Having worked in the global payroll/HR space for nearly three years now, I’m always asked (and rightfully so) how global companies are currently handling their employees or what their strategy is for managing their human capital internationally. The reality is, if you are already a multi-national company or corporation, you fall into either one of two buckets. I’ll call these buckets Thing #1 and Thing #2. For this discussion, I’m referring to organizations that have usually about 3+ countries.
Thing #1: Decentralized Approach
Think about the United States for a second. Imagine you have employees in 15 states, and in each state you have a payroll processor with their own system and way of submitting payroll. Even further, maybe in 3 of those states, you’re using a local CPA or even doing payroll manually. Either way, we’re talking about 15 different systems/providers and/or ways of submitting payroll. Now, use this same logic and apply it to 15 countries – this is the decentralized approach.
In a decentralized model, you have a different provider in each country, a different way of submitting payroll, and different types of reports being sent to you from 15 different vendors. You also have 15 different invoices. Now imagine trying to run a report on what your most recent global payroll spend was internationally. How long do you think that would take? And that’s just one example.
Usually when I’m speaking with an organization that’s set up this way, they are looking to somehow consolidate. Just because you are decentralized doesn’t necessarily mean you have to consolidate, but there are countless benefits to simplifying the global payroll process, accessing all countries through one system, and having consolidating reporting.
Thing #2: Using Global Managed Service
This is when you’ve given up on trying to keep track of 15 different vendors and have hired a company to manage it for you. In this example, you’re hiring a firm to “take care of it all” for you. This sounds a bit better than trying to manage 15 different countries, although what happens when something goes wrong and you aren’t sure where the error was? Many companies I speak with like trying to centralize global payroll in this way, but are running into other issues.
For example, not having visibility & control over their payroll- how do I make a change to a Salary amount and where is that change housed? Can I report on those changes whenever I want? How do I do that? Service is also something that often comes up as a challenge with this type of scenario because the Managed Service is acting as the service person, but what happens when the client has a question specific to Australia taxes? The Service person has to reach out to their in-country provider (ICP) to get the answer, and THEN loop back to the client. This creates bottlenecks in service.
What if there was a Thing #3? What’s the Next Level?
What if there was a way to consolidate all your countries into one interface with one submission process, have direct access to your data, and be able to have a hybrid Service model? I believe that’s the type of next-level environment and model that will be happening in the global payroll space; Technology + Hybrid Service + Reporting (Aggregated reports, yes please!). Lastly, integration – this is becoming a HUGE issue in the space now. Companies competing in the global space need to be more nimble and start playing nice in the sandbox to bridge the gap for a seamless client experience.
Managing global operations is challenging. If you are struggling with global payroll reporting (or lack of reporting), service issues, or need to manage costs, it might be time to rethink your global human capital management strategy. For more information, visit our solutions page: www.bluemarblepayroll.com/solutions