Is a software or managed services approach best for global payroll? Is a software or managed services approach best for global payroll?

Is a software or managed services approach best for global payroll?
31 Mar 2015

This is not so much a question of ‘which’ technology, but a matter of ‘who’ owns and controls it. You may even question ‘whether’ you need specific technology at all.

Lets start by considering why you might require technology. In the past I have defined global payroll as ‘a single strategy for managing and integrating all the payrolls within your organisation’.

One of the key steps towards this is to assess and standardise the interaction between payroll and the functions that sit upstream of it (HR, time and attendance, benefits etc) and those that sit downstream (finance, management reporting and banking).

In essence this is defining a directory or map of data required, a checklist of tasks to complete and a workflow of how it will all be passed through the payroll process (I use Excel).

The real challenge comes in how to accommodate each individual payroll within this overarching template. There is no universal payroll, so each individual payroll system or local processor will need a separate interaction. This is ostensibly a matter of filtering and relabelling the items in the data directory you have already defined and, again, you could do this with Excel.

I would almost be as bold as to say that if you cannot do it with Excel then you have not fully analysed and defined your requirements. Similarly, if your local provider is unable or unwilling to exchange simple, clear and understandable Excel spread sheets then this is not a failing of your global payroll strategy and more technology is unlikely to solve the problem.

Spreadsheets are fine for defining and blueprinting a global payroll strategy but they are not, necessarily, the most efficient and reliable way of implementing and managing one. In fact a plethora of incomprehensible spreadsheets is often the trigger for companies wanting to address global payroll but in this situation it is imperative to go back to the top of the page -technology will not, on its own, solve that problem. Understanding must come first.

Technology is just a tool. It is not a solution but a mechanism for delivering one. So, in ‘managing and integrating all the payrolls’ what does this tool need to do? It must:

• Represent your data directory
• Collect and collate data from upstream functions
• Provide data to each local payroll processor • Collect and collate data from each payroll processor
• Disseminate data to downstream functions • Deliver consolidated reporting (though this could be one of the separate downstream functions).

The information the system handles may well include what tasks are done, when and by whom.

So, whose technology should you use?

As a starting point - yours. Contrary to what many DIY enthusiasts tell their partners, a new tool is not a prerequisite of starting a new project. If you already have systems that are either the source or recipient of payroll data, for instance HR information systems (HRIS), finance and accounts (F&A) and business intelligence, then they will need to be tweaked anyway.

After all, there is little point in standardising the payroll input and output if you don’t similarly streamline those functions that output and input with it. If the result of this is that your existing systems then fulfil most or all of the requirements above then do you need to duplicate these functions in another piece of technology?

However, most companies don’t have existing, fully implemented global HRIS and F&A systems, but it is still useful to go through the stages above before you get to the question of who else’s technology to use, if for no other reason than it clarifies what you need and why.

So, whom should you buy technology from?

Or put it another way - who should control the technology you use? What this really means is should you buy technology from a software company or a managed service provider? Incidentally this is not a question of how the technology is delivered (local install, hosted, full SaaS) but from whom and for what.

There is, of course, no one right answer (or there would be no fun in writing about it). If you outsource payroll processing to a multi-country managed service provider (MSP) then they will undoubtedly have a global payroll management system (GPMS) that will act as a single point of interaction but it is unlikely that this is the complete or only solution. There are some broader considerations:

• As quoted, global payroll is a strategy for all your payrolls so does the technology cover all your payrolls? It is likely that there will be multiple components to a complete solution, groups of payrolls that are addressed in different ways, but make sure you are fitting the solutions to the requirement, not the other way round.

• Does the technology persist beyond the outsourcing service? The first point is about breadth of coverage but this is a matter of time; if you change ICP in a country do you still have use of the technology? Similarly, if you change ICP do you lose access to the historic data?

• What is the main function of the technology and who drives its configuration? In other words, is the technology there to enable the MSP’s service or to fulfil the objectives of your global payroll strategy?

It is unlikely that a single MSP will deliver all the global payroll requirements. There may be large existing in-house payroll processing in key countries, there may be small complicated expat payrolls across others or the implementation of the strategy may be subdivided into regions.

In these scenarios the GPMS from any one MSP is unlikely to satisfy the considerations above. Conversely, a single interface for multiple countries is one of the biggest benefits of using an MSP.

So this brings us back to the possible use of existing systems, interfacing directly with ICPs or in-house payrolls for some countries and a handful of regional or specialist service providers is still a lot simpler to implement than a separate interface for every country. Alternatively use a ‘lite’ GPMS setup to link your upstream and downstream functions to a number of sub-systems or providers.

The most important factor in what or whose technology to use is that the strategy must be global, even if there are multiple components to the delivery. As soon as you exclude payrolls from the strategy because they don’t fit a preferred solution then it is no longer global. If payroll wants its own seat at the top table, alongside HCM and finance then it needs to deliver strategic benefits across the entire organisation.

 

Piers Lambert

This is not so much a question of ‘which’ technology, but a matter of ‘who’ owns and controls it. You may even question ‘whether’ you need specific technology at all.

Lets start by considering why you might require technology. In the past I have defined global payroll as ‘a single strategy for managing and integrating all the payrolls within your organisation’.

One of the key steps towards this is to assess and standardise the interaction between payroll and the functions that sit upstream of it (HR, time and attendance, benefits etc) and those that sit downstream (finance, management reporting and banking).

In essence this is defining a directory or map of data required, a checklist of tasks to complete and a workflow of how it will all be passed through the payroll process (I use Excel).

The real challenge comes in how to accommodate each individual payroll within this overarching template. There is no universal payroll, so each individual payroll system or local processor will need a separate interaction. This is ostensibly a matter of filtering and relabelling the items in the data directory you have already defined and, again, you could do this with Excel.

I would almost be as bold as to say that if you cannot do it with Excel then you have not fully analysed and defined your requirements. Similarly, if your local provider is unable or unwilling to exchange simple, clear and understandable Excel spread sheets then this is not a failing of your global payroll strategy and more technology is unlikely to solve the problem.

Spreadsheets are fine for defining and blueprinting a global payroll strategy but they are not, necessarily, the most efficient and reliable way of implementing and managing one. In fact a plethora of incomprehensible spreadsheets is often the trigger for companies wanting to address global payroll but in this situation it is imperative to go back to the top of the page -technology will not, on its own, solve that problem. Understanding must come first.

Technology is just a tool. It is not a solution but a mechanism for delivering one. So, in ‘managing and integrating all the payrolls’ what does this tool need to do? It must:

• Represent your data directory
• Collect and collate data from upstream functions
• Provide data to each local payroll processor • Collect and collate data from each payroll processor
• Disseminate data to downstream functions • Deliver consolidated reporting (though this could be one of the separate downstream functions).

The information the system handles may well include what tasks are done, when and by whom.

So, whose technology should you use?

As a starting point - yours. Contrary to what many DIY enthusiasts tell their partners, a new tool is not a prerequisite of starting a new project. If you already have systems that are either the source or recipient of payroll data, for instance HR information systems (HRIS), finance and accounts (F&A) and business intelligence, then they will need to be tweaked anyway.

After all, there is little point in standardising the payroll input and output if you don’t similarly streamline those functions that output and input with it. If the result of this is that your existing systems then fulfil most or all of the requirements above then do you need to duplicate these functions in another piece of technology?

However, most companies don’t have existing, fully implemented global HRIS and F&A systems, but it is still useful to go through the stages above before you get to the question of who else’s technology to use, if for no other reason than it clarifies what you need and why.

So, whom should you buy technology from?

Or put it another way - who should control the technology you use? What this really means is should you buy technology from a software company or a managed service provider? Incidentally this is not a question of how the technology is delivered (local install, hosted, full SaaS) but from whom and for what.

There is, of course, no one right answer (or there would be no fun in writing about it). If you outsource payroll processing to a multi-country managed service provider (MSP) then they will undoubtedly have a global payroll management system (GPMS) that will act as a single point of interaction but it is unlikely that this is the complete or only solution. There are some broader considerations:

• As quoted, global payroll is a strategy for all your payrolls so does the technology cover all your payrolls? It is likely that there will be multiple components to a complete solution, groups of payrolls that are addressed in different ways, but make sure you are fitting the solutions to the requirement, not the other way round.

• Does the technology persist beyond the outsourcing service? The first point is about breadth of coverage but this is a matter of time; if you change ICP in a country do you still have use of the technology? Similarly, if you change ICP do you lose access to the historic data?

• What is the main function of the technology and who drives its configuration? In other words, is the technology there to enable the MSP’s service or to fulfil the objectives of your global payroll strategy?

It is unlikely that a single MSP will deliver all the global payroll requirements. There may be large existing in-house payroll processing in key countries, there may be small complicated expat payrolls across others or the implementation of the strategy may be subdivided into regions.

In these scenarios the GPMS from any one MSP is unlikely to satisfy the considerations above. Conversely, a single interface for multiple countries is one of the biggest benefits of using an MSP.

So this brings us back to the possible use of existing systems, interfacing directly with ICPs or in-house payrolls for some countries and a handful of regional or specialist service providers is still a lot simpler to implement than a separate interface for every country. Alternatively use a ‘lite’ GPMS setup to link your upstream and downstream functions to a number of sub-systems or providers.

The most important factor in what or whose technology to use is that the strategy must be global, even if there are multiple components to the delivery. As soon as you exclude payrolls from the strategy because they don’t fit a preferred solution then it is no longer global. If payroll wants its own seat at the top table, alongside HCM and finance then it needs to deliver strategic benefits across the entire organisation.

 

Piers Lambert