Martin Stockton is regarded as one of the leading experts in global payroll with a career spanning over 30 years. His expertise within HR and payroll has seen him work in the Americas, EMEA and Asia – advising some of the biggest brands in the world. He recently joined The Chartered Institute of Payroll Professionals (CIPP) as Head of Global Payroll Consulting.
The Chartered Institute of Payroll Professionals (CIPP) is the Chartered association for payroll and pensions professionals in the UK and is dedicated to raising the profile of payroll within businesses with approximately 11,500 enjoying membership benefits.
In this article, Martin will be highlighting the pitfalls when it comes to approaching the market for your global payroll and navigating your way to success. Whilst it encompasses the unique aspects of an international project there are many lessons for all seeking to re-evaluate their payroll, no matter what size.
Undertaking any payroll procurement exercise is fraught with danger. Like Little Red Riding Hood going through the forest, at every stage there are big bad wolves ready to gobble up unsuspecting project teams. Whilst working for a customer recently, and planning workshop material, it struck me that there was some intellectual capital to be produced here. All the issues I was raising in my workshops had a common denominator – they all began with a ‘C’. All of which are the building blocks for a successful global payroll project, so let’s consider them in a particular order:
Cost
Any costs should be predicated by a successful and ratified business case. If it’s an integrated project, it can be much more difficult to gauge the true cost and consequent cost benefit analysis from the HR aspect of the project than from the payroll side. Payroll costs tend to be much more visible and therefore tangible than for HR. Following very closely, is the total cost of ownership (TCO) where costs and benefits need to be extrapolated over the contractual length. My advice to customers is to beware of hidden costs at this stage. They are less easily quantifiable and include interfaces which are often criminally underestimated including reporting and third party payments.
Compliance
Recent evidence suggests that the issue of compliance and the worry of not being able to comply with national tax rules and international banking standards are one of the main drivers for organisations wishing to undertake global payroll. I always ask clients “what happens if you don’t do this?” The answer is invariably “we get sued”. No further justification is required. When prosecutions are often personal and damages extremely punitive, there can often be no alternative.
There is no payroll system able to cover all countries without the use of third parties. That has always been the nirvana of global payroll – the ability to run all countries on one system whilst using the same gross to net solution in one technology platform. So the question is therefore: “Is it truly impossible rather than is it really possible?” The simple answer is that of course it’s possible, if you are prepared to pay for it. But it’s the cost justification of having the data of small countries on the system which is one of the biggest roadblocks. In addition, the bigger the geographical scope of the global payroll solution the more expensive it becomes for countries with a smaller headcount.
Consolidation
In this context, we mean the consolidation of data for reporting purposes – often called the black art of payroll. The production and full dissemination of meaningful data from a global payroll solution has been near impossible to achieve. In the early days, major enterprise resource planning (ERP) systems were not built to integrate with each other. One bank I worked with ended up with SAP for payroll, PeopleSoft for HR and Oracle for financials. Many organisations were unable to produce meaningful, accurate and timely reports. Those reports that could be produced were often cumbersome with little room to deviate from the standard data and lacked the freedom to write bespoke reports.
However, a whole range of open source tools came onto the market recently which are simple to use and unrestricted by significant license costs. But just like a car, no matter how elegant, it won’t work without fuel – this is just like reporting tools which are only as good as the data which is input into them.
Change
Considered by many from the technology side of the fence, to be the easiest ‘C’ to consider. Change management is in many ways the most essential C, as the introduction of any global payroll undoubtedly means a change in delivery model – often when accompanied by a move to a customer centric model. Too much change and not enough change management results in employee uncertainty and an increased and sometimes dramatic rise in turnover. However, change consultants can be quite rapacious; I have seen many change consultancies gobble up major chunks of a project budget just in the preparation phase. Change is of course key but before a change programme can be fully implemented, you need an effective visioning exercise. This will help you understand where you are coming from and why change is needed before finding out where you want to be.
In my experience, the most traumatic experiences are around the change to a customer-centric model with the introduction of the ‘employee as a customer’ syndrome. Removing the human interaction from what essentially is a human function can be one of the most worrying features when it comes to the introduction of a global payroll platform.
Contracts
The purchase of a global payroll solution can be legally complex. It’s not just the key service level agreements (SLAs) and key performance indicators (KPIs) that can cause frustration; it’s the issue of liability. I’ve seen deals won and lost on the willingness to accept unlimited liability on performance and payroll accuracy.
In addition, don’t forget that the supplier’s contract may be full of legal terms and conditions your team may have never seen before. Remember, they are experts in this field and do this day in day out – so your legal team need to be ready and able to match them. Unfortunately, it is not unusual for dissatisfaction and bitterness to rear its ugly head early in the operation of a contract which may lead to one side pointing to the fine print of the legal document which both sides signed – remember to read the small print.