Considerations when sourcing local payroll services in a global environment Considerations when sourcing local payroll services in a global environment

Considerations when sourcing local payroll services in a global environment
30 Sep 2014

To most people on the ‘outside’ payroll appears to be a commodity process where people press a button and payments and pay slips appear as if by magic. For those on the ‘inside’ we know we are dealing with one of the most emotional and sensitive processes in any organisation, handling highly personal, sensitive and valuable information. Not to mention the distribution of large sums of money.

Data and financial protection is essential. So what are the risks of sourcing local services?

At this point, I am not going to bore you here with the ‘ins and outs’ of EU Directive 95/46/EC for data protection. Why not? Because it is a directive, not a real process.

I am not going to quote Sarbanes Oxley and the financial ring fencing and regulation that go with it. Why not? Because it is a regulation and certification and most credible payroll software comply by default.

I want to talk about more unpredictable factors. The people. Factors that are often ignored in high speed business, but can provide more peace of mind if treated in the right way.

Anyone can request due diligence information from any business. That does not guarantee any level of security. Just look at Enron and Lehman Brothers. The smaller the business; the easier it is to hide blemishes. In disparate countries it will often be the smaller companies you engage with. So how do you mitigate risk?

The risks around personal identity theft, fraud through personal financial information and theft of large sums of salary monies being transferred around the world are very real. Mitigation of these risks is far too complex to explain in the few words on these pages.

I have tried however to give you food for thought with a few of the options below. Do spend time considering the many other options and means of mitigating your risk, but also consider that somewhere you will need to take a leap of faith.

The Big Four: The low hanging fruit approach

They will take the risk out of the process and you may feel much more comfortable when you have experts involved. However, consider the contractual clauses of liability and that you will pay a price. These services do not come cheap.

Global outsourcing

Many such organisations claim to take the pain from your search and selection worries. In core countries they may have their own service centres. They engage different types of local partners and vendor manage the whole process.

Direct local partners

The most effective way of dealing with business on a day-to-day basis is through relationships. In the current electronic world we live in it is too easy to send an email or request a document rather than speaking on the phone. Form a relationship with your partner. Speak to them. This option can prove to be not only cost effective but also low risk. Whichever option you choose there is risk. It is all about balance.

General points to consider

• Do ‘due diligence’ but bear in mind the depth and detail may be unnecessary
• Relationships are key
• Know your partner. Talk to them. Use conference calls and video calls
• Be careful with odd requests for information of a sensitive nature – question why they need it
• Don’t transfer large sums of money where possible. Use FX agencies to transfer the money (not possible in all cases and all countries).

Kevin Parker is founder and Director of IntPay Ltd. Following a career in consumer goods, sales and marketing with The Princes Food Group, Britvic/Pepsico and others, Kevin moved into a business services role with IBM. He has a number of years experience in international payroll outsourcing. Based in the UK, IntPay specialise in the sourcing of local payroll partners in over 150 countries.

 

 

To most people on the ‘outside’ payroll appears to be a commodity process where people press a button and payments and pay slips appear as if by magic. For those on the ‘inside’ we know we are dealing with one of the most emotional and sensitive processes in any organisation, handling highly personal, sensitive and valuable information. Not to mention the distribution of large sums of money.

Data and financial protection is essential. So what are the risks of sourcing local services?

At this point, I am not going to bore you here with the ‘ins and outs’ of EU Directive 95/46/EC for data protection. Why not? Because it is a directive, not a real process.

I am not going to quote Sarbanes Oxley and the financial ring fencing and regulation that go with it. Why not? Because it is a regulation and certification and most credible payroll software comply by default.

I want to talk about more unpredictable factors. The people. Factors that are often ignored in high speed business, but can provide more peace of mind if treated in the right way.

Anyone can request due diligence information from any business. That does not guarantee any level of security. Just look at Enron and Lehman Brothers. The smaller the business; the easier it is to hide blemishes. In disparate countries it will often be the smaller companies you engage with. So how do you mitigate risk?

The risks around personal identity theft, fraud through personal financial information and theft of large sums of salary monies being transferred around the world are very real. Mitigation of these risks is far too complex to explain in the few words on these pages.

I have tried however to give you food for thought with a few of the options below. Do spend time considering the many other options and means of mitigating your risk, but also consider that somewhere you will need to take a leap of faith.

The Big Four: The low hanging fruit approach

They will take the risk out of the process and you may feel much more comfortable when you have experts involved. However, consider the contractual clauses of liability and that you will pay a price. These services do not come cheap.

Global outsourcing

Many such organisations claim to take the pain from your search and selection worries. In core countries they may have their own service centres. They engage different types of local partners and vendor manage the whole process.

Direct local partners

The most effective way of dealing with business on a day-to-day basis is through relationships. In the current electronic world we live in it is too easy to send an email or request a document rather than speaking on the phone. Form a relationship with your partner. Speak to them. This option can prove to be not only cost effective but also low risk. Whichever option you choose there is risk. It is all about balance.

General points to consider

• Do ‘due diligence’ but bear in mind the depth and detail may be unnecessary
• Relationships are key
• Know your partner. Talk to them. Use conference calls and video calls
• Be careful with odd requests for information of a sensitive nature – question why they need it
• Don’t transfer large sums of money where possible. Use FX agencies to transfer the money (not possible in all cases and all countries).

Kevin Parker is founder and Director of IntPay Ltd. Following a career in consumer goods, sales and marketing with The Princes Food Group, Britvic/Pepsico and others, Kevin moved into a business services role with IBM. He has a number of years experience in international payroll outsourcing. Based in the UK, IntPay specialise in the sourcing of local payroll partners in over 150 countries.