3 Steps to a Smarter Global Payroll Compliance Strategy
Dec 20, 2016
With enterprises reporting they use anywhere from one to 100 payroll solutions within a single multinational organization, paying a company’s global workforce is a complex challenge. Yet the day-to-day difficulties of processing and delivering payroll pale in comparison to the burden of managing global payroll compliance.
Arguably no other aspect of payroll involves as much manual effort, as high a cost of error, or as damaging potential consequences as the compliance function. Using a consolidated global payroll solution – instead of one to 100 vendors – can help companies achieve visibility into to compliance management at a broad or granular level.
Yet realizing the full benefits of a global solution requires more than lifting and shifting existing processes into a cloud-based system; it also requires incorporating smart, innovative strategies into your end-to-end approach to payroll compliance.
The following best practices can help companies achieve a more accurate, reliable, and data-driven payroll compliance strategy.
1. Use the Cloud to Support Global Shared Services
Project management, time and attendance, benefits administration, financial management, and many other functions are deeply connected to compliance management – as are all of the various business technologies that serve them. As such, a company’s payroll, payments, and compliance teams interact with many disconnected solutions – some hosted in-house, some in the cloud, some in shared services, and some proprietary to local partners.
A well-equipped, cloud-based payroll system can act as single access point for integrating all of those systems into the compliance function – especially when organizations make a concerted effort to streamline operations across all of the business areas affected. That’s why move to the cloud can be the most successful, from a compliance perspective, when initiated as part of a shift to a global shared services environment.
For the American Bureau of Shipping (ABS), running payroll across a fragmented software landscape was driving high costs across their 200 offices spread out over 70 countries. By shifting to shared services and utilizing cloud technology that integrated with their core HCM system, ABS achieved real-time transparency into global payroll compliance, with clear views into filing requirements and associated deadlines.
With a global shared services approach, ABS achieved greater confidence in their ability to meet specific, jurisdiction-based requirements. For example, sometimes a statutory entity will make a rule that’s effective retroactively – say, three months in the past.
Achieving compliance with a rule of that nature can be very difficult with a ‘decentralized’ payroll vendor landscape. Being able to go to one place to see how many countries are processing payrolls at what level, and to view where the entity stands in the compliance process across every jurisdiction, was a huge benefit for ABS.
2. Prioritize Process Automation & Data Standardization
In addition to using the cloud to integrate disconnected solutions, organizations are wise to use a consolidated global solution to support broad, holistic improvement initiatives. The most important objective, from a compliance perspective, is achieving more automated, standardized processes.
Why so? Because where there tend to be service issues, processing issues, or data-quality issues, there tend to also be compliance issues. Heavily manual processes lead to manual errors, which lead to corrections, re-filings, and the reprocessing of information – all of which can slow down the payroll cycle or create compliance vulnerabilities.
Take ABS: Prior to deploying an automated, cloud-based payroll solution, the company had little way of measuring payroll effectiveness and efficiency of the across the enterprise. With their payrolls processed through a multitude of systems – each with its own workflows and processing specifications – the reliability of look-back assessments was marred by the inconsistent standards to which the data is held.
Since every country had its own payroll process, senior management had no visibility or access to in-process information on behalf of our partners, and no visibility into related compliance requirements, beyond end-of-month reporting. (And by the time data from multiple systems is reported at the end of a given month, who really knows if it’s still correct.)
The disparate processes led to lost time on the compliance front, as well: ABS estimated that the lack of standardization caused at least 35 percent more time to be spent on explaining country regulations and ensuring adherence to evolving requirements.
With more automated payroll processes across the global enterprise, processing issues are far easier to catch up front – before they become compliance issues – as well as to audit retrospectively. Utilizing a cloud solution that standardizes end-to-end payroll delivery across geographies also improves the quality of companies’ pay data, thus delivering more accurate real-time intelligence on payroll performance and global compliance.
3. Phase a Global Implementation Wisely
Enterprise software implementations across any business function can be complex and time consuming. Given the far-reaching nature of global payroll, it’s vital for organizations to map out the onboarding experience tactically in order to achieve the greatest compliance-related benefits.
Your payroll software vendor will likely help you plot a smart implementation timeline and roll-out plan. Regardless, you should consider which approach – volume-based, need-based, or “ease-based” – makes the most sense for your company’s objectives.
- Volume: With its global shared services initiative, ABS opted to onboard its highest-headcount countries to the cloud ahead of smaller countries. The aim: To realize the greatest benefits as quickly as possible. By moving into ABS’ biggest entities first, the company earned “more bang for the buck” and the highest level of end-to-end compliance visibility most quickly.
- Need: In addition, ABS was able to align the establishment of its global shared services environment and cloud-based payroll system with its expansion into new geographies. Given that each new country requires implementation of its own payroll process and compliance strategy, onboarding new regions directly into a cloud solution lessened the need for the organization’s staff to learn all of the newly applicable local payroll information and compliance guidelines for each country.
- Ease: While ABS did not opt for an “ease-based” approach, many companies see success by implementing the smallest or simplest countries (from a payroll compliance perspective) ahead of those with greater complexity – implementing Australia before Brazil, for example. In doing so, multinational companies can introduce a system to a smaller portion of its staff first, and earn their buy-in and expertise before launching the solution more broadly.
Ultimately, compliance is one of the most important undertakings in any organization – make it a space where assessments should not only be done in hindsight. With the right tools for real-time tracking and a more standardized approach to global payroll across the enterprise, organizations can take control of the compliance function in a more effective, transparent way.