The future looks bright. According to Stephen Bates, KPMG partner, the M&A market is “absolutely turbocharged at the moment.” He estimates that globally deal-making activities could reach $6 trillion by the end of the year. If the number strikes you as unrealistic, consider this, eight out of 10 global executives say they are ready to make an acquisition in the next three years, with inorganic growth their primary source of expansion.
While this is excellent news for business and job seekers, it can present some challenges for those responsible for managing payroll in an organization that is acquiring other companies and employees.
What are the potential problems when expanding into new jurisdictions?
As payroll professionals know only too well, the issues range from a lack of technology in these new companies to depending on external vendors in the local country to provide the payroll service. It can often mean that the payroll team must now oversee multiple different payrolls and systems with little or no integration of data or process, resulting in an inconsistent employee experience across the enterprise. This lack of consolidation data makes it challenging to generate accurate data for financial planning and analysis (FP & A) and workforce forecasting. Plus, there may also be payments issues regarding the availability of a local bank and the high cost of the fees associated.
Compliance is a perennial concern for payroll teams, but it mushrooms when faced with the prospect of having to understand and follow the country-specific employment and tax regulations in each new location. Employment and tax law is complex multifaceted and brings a host of issues if you fail to understand the local obligations and regulations.
To help payroll teams face these challenges, we recommend the following guidelines.
Define the project
Create a steering group where the sole purpose is the end-to-end delivery of a seamless payroll function for the newly expanded organization. Understand all lines of responsibility and how insights feed into the M&A team. This group must be responsible for documenting the risks and savings opportunities for each of the following:
A country-by-country mapping of payroll vendors, systems, pay calendars, and organizational structure
- All existing HCM and FMS platforms
- The tax, employment, and data security laws for new countries
- The entities in each country, their tax registration, and payment methods
- All current vendor contracts and end dates
- Risks associated with expansion into new international markets
- Compensation plans and any inherent risks/legal issues
- Past fines and penalties
- Payments to contractors
- Employee data shared pre-and post-merger and how to ensure it is secure to reduce GDPR risk
Complete a country analysis
Map the legislation from each jurisdiction will be critical to the effective management of the process. This will include employment and tax laws, entities, registrations, and the different payment methods used. Take time to map all country-specific payroll processes, terms of employment, compensation plans, employee benefits, and the risks associated with changes to any of these.
Conduct a comprehensive organizational analysis
Analyze all stakeholder organizations according to their structure, including payroll vendors and their contractual obligations, payroll calendars – technology, and training. More specifically, this will include a detailed audit of the platforms and systems operating across location, and ideally, a SWOT analysis that helps the planning team create a best-practice modelling or ‘ideal scenario’ of what the new organization will look like. Some companies may be using multiple systems, while others may be running much of the HR or Payroll function off Macros or Excel spreadsheets. Finding the best fit for all will be key to streamlining processes.
Complete a risk assessment
Analyze potential risks or threats in each new jurisdiction. Make sure to exercise due diligence around government policies, hostile immigration laws that affect the local talent pool, and currency fluctuation – dig deep and do the homework at the beginning of the process. Investigating any past fines or penalties in those organizations and/or jurisdictions is one good way to discover some of the mitigating risk factors associated with any new territory.
No two deals are the same, and some organizations may decide to keep each organization separate. Although integrating employees onto one payroll was difficult in the past, today, cloud platforms make this process a lot more seamless. A good global payroll solution should have functionality that makes the onboarding process a seamless transition.
Create a roadmap and savings report
Once the review has been completed, develop a roadmap for the integration of operations, a technology, and vendor review. This should include an estimate of the savings to be made by synching systems.
Factors to consider include:
- organizational structure
- implementation timelines
- responsibility for managing the transition
- calendar reviews
- new policies far commission on benefits
- new payment methods
- communication with staff
- transition to new policies
- communications with tax authorities.
Assess the payroll talent
It is essential to take a considered approach and recognize existing talent across all payroll locations and source appropriate new talent and skills (where needed) in executing new plans and strategies. The Global Payroll function will need to identify technology skills and projects when bringing IT systems under one roof and must be brought to the bid process if new vendors are required to meet expanded needs. Similarly, it will be essential to ensure that all payroll teams are sufficiently trained on any new systems arising out of the M&A activity.
Enable consistent employee experience
Acquiring talent is a leading driver for M&A. M&As can be stressful for employees due to the uncertainty, competing priorities, and a change in systems and processes. Ensuring there is a smooth transition is critical for employee retention and productivity.
With a single global payroll solution, fully integrated with your HCM, you can deliver a consistent approach across both companies for a better employee experience. Additionally, implementing employee self-service capabilities empowers employees and gives them control over their personal information, and can also reduce errors and delays to payroll from missing or incorrect data.
Now that all employees are under the one umbrella organization, document and plan the communication of changes to HR policies and compensation plans. Create a listing of compensation and benefits to perform a gap analysis. Be sure to agree on future HR policies and plan to incorporate these changes into payroll.
Create a post-merger plan
For a successful transition, payroll leaders should arrange regular meetings with HR, Finance, and key business stakeholders. All parties should agree on a detailed plan with milestones clearly delineated.
Be sure to include the following:
- the payroll function structure
- full legal entity listing and compliance review
- change managers and what their responsibilities include
- zero breakage: what it means and why it is important
- concurrent payroll runs and how you plan to operate them. We typically advise two concurrent payroll runs
- workforce planning and the need for additional staff to deal with increased queries & additional workload after an M&A
- severance process
- tax filing requirements, including Leavers and Starters
- payments test plan
- post-implementation follow-through
- existing payroll systems
- compliance risks, especially around the current and past employees of the acquired organization
- GDPR compliance
- employee onboarding experience.
Work with Finance to automate your GL
Fully automating your GL entries and consolidating a single chart of accounts will free your Finance and Payroll teams from manual processes, resulting in improved self-service and audit readiness.
Your global payroll solution is a key asset
Global expansion is one of the goals of the M&A and offers the perfect opportunity to evaluate the capability of your current payroll provider. The last thing you want is to work with a provider that can’t support the needs of the ever-changing global business landscape, so you must ensure your provider can implement and scale across all relevant operating regions.
Centralizing payroll information produces an invaluable single source of truth. Business leaders can access real-time analytics so HR, Payroll, and Finance leaders can quickly identify headcount synergies. These analytics can also support forecasting future payroll costs and investigating significant variances.
A truly global payroll service provider should support additional country requirements and provide a solution with the functionality needed. In the most basic terms, it’s about understanding the country reach of the provider and their ability to meet local prerequisites in any additional locations – open transparency for all before the contract remit is expanded will be vital. Businesses can then leverage the expertise of their payroll provider to facilitate a smooth transition of payroll operations.
Look for:
*Scalability
Can it grow with you, and to what extent is its global footprint?
*Country Specific Information
How will the solution enable you to meet employment and tax legislation in each location?
*Employee self-service
What capabilities does the solution offer to employees? View payslip? Update personal information?
*Payments
Will the solution help you ensure the timely payment of employees, statutory parties, and local partners no matter where they might be in the world?
Moving into new markets and expanding your organization through the acquisition of other companies looks to be a key strategy this year. How payroll teams manage and deliver on the fundamental elements of payroll- accurate and timely payments- will play a critical role in this success and in how new employees experience the transition. Having the right global payroll solution is crucial for accomplishing this momentous task.
Sign up for the Immedis Platform: A Day in the Life monthly demo.
About Immedis
Immedis simplifies international payroll management, offering organizations a single consolidated source of global payroll truth, comprehensive reporting capabilities, real-time data analytics, and a fully managed international payments solution while ensuring data security and compliance. Our technology-driven global payroll solution uses robotic process automation(RPA)and artificial intelligence(AI) to improve payroll efficiencies and generate data insights that empower payroll teams. Multiple certifications with leading HCM providers like Workday, UKG, SAP Success Factors, Ceridian, and Oracle means Immedis is enabling organizations to benefit from seamless data flow between payroll and HCM systems.
The future looks bright. According to Stephen Bates, KPMG partner, the M&A market is “absolutely turbocharged at the moment.” He estimates that globally deal-making activities could reach $6 trillion by the end of the year. If the number strikes you as unrealistic, consider this, eight out of 10 global executives say they are ready to make an acquisition in the next three years, with inorganic growth their primary source of expansion.
While this is excellent news for business and job seekers, it can present some challenges for those responsible for managing payroll in an organization that is acquiring other companies and employees.
What are the potential problems when expanding into new jurisdictions?
As payroll professionals know only too well, the issues range from a lack of technology in these new companies to depending on external vendors in the local country to provide the payroll service. It can often mean that the payroll team must now oversee multiple different payrolls and systems with little or no integration of data or process, resulting in an inconsistent employee experience across the enterprise. This lack of consolidation data makes it challenging to generate accurate data for financial planning and analysis (FP & A) and workforce forecasting. Plus, there may also be payments issues regarding the availability of a local bank and the high cost of the fees associated.
Compliance is a perennial concern for payroll teams, but it mushrooms when faced with the prospect of having to understand and follow the country-specific employment and tax regulations in each new location. Employment and tax law is complex multifaceted and brings a host of issues if you fail to understand the local obligations and regulations.
To help payroll teams face these challenges, we recommend the following guidelines.
Define the project
Create a steering group where the sole purpose is the end-to-end delivery of a seamless payroll function for the newly expanded organization. Understand all lines of responsibility and how insights feed into the M&A team. This group must be responsible for documenting the risks and savings opportunities for each of the following:
A country-by-country mapping of payroll vendors, systems, pay calendars, and organizational structure
- All existing HCM and FMS platforms
- The tax, employment, and data security laws for new countries
- The entities in each country, their tax registration, and payment methods
- All current vendor contracts and end dates
- Risks associated with expansion into new international markets
- Compensation plans and any inherent risks/legal issues
- Past fines and penalties
- Payments to contractors
- Employee data shared pre-and post-merger and how to ensure it is secure to reduce GDPR risk
Complete a country analysis
Map the legislation from each jurisdiction will be critical to the effective management of the process. This will include employment and tax laws, entities, registrations, and the different payment methods used. Take time to map all country-specific payroll processes, terms of employment, compensation plans, employee benefits, and the risks associated with changes to any of these.
Conduct a comprehensive organizational analysis
Analyze all stakeholder organizations according to their structure, including payroll vendors and their contractual obligations, payroll calendars – technology, and training. More specifically, this will include a detailed audit of the platforms and systems operating across location, and ideally, a SWOT analysis that helps the planning team create a best-practice modelling or ‘ideal scenario’ of what the new organization will look like. Some companies may be using multiple systems, while others may be running much of the HR or Payroll function off Macros or Excel spreadsheets. Finding the best fit for all will be key to streamlining processes.
Complete a risk assessment
Analyze potential risks or threats in each new jurisdiction. Make sure to exercise due diligence around government policies, hostile immigration laws that affect the local talent pool, and currency fluctuation – dig deep and do the homework at the beginning of the process. Investigating any past fines or penalties in those organizations and/or jurisdictions is one good way to discover some of the mitigating risk factors associated with any new territory.
No two deals are the same, and some organizations may decide to keep each organization separate. Although integrating employees onto one payroll was difficult in the past, today, cloud platforms make this process a lot more seamless. A good global payroll solution should have functionality that makes the onboarding process a seamless transition.
Create a roadmap and savings report
Once the review has been completed, develop a roadmap for the integration of operations, a technology, and vendor review. This should include an estimate of the savings to be made by synching systems.
Factors to consider include:
- organizational structure
- implementation timelines
- responsibility for managing the transition
- calendar reviews
- new policies far commission on benefits
- new payment methods
- communication with staff
- transition to new policies
- communications with tax authorities.
Assess the payroll talent
It is essential to take a considered approach and recognize existing talent across all payroll locations and source appropriate new talent and skills (where needed) in executing new plans and strategies. The Global Payroll function will need to identify technology skills and projects when bringing IT systems under one roof and must be brought to the bid process if new vendors are required to meet expanded needs. Similarly, it will be essential to ensure that all payroll teams are sufficiently trained on any new systems arising out of the M&A activity.
Enable consistent employee experience
Acquiring talent is a leading driver for M&A. M&As can be stressful for employees due to the uncertainty, competing priorities, and a change in systems and processes. Ensuring there is a smooth transition is critical for employee retention and productivity.
With a single global payroll solution, fully integrated with your HCM, you can deliver a consistent approach across both companies for a better employee experience. Additionally, implementing employee self-service capabilities empowers employees and gives them control over their personal information, and can also reduce errors and delays to payroll from missing or incorrect data.
Now that all employees are under the one umbrella organization, document and plan the communication of changes to HR policies and compensation plans. Create a listing of compensation and benefits to perform a gap analysis. Be sure to agree on future HR policies and plan to incorporate these changes into payroll.
Create a post-merger plan
For a successful transition, payroll leaders should arrange regular meetings with HR, Finance, and key business stakeholders. All parties should agree on a detailed plan with milestones clearly delineated.
Be sure to include the following:
- the payroll function structure
- full legal entity listing and compliance review
- change managers and what their responsibilities include
- zero breakage: what it means and why it is important
- concurrent payroll runs and how you plan to operate them. We typically advise two concurrent payroll runs
- workforce planning and the need for additional staff to deal with increased queries & additional workload after an M&A
- severance process
- tax filing requirements, including Leavers and Starters
- payments test plan
- post-implementation follow-through
- existing payroll systems
- compliance risks, especially around the current and past employees of the acquired organization
- GDPR compliance
- employee onboarding experience.
Work with Finance to automate your GL
Fully automating your GL entries and consolidating a single chart of accounts will free your Finance and Payroll teams from manual processes, resulting in improved self-service and audit readiness.
Your global payroll solution is a key asset
Global expansion is one of the goals of the M&A and offers the perfect opportunity to evaluate the capability of your current payroll provider. The last thing you want is to work with a provider that can’t support the needs of the ever-changing global business landscape, so you must ensure your provider can implement and scale across all relevant operating regions.
Centralizing payroll information produces an invaluable single source of truth. Business leaders can access real-time analytics so HR, Payroll, and Finance leaders can quickly identify headcount synergies. These analytics can also support forecasting future payroll costs and investigating significant variances.
A truly global payroll service provider should support additional country requirements and provide a solution with the functionality needed. In the most basic terms, it’s about understanding the country reach of the provider and their ability to meet local prerequisites in any additional locations – open transparency for all before the contract remit is expanded will be vital. Businesses can then leverage the expertise of their payroll provider to facilitate a smooth transition of payroll operations.
Look for:
*Scalability
Can it grow with you, and to what extent is its global footprint?
*Country Specific Information
How will the solution enable you to meet employment and tax legislation in each location?
*Employee self-service
What capabilities does the solution offer to employees? View payslip? Update personal information?
*Payments
Will the solution help you ensure the timely payment of employees, statutory parties, and local partners no matter where they might be in the world?
Moving into new markets and expanding your organization through the acquisition of other companies looks to be a key strategy this year. How payroll teams manage and deliver on the fundamental elements of payroll- accurate and timely payments- will play a critical role in this success and in how new employees experience the transition. Having the right global payroll solution is crucial for accomplishing this momentous task.
Sign up for the Immedis Platform: A Day in the Life monthly demo.
About Immedis
Immedis simplifies international payroll management, offering organizations a single consolidated source of global payroll truth, comprehensive reporting capabilities, real-time data analytics, and a fully managed international payments solution while ensuring data security and compliance. Our technology-driven global payroll solution uses robotic process automation(RPA)and artificial intelligence(AI) to improve payroll efficiencies and generate data insights that empower payroll teams. Multiple certifications with leading HCM providers like Workday, UKG, SAP Success Factors, Ceridian, and Oracle means Immedis is enabling organizations to benefit from seamless data flow between payroll and HCM systems.