These predictions of what lies ahead over the year to come are based on the main changes we have witnessed in the global payroll market recently. As with all predictions, they may either be right or wrong, but hopefully at the very least, you will find them food for thought:
1. Industry focus moves from data privacy to data security
Data privacy was in the spotlight in 2018 due to the implementation of the General Data Protection Regulation (GDPR), which imposed new legislation across the European Union. As GDPR settles down though, the focus over the year ahead will switch to data security. Hacking attacks are increasingly targeting organisations’ financial data, and payroll operators are under particular threat from fraudsters due to the lucrative and sensitive personal data they hold.
As the devastating June 2017 Petya ransomware attack showed, hackers have learned how to infiltrate multinationals through vulnerable suppliers. Enterprises are reacting to this increased threat by giving their internal IT departments a bigger say in procurement decisions in order to ensure that new vendors have effective data security processes and infrastructure in place.
This should work in favour of organisations that operate global payroll functions, particularly if they are large. The bigger operations of most global payroll service providers when compared with domestic ones mean they have more resources to invest in data security infrastructure, such as big data centres with strong backup procedures and firewall protection. This helps them fulfil the increasingly tough procurement procedures being introduced by multinationals.
But this situation also brings with it disadvantages for global payroll functions. By their very nature, global payroll providers use more complex operational processes than domestic ones, with activity being based on a series of data transfers between members of a supplier’s wider ecosystem. The problem is that such complexity makes it more difficult for internal IT departments to understand and become comfortable with new global payroll contracts.
These contracts are also typically larger than those entered into with domestic providers or the in-house operations they are replacing. As a result, the impact of any potential attack can be more damaging as a single incident could affect sensitive employee data across multiple countries. This means that global payroll systems need to undergo high levels of scrutiny before being signed off by IT teams.
2. Global HR and payroll systems become increasingly integrated
The adoption of cloud-based HR systems, such as Workday and SuccessFactors, has seen explosive growth in recent years, and it is likely only be a matter of time before global payroll moves in this direction in a major way too due to huge opportunities to improve efficiency.
Because it becomes possible to transfer data more effectively in real-time between HR and payroll systems, the amount of time payroll professionals need to spend on the duplicate checking of inputs is significantly reduced. Employee-related data can be added directly to the HR system and transferred to payroll via a suitable interface.
In addition, as standardised HR systems are rolled out across more and more countries, it will likewise become easier to capture wider and deeper country-specific data, while also enabling information to be transferred seamlessly between multiple countries.
Despite the complex implementation projects, large investment, and strong partnerships with HR and payroll software suppliers that such a move requires, the signs are that the global payroll industry is already planning effectively for these changes.
One implication of this situation is that it is likely to tip the balance of the debate over whether finance or HR should take responsibility for payroll in favour of HR. By unifying data strategies and processing information across both systems, enterprises will be able to take full advantage of the potential synergies on offer.
The importance of teamwork
Ensuring a global payroll system is deployed effectively is critical as a poor implementation inevitably sours relations between clients and their vendors. It may also delay or prevent the full rollout of services covered by the global contract and makes a successful contract renewal much less likely.
But as the complexity of global payroll continues to increase, getting it right becomes harder and harder. This is a difficult area where it takes two to tango. In other words, a good implementation requires great teamwork between client and providers.
An important consideration here on the client side is to ensure you are prepared. Project management expertise and experience, dedicated resources and stakeholder engagement are all vital and good two-way communication skills are always key.
John Galvin is founder and CEO of award-winning international expansion company Galvin International, which has offices in the US and UK. His firm helps clients expand globally by providing one-stop commercial and compliance services in more than 100 countries. John is a former multinational CFO with over 20 years of international commercial and finance experience, and was named Global Consultant of the Year 2016 at the inaugural Global Payroll Awards.
OTHER STORIES THAT MAY INTEREST YOU
How systems integration could help transform payroll
Protecting your payroll data against cyberattack
These predictions of what lies ahead over the year to come are based on the main changes we have witnessed in the global payroll market recently. As with all predictions, they may either be right or wrong, but hopefully at the very least, you will find them food for thought:
1. Industry focus moves from data privacy to data security
Data privacy was in the spotlight in 2018 due to the implementation of the General Data Protection Regulation (GDPR), which imposed new legislation across the European Union. As GDPR settles down though, the focus over the year ahead will switch to data security. Hacking attacks are increasingly targeting organisations’ financial data, and payroll operators are under particular threat from fraudsters due to the lucrative and sensitive personal data they hold.
As the devastating June 2017 Petya ransomware attack showed, hackers have learned how to infiltrate multinationals through vulnerable suppliers. Enterprises are reacting to this increased threat by giving their internal IT departments a bigger say in procurement decisions in order to ensure that new vendors have effective data security processes and infrastructure in place.
This should work in favour of organisations that operate global payroll functions, particularly if they are large. The bigger operations of most global payroll service providers when compared with domestic ones mean they have more resources to invest in data security infrastructure, such as big data centres with strong backup procedures and firewall protection. This helps them fulfil the increasingly tough procurement procedures being introduced by multinationals.
But this situation also brings with it disadvantages for global payroll functions. By their very nature, global payroll providers use more complex operational processes than domestic ones, with activity being based on a series of data transfers between members of a supplier’s wider ecosystem. The problem is that such complexity makes it more difficult for internal IT departments to understand and become comfortable with new global payroll contracts.
These contracts are also typically larger than those entered into with domestic providers or the in-house operations they are replacing. As a result, the impact of any potential attack can be more damaging as a single incident could affect sensitive employee data across multiple countries. This means that global payroll systems need to undergo high levels of scrutiny before being signed off by IT teams.
2. Global HR and payroll systems become increasingly integrated
The adoption of cloud-based HR systems, such as Workday and SuccessFactors, has seen explosive growth in recent years, and it is likely only be a matter of time before global payroll moves in this direction in a major way too due to huge opportunities to improve efficiency.
Because it becomes possible to transfer data more effectively in real-time between HR and payroll systems, the amount of time payroll professionals need to spend on the duplicate checking of inputs is significantly reduced. Employee-related data can be added directly to the HR system and transferred to payroll via a suitable interface.
In addition, as standardised HR systems are rolled out across more and more countries, it will likewise become easier to capture wider and deeper country-specific data, while also enabling information to be transferred seamlessly between multiple countries.
Despite the complex implementation projects, large investment, and strong partnerships with HR and payroll software suppliers that such a move requires, the signs are that the global payroll industry is already planning effectively for these changes.
One implication of this situation is that it is likely to tip the balance of the debate over whether finance or HR should take responsibility for payroll in favour of HR. By unifying data strategies and processing information across both systems, enterprises will be able to take full advantage of the potential synergies on offer.
The importance of teamwork
Ensuring a global payroll system is deployed effectively is critical as a poor implementation inevitably sours relations between clients and their vendors. It may also delay or prevent the full rollout of services covered by the global contract and makes a successful contract renewal much less likely.
But as the complexity of global payroll continues to increase, getting it right becomes harder and harder. This is a difficult area where it takes two to tango. In other words, a good implementation requires great teamwork between client and providers.
An important consideration here on the client side is to ensure you are prepared. Project management expertise and experience, dedicated resources and stakeholder engagement are all vital and good two-way communication skills are always key.
John Galvin is founder and CEO of award-winning international expansion company Galvin International, which has offices in the US and UK. His firm helps clients expand globally by providing one-stop commercial and compliance services in more than 100 countries. John is a former multinational CFO with over 20 years of international commercial and finance experience, and was named Global Consultant of the Year 2016 at the inaugural Global Payroll Awards.
OTHER STORIES THAT MAY INTEREST YOU
How systems integration could help transform payroll
Protecting your payroll data against cyberattack
