Breaking The Global Payroll Paradigm

In a poll I ran last week, 28% of global payroll managers indicated that implementing global standards is their top priority for 2024. This implies that they will need to break through the longstanding paradigm in global payroll: flexibility combined with standardisation.

No one wants to sacrifice standardisation for flexibility, and vice versa. Yet everyone does it everyday. No more.

Let's explore what flexibility and standardisation mean in Global Payroll.

Flexibility

If you look closely at any global payroll operations you will likely see similarities between the footprint and population. You will be able to identify groups of countries to segment the footprint for further analysis:

1. Primary, HQ countries: ≈ 10% of your countries, ≈ 75% of population. You likely run these payrolls in-house.
2. Secondary countries: ≈ 20% of your countries, 20% of population. You likely have a mix of managed service and processing services.
3. Long tail countries: 70% of your countries, 5% of population. You likely have BPO services with additional advisory, and perhaps have one or two regional providers.

The segments have distinct different requirements and therefore demand flexibility in the way you design your operations. You cannot simply apply a one size fits all approach - unless that one size fit all is hybrid:

• You want to recognise and support different local needs and service requirements, while staying within budget.
• You want to be able to bring payrolls in-house or outsource them to meet requirements, and switch those surgically without disruption.
• You want the choice to go regional, cluster or local in terms of your payroll provider strategy.
• You want the best local service providers with direct access, and to not make yourself too dependent on any single vendor.
• You want to respect and build around existing organisational structures, both locally and centrally.
• You want to stay agile and keep your options open to respond to future business needs, without the need for large and costly transformations

This ask and need for flexibility is crucial for delivering the best global payroll experience to your workforce. However, if you don't look at standardisation at all, you will not be able to scale, automate and digitise your operations. It will then also be extremely difficult to adhere to internal and external financial and non-financial requirements in terms of audit, risk and control.

Standardisation

So, that brings us to standardisation. I have personally found this one of the more challenging yet rewarding parts of a Global Payroll Manager role. How can you deliver locally while applying rates of global standardisation at a minimum of 75%?

This proves to be difficult from the results of a poll I ran December 2023 about the standardisation of controls in global payroll: 63% indicated to have standardisation below 75%. Still, you can achieve this standardisation provided you design your controls well enough, and have a platform to support deployment. If you are looking to design and deploy global standards, you will likely look at:

• Harmonising your core payroll processes: pre payroll, run payroll and post payroll in a digitised way so that they are scalable and rotatable within the team.
• Standardising and automating your control framework: e.g. segregation of duties, variance control, input vs output reconciliation and reviews, approvals.
• Automate your data flows into payroll while allowing for (not drowning in) the local nuances required for local payroll processing, and be agnostic to any source file.
• Develop a clear playbook for when there are portfolio changes: carving our countries, adding countries, population changes and M&A.
• Develop a KPI framework to measure the performance of your operations, delivered payroll experience and payroll providers.
• Reporting and General Ledger standards across the entire footprint to report out to internal and external stakeholders in a consistent global data model.

Flexibility and Standardisation without trade-offs

You must be wondering by now how to have both flexibility and standardisation without trade-offs. In order to explain that I want to introduce a little visual first that combines low/high flexibility and standards, and I have plotted provider models based on my experience.

If you recall, we had three segments of countries with populations. Those have different needs and different service levels. If you want to run a truly industry standard global payroll you will do yourself a huge favour by adopting the hybrid approach. Let's explore the plotted vendor solutions:

1. Best of Breed, Local Solutions. Given the local nature you will benefit from choice and high flexibility, likely for primary countries. However, as those don't scale to other countries this option in itself doesn't allow for global standardisation.
2. Regional & Cluster Providers. These will provide services to groups of countries, but without choice of your service level (mostly only managed service) and local partner. Since this only covers a few countries, this option is a likely fit for secondary countries or long tail countries. In itself, however, this also doesn't allow for global standardisation.
3. Aggregators, Global Networks. You will gain from more standardisation as these will cover many countries, and likely have a platform. The service levels typically restrict to managed services without choice for your local payroll provider. When you need to make changes, you will break the model, as those will be carved out of the platform leading to less standardisation. You therefore have little to no flexibility. This option may work for some secondary countries, and some long tail countries where you don't need additional services.
4. The Payzaar Experience. You expected this one of course: we at Payzaar deliver an experience without trade-offs. You will get flexibility and standardisation. Our platform operates with in-house payrolls and outsourced payrolls: with or without vendor interaction. You have full choice, options and we can refer you to partners if you need. Standardise, digitise and automate your hybrid environment.

You have a choice

If you are struggling to find that balance between flexibility and? standardisation, and you are faced with unwanted trade-offs; know that?you have a choice. I have been there too and had to make trade-offs I didn’t need to make.

You can break through this paradigm too. So, tell me: do you find flexibility or standardisation more important in Global Payroll? Let me know by participating in this poll!