How to Conquer the 5 Most Common Payroll Challenges
Jul 19, 2016
They say ‘nothing worth having comes easy.’ So whether you’re implementing global payroll for the first time, or looking to introduce a more centralized and standardized approach to your existing global payroll processes, you can expect to encounter a few challenges along the way.
Every organization faces its own set of issues, but the five biggest hurdles tend to be the most common across most multinational companies. There’s a central theme that underpins the solution to each one of the five challenges: Beginning your global payroll initiative with an analysis of your existing operations and a review of how they are performing.
Challenge One: Managing the change
Any payroll change effort can be frustrating for those countries where payroll is performing reasonably well already. A global payroll transition is a significant operational change, so it will inevitably encounter resistance – and most likely, that resistance will come from your in-country payroll personnel or business unit leaders.
Why so? Because it’s the payroll team’s roles and responsibilities that are most affected by the introduction of global payroll. It is they who face the prospect of ‘unlearning’ established processes and adopting a new approach. For business unit leaders, there are also concerns about the potential for unwanted disruption.
Open and transparent communication is critical. Project leaders must clearly and vocally convey the different benefits of the project for both the group and individual countries: Consider a kick-off event where you bring together your international payroll teams, increasing engagement from the start. Then commence the roll-out with an ‘easy’ country to earn yourself a global champion that can showcase the success to your other operations.
Use the project to give your high-potential international team members new development opportunities. and if you’re concerned about key employees leaving during a project, address this ahead of time. Consider project bonuses or retention incentives if there is a high probability of losing key personnel.
Challenge Two: Balancing local flexibility with global standardization
When implementing global payroll, there’s a precise balance to be struck between standardizing your processes and retaining flexibility at a local level. Streamline and standardize your payroll platform too much, and your in-country teams will be forced to work outside of that system to deliver against the local legislation and cultural idiosyncrasies that govern their location.
On the other hand, building a single platform that accounts for every one of those local requirements, in every one of your territories, can be overly complicated and extremely costly to maintain.
The logical step here is to work with a modern global payroll software system that introduces best-practice standardization but can be modified to your specific needs without requiring heavy customization. (Customization leads to costly maintenance and difficulties in making improvements or enhancements further down the line.)
For a complex and large-scale operation, you won’t find off-the-shelf software that caters for every local requirement. So you are probably going to need to integrate with a local system or build a specific interface; with a modern global payroll platform, the vendor will already have made the bulk of the technological investment to create the core system, which should either negate or certainly minimize the need for the additional scope to cover local needs.
The other alternative is to outsource, which can come in different flavors. Certain vendors will be able to deliver their managed services in certain countries and send some services out to local partners – acting as ‘aggregators.’ Other providers, like CloudPay, have their own proprietary global platform that brings all of your processes and data together in a unified application. Determine your scope, then find the best fit for your unique situation.
Challenge Three: Effective data management & reporting
Traditionally, data management has been a huge challenge for global payroll teams. The first issue: Data integrity. The flow of data between global HCM and payroll software is critical for both functions to perform their relevant duties effectively, but the data residing in their corresponding systems of record are often out of sync – taking too long to process changes such as promotions, terminations, and bonuses, leading to data discrepancies that can require excessive workarounds.
The second issue is reporting. Pulling information together in a timely fashion from so many different payroll and HCM systems worldwide takes time. Mostly, this is a manual process, which means the data is incomplete, error-prone, and out-of-date well before it is ready for analysis. In a world where reports and insights are moving to a reliance on live, accurate data, traditional payroll reporting is fast becoming useless.
When it comes to insightful, analytical payroll reporting, the first step is the centralization and standardization of your data. With unified global payroll solutions, reports can be pulled together from one single source, rather than from disparate systems across your global operations.
This centralization offers the possibility for real-time reporting based on live data dashboards, supporting strategic decision-making at the very highest level. Ensuring the continuous quality of your data is key here too, so you should also look to the self-service data possibilities offered by cloud-based solutions – which reduce manual data input and updates.
Challenge Four: Technology integration, automation & best practices
We are experiencing a significant technology shift, across enterprise systems in general, around automation and web-based SaaS solutions. The emergence of cloud-based software and its rapid rate of adoption have created a new wave of system integrations, consolidations, migrations, and replacements.
These new technologies, with their improved user experiences, faster deployments, and lower ownership costs, pose a whole host of challenging questions. How and when do you bring your cloud and on-premise systems together? How do you get the most out of your previous technology investments? How do you get the best licensing deals and put in place the right maintenance strategies? Where do you find the new skills you need for modern integration tools and APIs?
A clear technology roadmap is required to break the integration challenge into manageable, focused projects, rolled out in stages with the assistance of cloud integration tools. However, the roadmap must be developed in line with a new payroll process and data model, with all elements directly focused on achieving better outcomes for the global payroll function.
This plan should take into consideration the need for organizational change, recognizing that customizing technology to fit with your current (potentially flawed) processes is not the route to best practice. Cloud payroll technology is, by its nature, more standardized – offering less customization (and instead more configuration). It has been designed to introduce efficiency and best-practice payroll processes. So, rather than view your implementation as a project which shapes the technology to fit your business, view it as about getting your business to adopt best practice payroll processes powered by the new technology.
Challenge Five: Achieving global compliance
With payroll governed by a raft of legislation, country by country, achieving consistent and ongoing payroll compliance across your global footprint is likely to be increasingly involved. Indeed, the quest for compliance has deterred some firms from moving to a global operation altogether, abandoning the multitude of potential payroll benefits in the process.
Predominantly, the challenge lies in monitoring global compliance and doing so in real-time. After all, identifying compliance errors too late is of little use – with a whole range of governing bodies ready to hand out fines and sanctions the moment you step out of line.
A thorough understanding of the country-specific employment laws affecting your business is fundamental, so bringing third-party experts on board to help with this is a sensible move. At the same time, leveraging the real-time compliance data on offer through cloud technology delivers increased visibility into your compliance status – providing centralized access to your statutory filings and the ability to maintain records more easily online.
Live compliance dashboards enable you to monitor and measure the performance of your payroll and payments processes. A well-equipped cloud payroll platform will also provide centralized compliance calendars with actionable due dates and legislation monitoring feeds to flag changes in local laws.
The move to global payroll is not without its challenges – but the rewards outweigh the risks. By identifying the likely ‘bumps in the road’ in advance, you can develop a payroll implementation roadmap that gives you the greatest possible chance of success.