Is Standardization Truly Possible in Global Payroll?
Jun 9, 2016
For many businesses that operate across multiple borders, there’s only goal in payroll: To get it right. Unlike more ROI-driven business functions, “good” performance is often good enough for global payroll stakeholders – and opportunities for standardization and operational improvement are rarely on their radar.
Yet executives’ motivations to accept the payroll status quo are rarely well-founded. Some fear that optimizing payroll processes will tamper with pay schedules, creating unnecessary risk; others believe the potential benefits of standardization aren’t worth the perceived effort it would entail. Still others think that standardization in global payroll processing is a pipe dream, given the vast complexity of country-specific laws, regulations, and schedules involved.
As a result, an “if it’s not broken, don’t fix it” mentality often prevails in payroll. But even if a company’s global payroll services aren’t broken, they’re likely not as efficient or as effective as they could be. By managing global payroll with a laissez-faire mindset, multinational companies are missing out on the huge value that more optimized, automated processes can deliver in global payroll.
Standardization is possible in payroll – in fact, standardization can unlock greater usefulness for payroll data and power more actionable payroll insights for the HR and finance teams. To move payroll beyond “good enough” performance and transform it into more impactful area of the enterprise, the key is to standardize processes not just at the country level, but across the entire global footprint.
THE MACRO AND MICRO CHALLENGES OF STANDARDIZATION
Naturally, the more territories your organization branches into, the more challenging global standardization becomes. But contrary to commonly held beliefs, the rewards are well worth it – with improved payroll performance, decreased redundancy, reduced human error, lower overall costs, and increased global data visibility being just a few of the potential benefits.
Standardization is also much more achievable than many stakeholders realize, thanks to recent advances in global payroll software. But it’s not without its challenges… some big, some small.
Sensitive by its nature, payroll is one area of your business with very little margin for error. Nobody wants payroll to go wrong, as the costs of repercussions can be massive – which often prevents organizations from overhauling any processes that are in any way functional.
While many global businesses have embarked on payments standardization programs to reduce the number of bank accounts and providers they use, core payroll processes are typically kept outside of scope. This means missing out on the full benefits of consolidation, given that multiple banks will still be required to settle salary disbursements. Overcoming this fear of change is arguably payroll standardization’s first major hurdle – but for the global business, there are many more considerations: Every country or region you operate in has its own local legislation, cultural issues, market practices, workforce demographics and (of course) language.
But the complexity shouldn’t deter companies from pursuing global standardization. Rather, it should make clear just how much work is involved in running separate systems and fragmented, siloed processes in each of your territories. A standardization initiative presents the opportunity for organizations to address the areas of their payroll operation that have evolved without systemization or careful planning.
For example, following a merger or acquisition, many organizations continue to run multiple payroll systems alongside one another to avoid the perceived difficulty of consolidating data with various terms and conditions. But by using short-term thinking to avoid the inconvenience of integration, companies waste time, effort, and money.
THE MICRO CHALLENGES
There’s also the payroll function’s reliance on different departments to consider. Payroll covers a broad range of processes from payslip generation to tax reporting, often leaning on other business functions (HR and finance, in particular) to get the data it needs to run efficiently. When it comes to standardization, as with any upgrade or optimization project, the needs of all relevant stakeholders must be taken into account – making it critical to utilize global payroll software that integrates properly with a company’s HCM or HRIS solutions.
Of course, there are many smaller, ‘grassroots’ barriers to standardization, but most are unique to each organization. One common problem most companies encounter, however, is the issue of data management.
All businesses have different ways of collecting the employee data required to run payroll, as laws require a variety of differing information across each country. One standard data capture framework is not going to work for every locality. For those companies working with a global HR system of record, it seems inevitable that each country will need to append payroll data locally for each pay run.
The need for such a high level of manual workarounds can make standardization feel like an elusive goal. But with better rules-based automation in global payroll solutions, companies can lessen the need for human intervention (thus minimizing the high risk of human error).
WHERE TO START WITH STANDARDIZATION
A standardization initiative should always begin with an ‘as is’ process map, reflecting how things work today. In the case of global payroll, that means generating several different process maps showing how each of country’s tasks are executed.
Process information should be gathered not from managers, but from the employees involved on the front lines. With parts of the process surely done differently across borders (or even within them), the next step is to identify the most efficient way of completing each step.
Once the optimum process for each step is defined, a new “best practices” process map can be used to create standard, skeleton process. The aim is to define an approach that works across all countries, but can be monitored and adapted to the needs of each country. The right global payroll services partner can help you delineate a smart global process that drives continuous error reduction and boosts efficiency over time.
MEASURING STANDARDIZATION SUCCESS
Technology clearly has a vital role to play in standardization – not only in the automation of processes and the consolidating and/or integrating systems, but also in the monitoring of performance.
Workflow tracking applications used in conjunction with a single global payroll platform enable businesses to monitor newly streamlined processes, providing a checklist that allows users to see exactly where they are in the pay cycle, what’s been completed and what hasn’t. That functionality enables stakeholders to identify where things go wrong – if and when they do – and to conduct more impactful Root Cause Analysis (RCA) to make fixes and remove errors over time.
Ultimately, no matter how non-systematized their starting point, multinational companies can achieve the benefits of global payroll standardization… but only with the right technology and automation on their side. An integrated global payroll solution can take payroll operations from good enough to truly great – learn more.