professional working in a multinational organisation, Well over a half (56%) admitted to having problems with payroll accuracy across different geographic markets. Inconsistencies with the provision of high service levels was also given as a top concern by 42% and just over a third (34%) indicated payroll was too expensive. Other key issues included time-consuming partner management (29%) and lack of international reporting capabilities (20%).
It’s clear that ineffective payroll systems are eating into business profit by increasing both cost and complexity.
Often an outsourced payroll provider with a team experienced in managing risk and compliance globally is the answer. Choosing a global outsourcing provider ensures that a company avoids duplication of effort, overall making for a more consistent employee experience involving just one provider, one contract, one point of contact and the roll out of a single payroll system with visibility across all geographies.
If this is the case, it’s important to choose a partner that works globally but has local knowledge.
Most companies are facing problems of compatibility with HR and payroll systems, as each country has its own system sometimes governed by rules that don’t match with the regulations of others. This could be expensive and challenging to manage and maintain. If businesses don’t integrate they are faced with dealing with different currencies, tax and social security requirements, as well as different jurisdictions, as well as regulations.
There is also the question of mobile workers. Managing payroll for mobile employees and dealing with cross-border issues needs to be carried out in a coordinated manner so that issues in the home and host country can be addressed simultaneously.
Outsourcing partners should have alliances that cross national and international borders and can proactively support different payroll aspects. For example, S D Worx has recently formed a partnership with World First, an international payments and money transfer business, to deliver an international payments solution to our global customer base.
The partnership provides us with an efficient, fully-compliant payment solution with the means to execute international payments to over 150 countries at favourable exchange rates across 127 currencies. Our customers can seamlessly load up payments, authorise them in multiple foreign currencies and handle all of the associated reconciling and reporting. This is all done over a single platform offering enhanced control over the payment process and also providing significant time and cost savings over traditional banking methods.
The partnership is enabling us to move closer to this previously elusive industry goal of offering a truly global/single payroll solution for multinationals.
