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GlobalChallenges

Facing the Biggest Global Payroll Challenges in 2020

By Don McGuire

 

GlobalChallenges_InsideGlobalization is consistently at the core of business growth and success. As businesses expand, many of them focus, understandably, on investors and funds. While this big picture perspective is necessary, there are other pragmatic challenges that arise as companies move across borders. Paying your workforce—wherever they are—is one of the most critical business functions. Paying a global workforce is one of the many unseen challenges that expanding businesses face. But what exactly are these challenges, and what wider role does payroll play in reflecting changing workplace, business, and societal trends?

Valuing Your People

Quite simply, payroll’s biggest challenge remains accuracy—a task that can increase in difficulty for businesses that are operating with a rapidly growing workforce on a global scale. The challenge of accuracy becomes even greater across borders, and any errors can lead to despondent employees.

This brings us to the important point of the people themselves. Today’s employers are facing a huge challenge in attracting and retaining talent in a market that is “enjoying a jobs boom of unprecedented scope,” according to a recent article in The Economist. In the United States, the unemployment rate is under 4%, while the U.K.’s unemployment rate has dropped to the lowest levels since the mid-1970s. Businesses need to ensure they’re working to keep their talent.

In the context of business expansion, this means ensuring transition is handled carefully. If a company is already experiencing change, it can negatively affect employees’ trust and engagement if basic processes do not run correctly. Considering the effects on employee trust and engagement when workers are paid incorrectly, it should be something all employers are ensuring they get 100% right.

On top of this, ADP’s recent Evolution of Pay report has revealed the increasing demand for alternative payment methods and flexible pay cycles. In the study, 78% of employers surveyed agreed that companies will need to customize payment options to remain competitive in the war for talent, while 62% of employees say off-cycle pay options, such as the ability to choose pay frequency, would make a difference when considering a job offer. Given the changing nature of employee expectations around pay, businesses are likely to face even greater challenges when paying a global workforce in the future.

Compliance, Workplace Trends

Compliance and reporting are becoming increasingly important responsibilities for any business, let alone those that work in multiple foreign markets and consequently have more reporting requirements to comply with. What do these requirements signal about wider changes in society, and what does it mean for the future of global payroll challenges?

In 2018, more than 600 new labor regulations were introduced worldwide, a trend that is set to continue. In the U.K., this included gender pay gap reporting for organizations with 250 or more employees, illustrating how changing social norms are reflected in compliance requirements, such as gender equality. In October 2018, the U.K. government also announced a consultation into ethnicity pay gap reporting, so it seems likely that in the future businesses will be responsible for more detailed reporting as governments look to employers to provide social demographic information about the people they employ.

While this is an essential step forward for progress in society, these reporting requirements can become increasingly time-consuming responsibilities. Companies need to start considering how they will manage the various requirements for each market they operate in.

In the future, it is likely that businesses will face a need for real-time reporting. Not only will they need to report on more data sets, but the form and frequency in which they do will shift. Government agencies such as social security agencies, tax authorities, and pensions providers are increasingly asking for data to be shared more regularly and often in real time. With markets changing so quickly and often in a state of flux, businesses will need to ensure they can provide a “state of play” report at a moment’s notice.

How Tech Solutions Can Help to Drive Growth

When any business is expanding globally, the key objective is growth, but business growth will always be limited by HR’s ability to cope with local regulations and the flow of new people into the business. This flow can limit an organization’s flexibility to expand globally when systems and processes make change very difficult, and may mean HR teams find their resources become devoted to simply keeping up with the monthly pay rounds instead of supporting business growth.

Expanding globally requires different systems in different geographies to work together, yet many HR systems are not able to manage international payroll rules. Considering that payroll, when combined with personnel and benefits administration, accounts for 35% of total HR costs, the administrative burden of managing multiple systems or vendors in different countries requires constant consolidation of information and reports, according to an ADP white paper “Payroll at the Heart of HR Outsourcing.” The resources required not only add to the cost but also impact the ability to make smart and timely business decisions, something that isn’t ideal when a company is already facing challenges as part of a new global focus.

Standardization in HR and payroll is important as it allows increased flexibility for chief HR officers and offers more efficient and cost-effective processes. For example, multinational companies can free themselves from having to deal with a host of different regulations, employee policies, labor conditions, currencies, and languages.

The Rise of AI, Machine Learning

When managing any business, although it is particularly true when running a global company, organizations need to make their data work for them. HR professionals often hold some of the company’s most valuable data, yet so often underestimate its potential. With quality data in a usable form, it’s possible to get robust, data-driven insights that will help to inform a company’s people strategy as well as its global decision-making.

We all know data is the new global currency and using artificial intelligence (AI) and machine learning offers the potential to collect and use more data, which in turn leads to richer insights. Not only can AI and machine learning save time and resources by helping HR professionals to recruit and match the right people to the right opportunities, it can also help to manage the complexities of payroll.

By harnessing the power of machines, businesses can be sure they don’t fall foul of human error and that work is accurate and fully complies with requirements. Ultimately, using the robots will also mean HR professionals can focus on higher value actions within their human capital management (HCM) responsibilities.

Looking Ahead

Payroll is often underestimated, but, as we can see, utilizing its potential creates a host of opportunities to succeed, from maintaining employee trust to producing strong business insights. Any company looking to expand its global business offerings needs to consider how both the challenges and the opportunities of global payroll play a part in the drive for growth, building HCM strategy, and the use of new technologies.

Paying your people accurately, while also responding to new employee expectations and government reporting requirements, can be a daunting challenge, but the rewards of greater insights and retaining your talent are most definitely worth the output.

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Don_Mcguire

Don McGuire is President, Employer Services International, for ADP, LLC. He was appointed to this role in June 2018. In this position, he leads the company’s international regions. His responsibilities include driving strategic growth, operational excellence, and providing leadership across all ADP offerings in more than 140 countries outside North America.