The Crucial Role of a Solid G2N

If you ever worked in a multi-country payroll role with outsourced payrolls, you will know how important a G2N (Gross to Net) report is in the payroll cycle. I used to (and still do to date!) dream about G2N, like literally dreaming about them. The G2N was at the heart of most payroll processing controls, automation and reporting. Let's explore the mythical status of the G2N!

So, what is a G2N?

A G2N is a report that contains all the pay code of a selected payroll period and paygroup. Simple, right? Well...

G2Ns differ for each country, as there are usually several local payroll engines used within a country and those all have different data models, and lay-outs. Even G2Ns within the same country and local payroll engine differ, as companies have different pay codes and attributes. And users may create different lay-outs too...

You can have G2Ns that are built up vertically and built up horizontally. Some have all the data period by period, and some have data year to date (YTD) - or both. Some may have pay codes in the local language and some have pay codes in English - or both. Some have pay code identifiers that are numerical and some have pay codes alphabetical - you guessed it, some have both.

Let's agree: G2Ns differ.

Why are G2Ns so important?

A G2N comes to play when you are receiving the trial payroll results form your payroll provider for validation, and approval (or rejection). The G2Ns are the basis for the following common controls - that I have without exception deployed:

1. Variance Control. You will need to analyse variances from the current period to a user selected other period (e.g. prior or a similar period). You review variance on a pay code level and/or employee level. I used to review pay code level for paygroups > 50 employees and employee level for paygroups < 50 employees. The G2N is the basis for this. This also is a brilliant way of spotting local to global pay code consistency: a variance of (-) and (+) of the same amount in a different pay code means an incorrect, manual mapping error. I used to be brutal here: reject a payroll, even if the local results were correct.
2. Input vs Output Reconciliation. You will want to ensure that all that you have submitted for processing is submitted, and that nothing is added that you have not submitted for processing: a reconciliation. What you will end up doing is mapping inputs (remember all those sources) vs G2N pay codes to reconcile. Now, this will do for non-calculated fields but calculated fields will require a deeper level of analysis.
3. Gross To Net Recalc. Yes, you read it - I would do a G2N recalc for payrolls of >50 employees for 4 scenarios: highest net pay, lowest net pay, joiner and leaver (and substitute if a scenario doesn't apply). This demonstrates that you don't blindly rely on an outsourced provider and that you have sufficient knowledge of a local payroll. You then also verify the attributes of pay codes: gross, BIK, net or tax free and payment or deduction.

With these controls, you will attest to the quality and accuracy of the G2N before you approve a payroll. As when a payroll is approved, that G2N is the basis for post payroll reporting.

What happens with an approved G2N?

I found this the most exciting part of being a Global Payroll Manager: approving a payroll! Oh the thrill of hitting that approve button, and sending a personalised email to the internal and local team confirming that too. I always did that without exception: thank the team for the hard work, reviews and the payroll provider too - it's a team effort, and needs a thank you. And I am accountable for the approval.

The post payroll process now kicks in based on that validated and approved G2N:

1. Payments. The net pay in the G2N is the basis for the payments made to the employees. The liabilities (e.g. employee income tax, employee social security, employer social security) with the employee, employer identifier information in the G2N are the basis for the filings and remittances.
2. Payslips. The pay codes in the G2N on an employee level almost (some payslips do not show employer contributions) are included on the payslip that is provided to the employees. And at the end of the tax year, the YTD G2N should reconcile against the annual income statement.
3. Payroll Journals (GLs). For most companies, the cost of labor (= payroll cost) represents over 60% of the P&L. Getting the labor cost from payroll into the Finance ERP is then naturally a crucial part of the post payroll process: payroll journals, or GLs: the basis are the G2Ns linked to the Chart of Account. And the entries can be in local G2N naming or in English - or both.
4. Reconciliations. You thought reconciliations are done by now? Haha, no - just count the reconciliations from source to journal to payment on a single data element. You'll be surprised. When the payroll journals are posted and payments are made, the accounting team and cash posters reconcile the accounts - yes, using the G2Ns.
5. KPIs. To run both efficient and effective global payroll operations, you need to analyse the quality of the G2Ns. How many times were G2Ns rejected? Which pay codes in these G2Ns resulted in rejections? To which source processes, systems can those pay codes be linked too? What is the root cause to avoid these errors?
6. Data warehouse. With the governments demanding more and more reporting (e.g. ESG, CSRD) the payroll data (red: G2Ns!) are an important input into data warehouses that combine HR, Reward and Payroll Data.

Yes, getting the G2N right is crucial! Wait, what if we multiply this G2N times X countries? You will observe that the G2Ns differ. Yet you need a consistent G2N to standardise those 3 controls and 6 post payroll processes. This means you need a platform to transform those local G2Ns to a format, lay-out that has a global data model. You can then truly standardise your controls and post payroll processes.

In conclusion

G2Ns are legendary and a core part of any global payroll operation. Cherish your G2N and treat it as family, as a child. You need to ensure you put all efforts in ensuring the accuracy, compliance and timeliness (ACT) of the G2N at (almost) all cost. When you are managing a multi-country payroll you should look for a platform (beyond Excel, Google Sheets ??) that helps you automate, digitise and scale this crucial part.

I am a Global Payroll Professional, and a passionate one too! After managing global payrolls across the world for about 20 years, I found there must be a better way of doing this. I joined Payzaar - the global payroll management platform everyone needs and can easily implement. Oh yes, we are just fun to work with too. Join the Payzaar Experience. Let me know if you want to chat.