Executive Brief
Driving Globally Strategic Payroll
The Paradoxical Journey to Efficiency and Innovation
HR. Payroll. Benefits.
Executive Overview
Managing a global organization presents a wealth of opportunities – the possibilities of a nearly unlimited
customer base, the economies of scale achieved by tapping worldwide production efficiencies – the list
goes on. But with the potential of a global marketplace comes enormous complexity. Country to country,
there are different rules, different laws, different expectations. One thing however, is true no matter
where your business takes you.
People need to get paid.
Designing and implementing a truly global payroll system is a tall order for even the
most accomplished multinational organizations. Jeitosa Group International, in
collaboration with the ADP®, developed the Global Benchmarking Study (GBS) to research
the varying environments of global payroll among multinational organizations.
With the goal to uncover specific drivers that affect an organization’s ability to effectively
manage the processes and costs of operating in multiple countries, the multi-year
study selected organizations with more than 5,000 employees globally and at least 500
employees located in at least three different countries. All organizations provided their
individual data on the grounds of confidentiality and anonymity, with an understanding
that results are reported in aggregate only.
The research yielded key findings that demonstrate the journey towards greater
levels of efficiency, innovation, and effectiveness with respect to their global payroll
function. Broadly, there are four benefits that can be derived from an integrated
global payroll strategy:
•
•
•
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Cost Containment
Increased Efficiency
Reduced Compliance Risk
Talent and Employee Engagement
This report will highlight the nine practices of high-performing organizations despite
the ambiguity of the global economy. We will provide some concrete, step-by-step
recommendations to help global organizations in their journeys toward both greater
efficiency and enhanced innovation.
Driving Globally Strategic Payroll 2
Key Global Payroll Findings
1.
Efficiency is Important, But so is Innovation
The Global Benchmarking Study found that the field of global payroll is still maturing in
its ability to manage the paradox of efficiency and innovation.
High-performing organizations
are slightly more efficient (3%)
in their global payroll operation
and are significantly better at
leveraging innovative practices
(19%) in global payroll.
During a global recession, many organizations’ initial response is to cut back on costs
and seek more efficient ways to conduct operations. With the most recent global
recession, organizations have clearly been maturing in their efforts to find greater
efficiencies in global payroll, although making considerably less progress towards greater
innovation. Throughout the Global Benchmarking Study we see that high-performing
organizations understand the need to balance efficiency gains in order to enable greater
innovation advancements.
2.
Global Shared Service Models
Deliver Results
In the Global Benchmarking Study, organizations were asked how they manage the delivery
of payroll services across their global enterprise. They were given the option to choose from
the following five models that best described their global payroll service delivery model:
• Global Shared Services Model – a single, centralized service center that services
all locations in the organization
• Global/Regional Hybrid Model – a centrally guided payroll function with regional
(multiple countries) service centers located strategically across the globe
• Local/Global Hybrid Model – a centrally guided payroll function with the execution
of payroll delivery conducted at the location or country level
• Regional/Local Hybrid Model – a decentralized model with regional oversight of
the payroll function and local or country execution of payroll activities
• Local Country Model – an entirely decentralized model with individual locations
or country payroll departments operating independently from one another
The results show that high-performing organizations are more likely to be early adopters
of a global, centralized payroll service delivery model and have implemented that model
within the last three years. The remaining organizations in the study indicate that they have
had their global payroll delivery models in place for five years or more. This is an indication
that financially successful organizations are early adopters of the new global service
delivery models for payroll, while other organizations are more likely to keep their longstanding, localized models in place. A reasonable conclusion to be drawn from this finding
is that top-performing organizations are better able to convert plans into action than their
counterparts who are not as competitive in the marketplace.
High-performing organizations
are more likely (20%) than
other organizations to adopt a
more globally-managed payroll
delivery model and more likely
(53%) than low performing
ones to have implemented a
new service delivery model
within the last three years.
Driving Globally Strategic Payroll 3
3.
Global Visibility and Accountability Is Key
Not surprisingly, organizations with more globally-focused payroll delivery models also
have reporting structures that are aligned to support these models. High-performing
organizations are far more likely to have a global payroll team that has both visibility to and
accountability for the functioning of payroll at the country level across the entire enterprise.
4.
A Balanced Approach to Global
Payroll Sourcing Strategy
Highly successful organizations are rarely taking a single
ideological approach to their global payroll sourcing strategy –
they tend to pursue a hybrid strategy to best meet the needs
of the business.
In this study, participants were asked to describe their primary
global payroll sourcing approach and their responses were
scored according to the following scale:
• In-house Vendor Software – proprietary vendor software,
licensed by the client and run in-house on the client’s
own servers
• Hybrid In-House and Outsourced Services – a combination
of both in-house run software and outsourced services
through a third-party provider
5.
High-performing organizations
are more likely (10%) to establish
global lines of authority for
payroll, as opposed to maintaining
autonomous in-country functions.
• Hosted/ASP Outsourcing – proprietary vendor software
hosted by the vendor or by a third-party provider who
provides basic processing services
• Managed Services Outsourcing – outsourcing software
with additional levels of service provided
• Full BPO Outsourcing
The findings from this study clearly show that high-performing
organizations are far more likely to pursue a hybrid strategy,
balancing both in-house software and outsourced solutions
as appropriate.
High-performing organizations
are more likely (13%) to leverage
a hybrid sourcing strategy –
balancing in-house functions
with outsourcing – as opposed to
embracing one single approach.
Global BPO Doesn’t Have to Mean
Reduction in Force
When pursuing an outsourcing strategy, financially successful organizations report
significantly less headcount reduction and less need for staff role realignment in their local
country payroll staff. Only 7% of high-performing organizations report that outsourcing
resulted in some headcount reductions and none whatsoever report major headcount
reductions as a consequence of outsourcing. In contrast, over half (53%) of low-performing
organizations report headcount reductions as a result of outsourcing, with a third (33%)
describing their headcount reductions as major.
Only 7% of high-performing
organizations report that
outsourcing resulted in some
headcount reductions and
non whatsoever report major
headcount reductions.
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6.
Fewer Vendors Drives Greater Efficiency
A major challenge to finding greater efficiency in delivering
payroll services across a global enterprise is the dependency on
local vendors to handle the diverse local laws and regulations
that govern country payroll practices. Until recently, there were
few providers available in the market that could provide payroll
services across a large number of countries.
The vendor landscape within the organizations participating in
this study was evaluated according to the following options:
• Multiple payroll vendors in each country
• Payroll vendors consolidated at the country level
• Several clusters of payroll vendors across the
global operation
• Two to four payroll vendors that service the entire
global operation
• One global payroll vendor for the entire enterprise
7.
While consolidating vendors is a solid method of pursuing greater
efficiency, the Global Benchmarking Study finds that this process
is still in its infancy.
High-performing organizations, however, report that they are
either planning to or currently in the process of consolidating
payroll vendors, as opposed to low-performing organizations
who report that they have no plans for consolidation.
Global HCM Key Platform for
Employee Self-Service
The Global Benchmarking Study found a very low level of self-service within global
payroll. In fact, high-performing organizations are even less likely than the average
organization to utilize employee and manage self-service from their payroll vendor.
Through comprehensive discussions with participating organizations, it appears that
most take advantage of the self-service functionality provided by their global HCM
system. Most organizations have put in place key integrations between their HR and
payroll systems (53%), so leveraging self-service from the HCM system provides a
single and consistent interface for system users, lowering the learning curve and
increasing adoption.
8.
High-performing organizations
are significantly more likely
(42%) to be currently planning
or in the process of reducing
their number of payroll vendors
to as few as possible across
the globe.
High-performing organizations
are less likely (11%) to utilize
self-service options offered
by their payroll vendor, rather
opting for an integrated approach
within their HR system.
Metrics Matter
Establishing a set of operational metrics is vital to processing quality control. However,
some organizations are much better at using techniques such as root cause analyses
and predictive analytics to help guide future decisions.
Top-performing organizations in the Global Benchmarking Study are 23% more likely than
low-performers to have a mature metrics framework, utilizing evidence-based methods
for analytical decision support. Low-performing organizations report greater use of basic
metrics and lagging indicators or, in many cases, no metrics frameworks in place at all.
High-performing organizations
are more likely (23%) to employ
advanced metrics to manage
quality and make informed
decisions about their global
payroll operation.
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9.
Building a Global Mindset
High-performing organizations pursue innovation and efficiency by moving toward
regional and global shared services centers. These organizations place greater emphasis
on international, cross-cultural, and global payroll teams who are not solely focused
on the clerical and operational tasks involved in supporting a single country. As discussed
previously, high-performing organizations show fewer headcount reductions with
outsourcing, indicating that their payroll staff is more likely involved in higher level
strategic and process-oriented activities.
High-performing organizations
are more likely (36%) to build a
more global mindset across their
payroll staff as compared to their
lower performing counterparts.
While most organizations in the study describe their payroll team members as having a
“local country mindset”, financially successful organizations are significantly more likely
(35%) to describe their teams as having a regional or global process-oriented mindset as
compared to their less successful counterparts.
Conclusion
The notion of “globally strategic payroll” is indeed a paradox. Once largely considered a
purely administrative function, global economic forces and technological advances have
propelled payroll into becoming a genuinely strategic function within the organization.
The constant charter to “do more with less” has led leading payroll executives to seek
strategies to drive both efficiency and innovation in their payroll organizations.
Creating global service delivery models with clear accountabilities at all levels of the
organization, coupled with consolidation of vendors and the building of a global, mindset
among the payroll staff, are clear pathways that high-performing organizations have
chosen to achieve greater levels of efficiency, while controlling costs, reducing compliance
risk and winning the never-ending war for global talent.
5 Recommendations to Drive Global Efficiency and Innovation
• Understand your organization’s corporate strategy and business model and seek to
implement practices that support its goals and strategies.
• Systematically involve your HR professionals from local and regional business units
in strategic business planning efforts.
• Organize the HR function on a more global basis and standardize HR operations to
improve processing, reduce costs, and drive business performance.
• Seek “to be as global as possible, as local as necessary” by evaluating which
processes can bring the greatest benefit to your organization by being global and
which ones make the most sense to keep local.
• Take a systematic and process-driven approach and evaluate HR functions processby-process to determine the highest priority processes for global integration and
workflow-enablement.
Driving Globally Strategic Payroll 6
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