Creating a blueprint for a global payroll system Creating a blueprint for a global payroll system

Creating a blueprint for a global payroll system
04 May 2016

In past issues I have written about why and how to build a global payroll strategy. Stressing that global payroll is country agnostic - focusing on how all payrolls fits within the organisation as a whole without being influenced by the ways and means of any particular payroll.

However, having defined the strategy, we now need to look at each payroll, in all countries, to see how they compare with the strategy and what requirements of their own they throw up.

Status quo

There are four strands to this: how, who, what and why? • How is the payroll being processed? In-house, outsource, local software, ERP, spreadsheet, government tool.

• Who is running it? Local admin, shared service centre, payroll provider, accountant.

• What do they do? Build up to gross, gross to net, statutory reporting, payslips production, employee registration.

• Why is it done this way? Convention, preference, lack of local outsourcers, limited government registered processors, skills availability.

The idea is to understand the key features of each payroll; it is not to learn how to run them all. It will identify whose expertise to call upon in the next step and any limiting factors in choosing a solution later on.

Document the detail

It is now necessary to nail down some clear, documented facts before making an objective assessment of the gap between the payrolls and the strategy. The emphasis is still on what is needed to bring payrolls in line with the strategy, not on how to deliver each one locally.

Obligation

A checklist or workflow of key actions - what needs to be done, when and by whom. This should include things like provision of employee data to the payroll process, statutory documentation/registration, statutory reporting, statutory payments and financial/management reporting.

The ‘who’ need not be individuals but roles which could be fulfilled by different parties, if necessary. Corporate strategies or policies often have undertones of assumed wholesale change but the quickest and cheapest solution is often to change as little as possible which is why the global payroll strategy should start with the view of the destination, not the journey.

Information

Mention of master data or core data is often enough to bring on an attack of the vapours outside of IT but it is possibly the most important element in connecting a wide range of payrolls to the core corporate systems and processes. Personally I am not keen on the terms ‘master’ or ‘core’ as it is inclined to give precedence to one view or system and to leave out peripheral stuff. It is a tad techie too.

Think of it as a data dictionary or index, a lookup list of all the pieces of information that are in use and friendly transitions for each. It need not be complicated - a spreadsheet with a column for the ‘corporate’ or ‘common’ name for each item and then a column added for each country or system or process.

Each column should then indicate the local name or label for each item and colour coding or markings for those that are not used or are mandatory. With each new column it will be necessary to add a few extra rows but it is surprising how quickly this becomes minimal as the same items are used over and over - just with local names.

An important aspect to this exercise is that it identifies the information required and output that is specific to each payroll and is additional to the common details.

Conversely, it should be limited to information that is exchanged with other parts of the organisation and not get bogged down in details that are entirely internal to the payroll process. For example, if an employee tax code is provided by the local statutory authority to which the results are then reported, then it is not needed by the central organisation.

It is advisable to make a similar, yet separate, catalogue of payment and deduction types and organisational structure (e.g. department, cost centre, project etc). Again, most of the gross items will be similar and the statutory withholdings or contributions will be fairly fixed per country - there are just an awful lot of them in some countries. This exercise will also be the feeder into general ledger reporting.

Creating this directory or index is not difficult, but it is onerous. The skills to harvest the details from the existing local administrators will be more pertinent than payroll expertise.

Mind the gap

Once the payroll details are amassed it is time to start comparing the characteristics of each against the requirements set out in the global payroll strategy.

The objective is to ascertain whether they comply with the strategy? If not, then why not and could they? This also has two aspects to it. Could the current provision of payroll be brought into line with the strategy and, if not, could another solution tick all the boxes? In other words, is the current option incompatible or are there unavoidable circumstances?

A number of patterns should start to emerge. One will be based on consistency with the strategy and another will be based on profile (in-house/outsourced, size, region, adoption of other corporate systems).

It would be advisable to summarise these groupings on a matrix or chart as they will be the main reference point for planning the implementation of the global payroll strategy and in selecting the solutions that are most likely to achieve it.

Review the strategy

Consider if there are any major inconsistencies between the strategy and the payroll details documented. If there are then this is often because the strategy is too presumptive or prescriptive of how the individual payrolls are delivered rather than sticking to a higher level framework into which the payrolls will fit. This review is not, however, an invitation to alter the strategy to make it easier to implement or to sideline troublesome payrolls.

Planning for a global payroll implementation

This will be discussed in more detail next month but there are a few points to highlight at this stage:

• Some payrolls may never by fully consistent with the strategy, accept this and mitigate

• Where the current delivery of a payroll is, or could be made, consistent then avoid wholesale replacement

• One solution will not fit all: adopt a tiered and phased approach.

Piers Lambert is an international payroll specialist with experience and expertise in the integration and implementation of processes and systems for managing multi-country payroll. Find out more at alambert.ltd.uk.

In past issues I have written about why and how to build a global payroll strategy. Stressing that global payroll is country agnostic - focusing on how all payrolls fits within the organisation as a whole without being influenced by the ways and means of any particular payroll.

However, having defined the strategy, we now need to look at each payroll, in all countries, to see how they compare with the strategy and what requirements of their own they throw up.

Status quo

There are four strands to this: how, who, what and why? • How is the payroll being processed? In-house, outsource, local software, ERP, spreadsheet, government tool.

• Who is running it? Local admin, shared service centre, payroll provider, accountant.

• What do they do? Build up to gross, gross to net, statutory reporting, payslips production, employee registration.

• Why is it done this way? Convention, preference, lack of local outsourcers, limited government registered processors, skills availability.

The idea is to understand the key features of each payroll; it is not to learn how to run them all. It will identify whose expertise to call upon in the next step and any limiting factors in choosing a solution later on.

Document the detail

It is now necessary to nail down some clear, documented facts before making an objective assessment of the gap between the payrolls and the strategy. The emphasis is still on what is needed to bring payrolls in line with the strategy, not on how to deliver each one locally.

Obligation

A checklist or workflow of key actions - what needs to be done, when and by whom. This should include things like provision of employee data to the payroll process, statutory documentation/registration, statutory reporting, statutory payments and financial/management reporting.

The ‘who’ need not be individuals but roles which could be fulfilled by different parties, if necessary. Corporate strategies or policies often have undertones of assumed wholesale change but the quickest and cheapest solution is often to change as little as possible which is why the global payroll strategy should start with the view of the destination, not the journey.

Information

Mention of master data or core data is often enough to bring on an attack of the vapours outside of IT but it is possibly the most important element in connecting a wide range of payrolls to the core corporate systems and processes. Personally I am not keen on the terms ‘master’ or ‘core’ as it is inclined to give precedence to one view or system and to leave out peripheral stuff. It is a tad techie too.

Think of it as a data dictionary or index, a lookup list of all the pieces of information that are in use and friendly transitions for each. It need not be complicated - a spreadsheet with a column for the ‘corporate’ or ‘common’ name for each item and then a column added for each country or system or process.

Each column should then indicate the local name or label for each item and colour coding or markings for those that are not used or are mandatory. With each new column it will be necessary to add a few extra rows but it is surprising how quickly this becomes minimal as the same items are used over and over - just with local names.

An important aspect to this exercise is that it identifies the information required and output that is specific to each payroll and is additional to the common details.

Conversely, it should be limited to information that is exchanged with other parts of the organisation and not get bogged down in details that are entirely internal to the payroll process. For example, if an employee tax code is provided by the local statutory authority to which the results are then reported, then it is not needed by the central organisation.

It is advisable to make a similar, yet separate, catalogue of payment and deduction types and organisational structure (e.g. department, cost centre, project etc). Again, most of the gross items will be similar and the statutory withholdings or contributions will be fairly fixed per country - there are just an awful lot of them in some countries. This exercise will also be the feeder into general ledger reporting.

Creating this directory or index is not difficult, but it is onerous. The skills to harvest the details from the existing local administrators will be more pertinent than payroll expertise.

Mind the gap

Once the payroll details are amassed it is time to start comparing the characteristics of each against the requirements set out in the global payroll strategy.

The objective is to ascertain whether they comply with the strategy? If not, then why not and could they? This also has two aspects to it. Could the current provision of payroll be brought into line with the strategy and, if not, could another solution tick all the boxes? In other words, is the current option incompatible or are there unavoidable circumstances?

A number of patterns should start to emerge. One will be based on consistency with the strategy and another will be based on profile (in-house/outsourced, size, region, adoption of other corporate systems).

It would be advisable to summarise these groupings on a matrix or chart as they will be the main reference point for planning the implementation of the global payroll strategy and in selecting the solutions that are most likely to achieve it.

Review the strategy

Consider if there are any major inconsistencies between the strategy and the payroll details documented. If there are then this is often because the strategy is too presumptive or prescriptive of how the individual payrolls are delivered rather than sticking to a higher level framework into which the payrolls will fit. This review is not, however, an invitation to alter the strategy to make it easier to implement or to sideline troublesome payrolls.

Planning for a global payroll implementation

This will be discussed in more detail next month but there are a few points to highlight at this stage:

• Some payrolls may never by fully consistent with the strategy, accept this and mitigate

• Where the current delivery of a payroll is, or could be made, consistent then avoid wholesale replacement

• One solution will not fit all: adopt a tiered and phased approach.

Piers Lambert is an international payroll specialist with experience and expertise in the integration and implementation of processes and systems for managing multi-country payroll. Find out more at alambert.ltd.uk.