Can Your Firm Use a Global Payroll System?
And as we move to this global village state organizations are looking for global solutions and so are looking for 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 there are various solutions and providers being used for payroll in an organization, all of these will be at a cost and require support. Some of these may be products or providers that are used in more than one country but all operated locally.
Having a global payroll solution may well allow an organization to rationalize its payroll operation. With just one system is there a need to have a payroll service based in every country especially those 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 solutions will also give the opportunity to have better management information, with less intervention, as the information can be taken from one source. Thus allowing organizations to undertake analysis based on wider and more up to date business intelligence and so start to get added value from these systems. Payroll and HR systems are a veritable mine field of information about an organization; in tapping into that data an organization has access to a wealth of intelligence about its most important commodity its people and costs.
Alan Wigley, Director of Global Payroll Solutions consultants says that “when looking at vendors a small number claim to provide the service but in reality none do. An organization with a large number of employees in a number of countries will get the support from providers as it becomes 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 the demographics of a global/multi national company; several countries with larger numbers of employees and a number of countries with a small sales force”
A large IT company has recently reviewed its payroll function and has started to implement a global solution. Very early on it was recognized that payroll could be broken down into 4 key components where at least 2 of the components are highly transactional based. Finding a global solution for each component then becomes an easier mountain to climb; this is alongside the recognition that the strategy for countries with a large workforce is different to that with a small workforce or a green field site. Consideration also has to be given to cultural differences as 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. 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 organization 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.