Trends 2018: Five global payroll industry shifts to watch Trends 2018: Five global payroll industry shifts to watch

Trends 2018: Five global payroll industry shifts to watch
07 Feb 2018

The global payroll industry is a relatively young one that it is evolving constantly. Changes are being driven by many factors including new technology, legislative developments and internal organisational shifts. Here are five key trends that we expect to see influencing the sector in 2018:

Trend 1: Cloud-based systems become the technology de jour

The top trend to watch out for in 2018 is that more and more multinationals will move their HR and payroll systems to the cloud. Cloud-based HR application providers will boost their market penetration and continue to globalise their software. 

These cloud-based systems will bring about new opportunities within the global payroll sphere as they should make it easier to align HR and payroll internationally. Over the year ahead, expect to see vendors enable seamless, one-stop data entry into HR and payroll systems, thereby enabling both functions to become more efficient.

Cloud-based applications will progressively replace dedicated global payroll systems or server-based interfaces, a move that will remove the need to enter data twice and speed up validation. HR systems will be able to hold all of the data that global payroll functions require AND enable them to connect in real-time to overseas payroll applications. This situation will act as a game changer for global payroll.

Trend 2: Data quality and integration are big preoccupations

The increasing adoption of cloud technology will make issues such as data integration and quality more challenging and important than ever. The more that payroll is automated, the fewer chances payroll teams will have to validate and correct ‘bad’ data. As a result, serious work will need to take place over the coming year to try and tackle the matter.

A growing requirement for integrating real-time data across systems will have a similar impact and put a strain on current ways of working in many global payroll operations. It will also place new demands on data interface tools. Therefore, we are likely to see the development of new technical protocols, and maybe even new global payroll processes, to deal with the situation over the year ahead. 

Trend 3: Payroll providers are forced to differentiate

Integrating cloud-based HR and payroll systems will not benefit all global payroll providers equally, not least because such activity requires a heavy investment. But it is likely to lead to closer relationships between payroll providers and members of the HR sector in many instances. 

Those vendors that have neither the financial resources nor the HR partnerships required to go down this route are expected to respond by staking out more distinctive positions. This situation could lead to a more segmented market, with different suppliers targeting services at different audiences, for example, small, medium-sized and large multinationals.

Trend 4: In-country providers shake up global payroll services market

The recent enormous growth in the global payroll sector has been enabled by deals undertaken between payroll providers and hundreds of in-country providers (ICPs), which comprise the backbone of the industry. ICPs may generally have a low profile, but the market largely relies on them to provide overseas payroll services.

But while ICPs entered into global payroll partnerships to boost growth, some are now finding that the costs of servicing these contracts are rising. The need to integrate HR and payroll systems is also leading to higher up-front development costs.

Moreover, some ICPs are finding that global deals can restrict their growth into the long run because ultimately they do not own the relationship with the client and so are not in a position to expand it. Others end up neglecting the development of their own brands by becoming too reliant on the global payroll business generated by their partners.

As a result, in 2018 ICPs are likely to start reassessing their own business strategies for providing global payroll services. Some will use their growing importance in the market to strike better deals with global providers, which could lead to higher costs and reduced profits. Alternatively it could result in more mergers between ICPs themselves or even see providers starting to buy them up in some instances.

Trend 5: US tax cuts drive growth in global payroll industry

The final trend to watch out for is outside the control of the payroll industry itself. President Trump's US tax reforms, which were passed at the end of last year, are likely to make overseas expansion more attractive for US multinationals.

The reforms, among other things, cut tax on foreign earnings that are repatriated back to the US. Such reforms will reportedly save Apple alone $47 billion.

Anything that makes international expansion more attractive for US companies has to be good for global payroll. Expect to see this tax reform if it comes to pass, drive higher demand for global payroll in 2018.

John Galvin is CEO of award-winning consultancy Galvin International, which provides independent, cost-effective and compliant advice for clients setting up global payroll functions. John was awarded Global Consultant of the Year at the inaugural Global Payroll Awards.

The global payroll industry is a relatively young one that it is evolving constantly. Changes are being driven by many factors including new technology, legislative developments and internal organisational shifts. Here are five key trends that we expect to see influencing the sector in 2018:

Trend 1: Cloud-based systems become the technology de jour

The top trend to watch out for in 2018 is that more and more multinationals will move their HR and payroll systems to the cloud. Cloud-based HR application providers will boost their market penetration and continue to globalise their software. 

These cloud-based systems will bring about new opportunities within the global payroll sphere as they should make it easier to align HR and payroll internationally. Over the year ahead, expect to see vendors enable seamless, one-stop data entry into HR and payroll systems, thereby enabling both functions to become more efficient.

Cloud-based applications will progressively replace dedicated global payroll systems or server-based interfaces, a move that will remove the need to enter data twice and speed up validation. HR systems will be able to hold all of the data that global payroll functions require AND enable them to connect in real-time to overseas payroll applications. This situation will act as a game changer for global payroll.

Trend 2: Data quality and integration are big preoccupations

The increasing adoption of cloud technology will make issues such as data integration and quality more challenging and important than ever. The more that payroll is automated, the fewer chances payroll teams will have to validate and correct ‘bad’ data. As a result, serious work will need to take place over the coming year to try and tackle the matter.

A growing requirement for integrating real-time data across systems will have a similar impact and put a strain on current ways of working in many global payroll operations. It will also place new demands on data interface tools. Therefore, we are likely to see the development of new technical protocols, and maybe even new global payroll processes, to deal with the situation over the year ahead. 

Trend 3: Payroll providers are forced to differentiate

Integrating cloud-based HR and payroll systems will not benefit all global payroll providers equally, not least because such activity requires a heavy investment. But it is likely to lead to closer relationships between payroll providers and members of the HR sector in many instances. 

Those vendors that have neither the financial resources nor the HR partnerships required to go down this route are expected to respond by staking out more distinctive positions. This situation could lead to a more segmented market, with different suppliers targeting services at different audiences, for example, small, medium-sized and large multinationals.

Trend 4: In-country providers shake up global payroll services market

The recent enormous growth in the global payroll sector has been enabled by deals undertaken between payroll providers and hundreds of in-country providers (ICPs), which comprise the backbone of the industry. ICPs may generally have a low profile, but the market largely relies on them to provide overseas payroll services.

But while ICPs entered into global payroll partnerships to boost growth, some are now finding that the costs of servicing these contracts are rising. The need to integrate HR and payroll systems is also leading to higher up-front development costs.

Moreover, some ICPs are finding that global deals can restrict their growth into the long run because ultimately they do not own the relationship with the client and so are not in a position to expand it. Others end up neglecting the development of their own brands by becoming too reliant on the global payroll business generated by their partners.

As a result, in 2018 ICPs are likely to start reassessing their own business strategies for providing global payroll services. Some will use their growing importance in the market to strike better deals with global providers, which could lead to higher costs and reduced profits. Alternatively it could result in more mergers between ICPs themselves or even see providers starting to buy them up in some instances.

Trend 5: US tax cuts drive growth in global payroll industry

The final trend to watch out for is outside the control of the payroll industry itself. President Trump's US tax reforms, which were passed at the end of last year, are likely to make overseas expansion more attractive for US multinationals.

The reforms, among other things, cut tax on foreign earnings that are repatriated back to the US. Such reforms will reportedly save Apple alone $47 billion.

Anything that makes international expansion more attractive for US companies has to be good for global payroll. Expect to see this tax reform if it comes to pass, drive higher demand for global payroll in 2018.

John Galvin is CEO of award-winning consultancy Galvin International, which provides independent, cost-effective and compliant advice for clients setting up global payroll functions. John was awarded Global Consultant of the Year at the inaugural Global Payroll Awards.