COMPLIANCE
Russell Webb, business development manager, managed service payroll at Phase 3 Consulting, outlines the various payroll models available to international organisations and how to decide what’s best for your business Global, local and hybrid payroll models
T hroughout my experience in working with international and domestic payroll, I’ve come across two pivotal questions that remain unanswered. The first concerns the ongoing debate about the placement of payroll management within an organisational structure, with human resources (HR) and finance holding differing opinions about the reporting lines. The second question revolves around whether international organisations should opt for a global, local or a hybrid payroll model. While the former question has been extensively discussed, I would like to share my personal perspective on the latter. Cost, quality and risk When I started working in payroll, I held the common view of those not involved in payroll; isn’t it just pushing a button? Well, I soon found out saying that to a payroll veteran might land you in a spot of bother and that there’s quite a lot more to it. The first person to explain to me why payroll providers are so business critical set me straight. If you’re a global organisation with a footprint in multiple countries, you’d need a separate payroll office in every country you have a presence in, which would prove extremely expensive. Potentially you could regionalise these and have the office in Sweden pay your Danish or Finnish- based team, but even these countries have specific rules about payments across borders which make things more complex. Or you could outsource that responsibility to a payroll provider for a fraction of the price, which has a local presence in the form of a vetted partner or a local office. So, this made sense to me for
international companies, but most of these aren’t enterprises and have one geographical country they operate from. The answer here I’ve found is usually down to cost, quality and risk. It’s expensive to hire a payroll person, let alone a team, then equip them and provide payroll software that allows them to do their job. Then they need back- up in case of the unexpected, and this can also prove costly. Often, having a payroll provider perform some or all the process can ease the financial burden. “If you’re a global organisation with a footprint in multiple countries, you’d need a separate payroll office in every country you Global payroll Companies with large geographic footprints must make a choice with how they handle payroll, and these choices will often flow down from the home country with the largest footprint, at least I’ve found that’s usually the case when working have a presence in, which would prove extremely expensive”
with American companies. The burning question, is what is the most efficient and best choice for these companies? Is it to have one global payroll system that treats employees from Paraguay to the same experience as their Singaporean colleagues from onboarding to payslip? Is it to have a regional model where the Nordics support each other for example, or is it to have in- country teams that know the language, the nuances and give your employees in that country the ‘local’ experience? Or is it to find somewhere in between? When outsourced global payroll models started to appear many years ago, the premise was simple; payroll processing was performed in-country by local providers that understood the legislation, knew the nuances, spoke the language, processed the payroll, made the payments to employees or provided a bank file, then forwarded their outputs to the central payroll provider team to share with the central client team. It was a simple process model and it was effective. Finance reporting and payroll data was shared at the highest level, but in effect it was a local payroll model strung together by loose reporting channels. Multiple global payroll providers used this method and some still do, albeit with a more technological solution in place. As technology advanced and innovation and automation became the industry standard in most industries, companies started to take deeper looks at their HR and payroll setups and wanted to have this unified global employee experience for their employees; globalisation means that employees in Canada are just as important as the team in Hungary, right?
| Professional in Payroll, Pensions and Reward | October 2024 | Issue 10 18
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