A five-step plan for setting up foreign payrolls quickly and efficiently A five-step plan for setting up foreign payrolls quickly and efficiently

A five-step plan for setting up foreign payrolls quickly and efficiently
31 Jul 2015

Greg finally received his answers from corporate about the planned acquisition (see June issue). It will be an asset purchase that encompasses eight new internal locations and approximately 300 new people.

A couple of locations only have a handful of people and the largest has 70 employees. But currently the company has no operations in these countries and there will be no transition services agreement (TSA).

Thankfully there is a long lead-time until the financial close. But, typical of these situations, the close data is continually in play, which makes the payroll transition even more difficult. Greg was beginning to worry about how he was going to bring up these new locations in time. He starts building his plan, which is comprised of five key areas:

The implementation plan

Greg realised he needed to quickly put together a comprehensive plan for standing up payrolls in each of these new countries. The plan needed cascading time lines for each of the main components of a payroll implementation: data gathering, resource allocation, entity creation, payroll registration, vendor selection, bank account set-up, payment and deduction codes determination and gathering financial reporting requirements.

Timing of the transition is set by the deal constraints, but depending on whether an entity is needed in each country, will determine if the timeline is feasible. Greg consulted his list of countries. It appears three of the countries he could just register for payroll and the other five needed an entity. He planned to kick-off the meetings with ‘legal’ on Monday to address these issues. The next critical item was vendor selection. Timing is tight. Who could he find to help him get these payrolls up in time?

Vendor selection

There are so many choices on vendors. How does Greg decide which one can help him implement the payrolls on this tight of a timeline? For some of the smaller locations, which also needed entity set-up, he certainly can use the local accounting firm, which will also do all the corporate filing and taxes.

But for the other five countries he needed a larger organisation to support the infrastructure. So how does he find the right partner? First, he needs to determine what his company’s needs are for these payrolls. For example, does he need just need processing? Or does he also need additional support for filing? Local payroll expertise? Language support? Integration with HRIS and/or finance? Is he going to support these payrolls from his office in the UK or in each location with a local HR manager? Greg mulls over his options and decided on selecting a company that could support multiple locations. He contacts purchasing to help him put together a short RFP to source the right partner.

Data acquisition

This is tricky, Greg thinks. How do I get the employee data before the close date? I need to understand the payments and deductions by employee to better understand the benefits and compensation items that are included in each person’s pay. Typically with most acquisitions, the buyer is required to at minimum match the current compensation packages of the employees that are going with the acquisition. Additionally, Greg is concerned about how hard it will be to obtain this data from the divesting company, as these employees are a part of greater employee populations in these countries.

Therefore it might be difficult for the divesting company to separate the data of the employees going with the divestiture from the larger population that is staying behind, which may require them to compile and send the data manually. Also the data needs to be sent in a secure manner, which is yet another programme to be set-up as part of the implementation.

Greg determines it will be important to have good templates from his payroll vendor to pull the correct information as soon as possible. This data will also need to be refreshed periodically before go live so at the time of the transaction, it will be current for vacation balances, deduction totals, address information, bank account detail and compensation elements.

HR systems integration

Greg is concerned about how these payrolls will be managed going forward. Currently his company has a global HR system, which will include these new employees. Some of the companies’ current countries were integrated for payroll, but not all. Since these new populations were small and time is of the essence, Greg decides the lift would be too great to try to integrate HR at the same time as implementing these new locations. They certainly could be integrated in the future and the data gathered for each location could be back filled into the HR system. Mentally, Greg checks this box and moves on to financial reporting.

Financial reporting

Greg’s company also has global financial systems. Each country needs to be set-up with financial codes that are in alignment with the global chart of accounts. Since the financial systems will be in process of being implemented alongside the entity set-up, cost centre reports should be sufficient for financial reporting at go-live on the transaction date. Data will need to be input manually into the financial systems for payroll costs until a general ledger report can be automated.

Acquisitions with no TSAs are like a high wire act with no net. Everything has to be coordinated perfectly and at the eleventh hour, there can be no wind. Sometimes close dates get pushed back because payroll cannot be implemented, which has all kinds of financial and logistical ramifications. Greg is in for a long summer of intensity, but also of exciting challenges. He smiles to himself, presses save on his implementation plan and heads out for his last long weekend for the foreseeable future

Michele Honomichl 

Greg finally received his answers from corporate about the planned acquisition (see June issue). It will be an asset purchase that encompasses eight new internal locations and approximately 300 new people.

A couple of locations only have a handful of people and the largest has 70 employees. But currently the company has no operations in these countries and there will be no transition services agreement (TSA).

Thankfully there is a long lead-time until the financial close. But, typical of these situations, the close data is continually in play, which makes the payroll transition even more difficult. Greg was beginning to worry about how he was going to bring up these new locations in time. He starts building his plan, which is comprised of five key areas:

The implementation plan

Greg realised he needed to quickly put together a comprehensive plan for standing up payrolls in each of these new countries. The plan needed cascading time lines for each of the main components of a payroll implementation: data gathering, resource allocation, entity creation, payroll registration, vendor selection, bank account set-up, payment and deduction codes determination and gathering financial reporting requirements.

Timing of the transition is set by the deal constraints, but depending on whether an entity is needed in each country, will determine if the timeline is feasible. Greg consulted his list of countries. It appears three of the countries he could just register for payroll and the other five needed an entity. He planned to kick-off the meetings with ‘legal’ on Monday to address these issues. The next critical item was vendor selection. Timing is tight. Who could he find to help him get these payrolls up in time?

Vendor selection

There are so many choices on vendors. How does Greg decide which one can help him implement the payrolls on this tight of a timeline? For some of the smaller locations, which also needed entity set-up, he certainly can use the local accounting firm, which will also do all the corporate filing and taxes.

But for the other five countries he needed a larger organisation to support the infrastructure. So how does he find the right partner? First, he needs to determine what his company’s needs are for these payrolls. For example, does he need just need processing? Or does he also need additional support for filing? Local payroll expertise? Language support? Integration with HRIS and/or finance? Is he going to support these payrolls from his office in the UK or in each location with a local HR manager? Greg mulls over his options and decided on selecting a company that could support multiple locations. He contacts purchasing to help him put together a short RFP to source the right partner.

Data acquisition

This is tricky, Greg thinks. How do I get the employee data before the close date? I need to understand the payments and deductions by employee to better understand the benefits and compensation items that are included in each person’s pay. Typically with most acquisitions, the buyer is required to at minimum match the current compensation packages of the employees that are going with the acquisition. Additionally, Greg is concerned about how hard it will be to obtain this data from the divesting company, as these employees are a part of greater employee populations in these countries.

Therefore it might be difficult for the divesting company to separate the data of the employees going with the divestiture from the larger population that is staying behind, which may require them to compile and send the data manually. Also the data needs to be sent in a secure manner, which is yet another programme to be set-up as part of the implementation.

Greg determines it will be important to have good templates from his payroll vendor to pull the correct information as soon as possible. This data will also need to be refreshed periodically before go live so at the time of the transaction, it will be current for vacation balances, deduction totals, address information, bank account detail and compensation elements.

HR systems integration

Greg is concerned about how these payrolls will be managed going forward. Currently his company has a global HR system, which will include these new employees. Some of the companies’ current countries were integrated for payroll, but not all. Since these new populations were small and time is of the essence, Greg decides the lift would be too great to try to integrate HR at the same time as implementing these new locations. They certainly could be integrated in the future and the data gathered for each location could be back filled into the HR system. Mentally, Greg checks this box and moves on to financial reporting.

Financial reporting

Greg’s company also has global financial systems. Each country needs to be set-up with financial codes that are in alignment with the global chart of accounts. Since the financial systems will be in process of being implemented alongside the entity set-up, cost centre reports should be sufficient for financial reporting at go-live on the transaction date. Data will need to be input manually into the financial systems for payroll costs until a general ledger report can be automated.

Acquisitions with no TSAs are like a high wire act with no net. Everything has to be coordinated perfectly and at the eleventh hour, there can be no wind. Sometimes close dates get pushed back because payroll cannot be implemented, which has all kinds of financial and logistical ramifications. Greg is in for a long summer of intensity, but also of exciting challenges. He smiles to himself, presses save on his implementation plan and heads out for his last long weekend for the foreseeable future

Michele Honomichl