Like all overhead functions, global payroll departments are under continuing pressure to reduce their costs. This can be increasingly more difficult for global payroll managers particularly once short term, easier savings have already been made. However there are many ways to plan ahead and reduce costs without harming the quality of payroll service to your global employees.
How this article will help
The aim of this article is to give global payroll managers some longer-term methods for cutting the costs of global payroll. These methods will help to reduce your in-house headcount and your outsourcing bill. They will also make your global payroll operation more efficient.
For some of these actions, the benefits may be hard to quantify. They may not even result in immediate savings. However when taken together you will find these methods provide a cumulative benefit which can reduce the costs of your outsourcing and your in-house teams.
Standardizing global processes and policies
Payroll is a highly process driven area. Each month, year after year, global payroll teams and their outsourcing partners perform very similar processes. These processes often very substantially at a country-by-country level. For example, there may be different practices for processing salary increases in certain countries.
Benefits of standardizing practices
Standardizing processes at a global level is not a short-term initiative, but it has many benefits. It enables staff from another region or your global HQ to provide cover when in-country staff leave or need short term cover. You will find that your HQ team spend less time dealing with regional or in-country operations because they are easier to understand. This in turn leads to savings for local teams and outsourcers, as they have fewer HQ queries to deal with.
It can also make your regional or local teams more efficient. Global payroll managers can identify best practices in one country and train all other countries to implement these. This will help to raise standards as well as driving savings. Managers may find that their teams are spending time on tasks that can be delivered in a different way. For example, they may be helping their local business partners with payroll knowledge that could be provided centrally.
Focus on policies
Many processes are driven by corporate policy. For example, if your organization has different approvals across the world for mid-year salary increases or benefits, then global payroll teams will have to adopt a number of different practices to implement these different policies. This increases cost and inefficiency in the global payroll team.
By highlighting the negative impact of these variations on global payroll, global payroll managers can influence their leaders and other business partners to standardize policies at a global level. This in turn will make it easier for managers to implement consistent practices across their global payroll team.
Identifying areas to target
Global payroll managers can identify which processes and policies to target by asking themselves and their teams:
- are there any processes which are not standardized across countries?
- do local countries or regions have weak spots, i.e. areas where they are under-performing?
- do these areas routinely cause global payroll teams or outsourcers extra work?
- are there any countries where personnel policies are not followed?
- Are there any policies which vary locally and which make it difficult to standardize processes across global payroll?
After asking these questions, managers can draw up a list of processes which would have the greatest impact on improving the efficiency of their teams and outsourcers.
Identifying cost savings
Once managers have a list of processes which they wish to change, they can set deadlines for implementing the changes and targets for how much time and cost these will save. These savings can then be used to deliver budget cost reductions. As process change can be difficult to achieve, enlist help from other areas such as project management. These specialists are used to delivering complex projects and can help you ensure your savings are delivered on time. You can also ask your outsourcers to identify cost savings which they could make as a result.
Improving data quality
Global payroll teams are usually very reliant on data they receive from other sources, such as HR or sales commission teams. If this data is of poor quality, it can cause severe delays and unnecessary effort for payroll teams and their outsourcers. As a result, improving data at source can be a key driver of cost savings for global payroll.
Correcting bad data
If your global payroll team routinely receives bad data from their business partners, then the chances are that these partners are unaware of the extra work they are causing global payroll. Payroll managers can often see major improvements in data simply by discussing their needs with other departments and helping them to improve their own processes.
Eliminating data reconciliations
Global payroll managers should review whether their staff have to routinely compare two different sets of data. For example, does the salary and benefits data on the payroll system need to be compared against the HR system? If the same data is on different systems, this will create reconciliation headaches and additional work for your teams.
Any routine data checking by your team can usually be eliminated in one of two ways:
- Creating one data source, so that the same data is not held in two different places
- Automatically interfacing data transfer from one system to another, so that your teams can be sure the data is correct
Manual data entry
If there are any areas where global payroll teams need to manually input data, these manual touch points involve staff time and increase the risk of error. Usually global payroll teams receive data from other parts of the organization, so it may be possible to create automatic interfaces or electronic forms which can easily be uploaded.
Hard to understand areas
If you have time to plan ahead, it is also a worthwhile exercise to identify any areas of cost in global payroll which you do not fully understand. It is likely that these areas may contain inefficiencies or high costs which you can resolve.
A good example could be any repetitive expat calculations which are done for you by outsourcers. These may be more efficiently performed in house. Another example could be a country outsourcer who is performing tasks you do not understand. It is possible that these may be finance reporting tasks, which should be in the finance budget.
TOP TIP: the more difficult an outsourcer is to communicate with, the more likely it is that you will find savings when you fully understand what they do for you.
This article has presented a range of methods which can help reduce global payroll costs in the long term. These will enable you to plan ahead and build these into your own and your team’s objectives for the year ahead. They will hopefully improve the efficiency and performance of global payroll without having to make other cost savings that might be more damaging.
John Galvin is a Blue Marble Global Consultant residing in the UK.