Shared service centers (SSCs) have been in existence for many years, implemented primarily to reduce business costs. However, as the competition for work has driven up prices in offshore locations, the cost benefits of SSCs have become marginalized—and new drivers, such as increased efficiency through automation, are now shaping its future.
Being lumped into a broader back-office SSC has long limited the potential of the global payroll function. However, now payroll has the chance to embrace a new generation of efficiency-focused shared services—thanks to the opportunities afforded by advancements in automation and analytics.
The Here and Now
A multi-country payroll function run as part of a broader, global back-office SSC typically reports into finance or HR. According to PwC findings—in organizations with fewer than 10,000 employees—finance is usually in charge. In companies employing more than 10,000 employees, payroll is often run by HR.
Consistent with the findings from the PwC survey, we find that payroll shared services are typically deployed using one of the following three models:
1. The Centralization Model—This is the most common model for payroll shared service centers whereby all of your business support services are in a single global center.
2. Regional Model—Something of a stepping stone to the centralized system, the regional model involves running several SSCs rather than one, providing services on a region-by-region basis.
3. Capability-Led “Centers of Excellence” Model—This focuses on global organizations playing to their strengths by moving individual business processes to the location that houses the greatest skill and experience in that specific area.
Regardless of the methodology employed, the levels of payroll efficiency achievable through SSCs have, in most cases, reached a ceiling. This is mainly due to the legacy technology in place; originally designed to support the whole back office that has gradually become outdated and increasingly unfit for its new purpose.
5 Aspects of the Next-Generation Payroll SSC
An ever-changing landscape means continuous improvement should always be the goal of a global payroll SSC. But the drivers for future SSC developments have now mostly moved beyond cost savings and should instead be focused on value creation and business performance. Here are five aspects that should be looked at to develop your next-generation payroll SSC:
1. Technology Platform
By leveraging the power of the cloud, modern payroll technology provides an opportunity for far greater efficiency and standardization, increased self-service, and valuable analytical insight. In particular, analytics ties into the process of continuous improvement, giving you the power to identify where your payroll processes are underperforming and why. Equally, modern global payroll analytics can provide an array of strategic insights, using global employee data to inform boardroom-level decisions—for example, on the most effective deployment of resources.
2. Automation and Standardization
With the increases mentioned above to offshore staffing costs, organizations are increasingly looking to lighten the manual load on payroll delivery by automating as much of the process as possible. This is being driven by advancements such as robotic process automation (RPA). The latest payroll platform technology facilitates the automation of many data management tasks, as well as calculations and reporting, reducing the time and resources needed to complete the end-to-end payroll process.
Combined with other emerging trends, such as the rise of machine learning and predictive analytics in payroll, automation delivers significant cost reductions and reduces the risk of error—a benefit which, in the sensitive field of global payroll, is not to be taken lightly.
Whether an organization’s payroll is in house, outsourced, or a mix of both, data management and integration are essential to ensuring smooth payroll delivery at both a local and global level. The trend has been to use external global payroll aggregators, which use a network of regional partners to manage payroll processing and reporting on a customer’s behalf. However, a more cost-effective alternative can be a unified global payroll solution, which maintains complete payroll data, processing, and reporting for all locations on a single platform.
Through data centralization, cloud-based platforms can provide information instantly and in real-time, replacing the archaic manual methods that led to traditional reports taking days to produce and decisions being based on outdated data.
4. More Effective Compliance
If performance and value creation are the drivers for the next generation of SSCs, then it stands to reason that subject matter expertise is increasingly important—especially when it comes to payroll compliance.
As global payroll compliance becomes ever more challenging and the cost of noncompliance grows harder to swallow, trained subject matter experts are becoming increasingly indispensable to global organizations. Your experts can monitor legislation updates, track compliance status in real-time, and implement changes across the SSC, ensuring you stay in step with global payroll compliance.
Co-location with other business functions, such as finance and HR, will also enable payroll to play a more strategic role in the next generation of SSCs. Primarily, this will be driven by the need for people-related data that helps to drive improvement in workforce visibility and performance.
Payroll will be central to how this information is collected, aggregated, and visualized, as organizations look to act on one version of the truth for all of their employee data. As such, keeping global payroll close at hand across the shares services ecosystem is key to success.
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Paul Bartlett is the CEO of CloudPay, a managed global payroll and payments solution for multinational organizations. A global business expert, Bartlett has deep experience helping companies improve the efficiency and scalability of their operations using technology and services. As CloudPay’s CEO, Bartlett spearheads corporate innovation and product development initiatives focused on automating client workflows and minimizing manual practices. Throughout his career, he has helped organizations address strategic and operational challenges as they navigated different growth phases and scaled their operations. In addition to CloudPay, Bartlett has served as a partner of Rho Ventures since 2007, focusing on investments in SaaS, software-related services, and new media. He holds an MBA from Stanford University’s Graduate School of Business and an undergraduate degree from Princeton University.