Global businesses have multiple human resources (HR) responsibilities to manage across diverse populations, time zones, and cultures. These include payroll, benefits distribution, talent development, and culture management. For many years, larger companies have evolved to perform these functions from regionally placed shared service centers, including payroll shared services. This has been an effective strategy to achieve economies of scale.
This process also drives high levels of operational quality, consistency, and predictability—a plus for business. But even when using a strong shared services platform, companies must still rely on a number of outside partners for the full execution of services. These partners include benefits administrators, payroll providers, professional employment organizations, recruiters, etc.
Choices must be made to ensure streamlined processes as well as positive morale for both international and domestic employees. The organization needs to align all existing—and future—regional service centers with its global partners. This is especially true in the payroll arena where meeting deadlines and ensuring accuracy are paramount to employee engagement.
Aligning on Strategy, Location
So, how do you ensure your in-country partners are aligned with your shared services centers? First, we recommend the establishment of a strong global framework—a governance model—that can be implemented uniformly in each center. This would include defining partner-relations roles to be held by team members in each center, such as contract manager, program manager, incident manager, etc. It also includes creating a uniform set of success metrics and service level agreements specific to each function or service. Finally, an effective governance model will follow a deliberate “rhythm.” Decide how often staff and partners need to talk, share information, and check on the status of projects or pending issues. We recommend basing such meetings or calls on a set of reports that can be distributed ahead of time so that no time is wasted.
Once you have your governance model down on paper, we recommend sharing it with your staff and all your partners.
Sharing your goals and expectations with employees as well as with each partner is key to alignment. If your shared service centers are well-established, then you likely already have well-documented standard operating procedures. But this may be a good time to revisit them to make sure they are up to date and as uniform across all centers as you want them to be. A formal rollout or kickoff meeting is a great way to launch your governance model and alignment initiative. Remember, whatever flow exists today between each center and its particular partners will need to be disrupted to a degree, and that type of change is never easy. A strong kickoff event and ongoing rhythm will demonstrate to all parties that you are serious about achieving and maintaining alignment.
Going forward, when establishing new partnerships in your various countries, such as a consolidated payroll service, be sure to keep strategies and expectations consistent for each partner.
Yes, there will always be the need to accommodate some country-specific peculiarities within your framework, but a large majority of your framework can be the same across your entire footprint. We recommend maintaining good, crisp documentation on any country-specific exceptions that you choose to include in your processes and/or metrics.
Relying on Partners to Supplement Regional Service Centers
According to Deloitte, 50% of companies with more than 100,000 employees use payroll shared services. At the other end of the size spectrum, 70% of companies with fewer than 1,000 employees do not leverage shared services and have payroll reporting to HR. Between these two extremes are a sea of employers that, as they mature, are making the shift from localized HR delivery to shared service centers. This shift can create a risky gap for international employers, as valuable expertise in local regulations goes out the door when jobs are shifted to the center. After all, there are different labor laws in each country and different payroll requirements that need to be respected. The local rules around taxation, withholding, reporting, payments, etc., do not go away as you shift the location of your resources.
To close the expertise gap, it’s always a good idea to select providers with demonstrated expertise in your markets (no matter how big or small the population in each country). Partners that are local experts will help with your compliance concerns. This is true for both large and small organizations. Confirm with providers that they have the resources and knowledge to manage compliance on your behalf, and explore what types of assurances and guarantees they offer.
Avoid Complications in Long-Tail Countries
Multinationals with a diverse geographic footprint will have some countries with smaller populations (i.e., 1 to 500 employees in the country) where the cost of doing business internally is disproportionately high. These are known within the payroll industry as “long-tail countries,” and they can be particularly difficult to manage. Long-tail countries lack scale that makes them suitable for the shared services concept, and often they are the more exotic, developing countries as well.
It’s almost impossible to source and maintain deep expertise in shared services for these long-tail countries. Fortunately, there are specific vendor partners in the market that specialize in servicing many long-tail countries at once. It’s best to leverage this type of vendor for smaller populations, especially for those that have regional service centers in proximity to shared service centers. Being in a similar time zone will make it easier to obtain assistance when you need it.
Your organization can avoid issues and ensure alignment in your payroll shared services by relying on a streamlined vendor approach such as a consolidated global payroll solution.
This comprehensive global service increases your efficiency by capturing many countries under one contract and keeping all communications under one roof. You will find that some vendors in this category will manage every aspect of the payroll function for you, including:
• Auditing changes (as they come in)
• Processing payroll
• Treasury management/foreign currency exchange
• Local compliance
• Statutory filings
The consolidated model for international payroll offers the best balance of time savings, accuracy, and turn-key scalability for companies of all sizes and helps keep shared services in alignment.
Be sure to also read this issue’s Professional Spotlight on Jim Birch, Senior Director, Partner Management at Celergo.
Celergo is a technology-enabled provider of global payroll management solutions to multi-national employers. Its mission is to simplify payroll for its customers by making 150 countries look and feel like just one, while guaranteeing compliance with all local and international requirements. Visit Celergo at celergo.com.