Global businesses have a lot of HR responsibilities to manage across diverse populations, time zones, and cultures. These include payroll, benefits distribution, talent development, and culture management. For many years now, larger companies have evolved to perform these functions from regionally placed shared service centers, including payroll shared services. This has been a great strategy for achieving economies of scale. This process also drives the high levels of operational quality, consistency, and predictability that businesses crave. But even when a strong shared services platform is employed, companies must still rely on a number of outside partners for full execution of services. These include benefits administrators, payroll providers, professional employment organizations, recruiters, etc.
Choices must be made to ensure streamlined processes as well as positive morale for both international and domestic employees. The organization needs to align all existing — and future — regional service centers, with its global partners. This is especially true in the payroll arena where meeting deadlines and ensuring accuracy are paramount to employee engagement.
So, how do you ensure your in-country partners are aligned with your shared services centers? First, we recommend the establishment of a strong global framework – a governance model – that can be implemented uniformly in each center. This would include defining partner-relations roles to be played by team members in each center, such as contract manager, program manager, incident manager, etc. It also includes creating a uniform set of success metrics and service level agreements specific to each function or service. Finally, an effective governance model will follow a deliberate “rhythm.” Decide how often staff and partners need to talk, share information and check on the status of projects or pending issues. We recommend basing such meetings or calls on a set of reports that can be distributed ahead of time so that no time is wasted.
Sharing your goals and expectations with employees as well as with each partner is key to alignment. If your shared service centers are well-established, then you likely already have well-documented standard operating procedures. But this may be a good time to revisit them to make sure they are up to date and as uniform across all centers as you want them to be. A formal roll-out or kick-off meeting is a great way to launch your governance model and alignment initiative. Remember, whatever flow exists today between each center and their particular partners will need to be disrupted to a degree and that type of change is never easy. A strong kick-off event and ongoing rhythm will demonstrate to all parties that you are serious about achieving and maintaining alignment.
Yes, there will always be the need to accommodate some country-specific peculiarities within your framework, but we believe that the large majority of your framework can be the same across your entire footprint. We recommend maintaining good crisp documentation on any country-specific exceptions that you choose to include in your processes and/or metrics.
According to Deloitte, 50% of companies with greater than 100,000 employees use payroll shared services. At the other end of the size spectrum, 70% of companies smaller than 1,000 employees do not leverage shared services and have payroll reporting to HR. Between these two extremes are a sea of employers who, as they mature, are making the shift from localized HR delivery to shared service centers. This shift can create a risky gap for international employers, as valuable expertise in local regulations goes out the door when jobs are shifted to the center. After all, there are different labor laws in each country and different payroll implications that need to be respected. The local rules around taxation, withholdings, etc. do not go away as you shift the location of your resources.
To close the expertise gap, it’s always a good idea to select providers with demonstrated expertise in your markets (no matter how big or small the population in each country is). Partners who are clear local experts will help avoid compliance concerns; this is true for both large and small organizations. Confirm with suppliers that they have the resources and knowledge to manage compliance on your behalf and explore what types of assurances and guarantees they offer.
Multinationals with a diverse geographic footprint will have some countries with smaller populations ( i.e. 1 to 500 employees in the country) where the cost of doing business internally is disproportionately high. These are known within the payroll industry as “tail countries” and they can be particularly hard to manage. Tail countries lack scale that makes them suitable for the shared services concept, but often they are the more exotic developing countries to boot. (We go into more detail about tail-countries in this post.)
It’s almost impossible to source and maintain deep expertise in shared services for these tail-countries. Fortunately, there are specific vendor partners in the market who specialize in servicing many tail countries at once. It’s best to leverage this type of vendor for smaller populations. We recommend, in particular, those who have regional service centers in proximity to your shared services centers. Being in a similar time zone will make it easier to obtain assistance when you need it.
This comprehensive global service increases efficiency for you by capturing many countries under one contract and keeping all communications under one roof. You will find that some vendors in this category will manage every aspect of the payroll function for you, including:
• Auditing changes as they come in
• Processing payroll
• Treasury management / foreign currency exchange
• Local compliance
• Statutory Filings
The consolidated model for international payroll offers the best balance of time savings, accuracy, and turn-key scalability for companies of all sizes and helps keep shared services in alignment.
To manage international payroll effectively, rely on the simplest, most complete solution in the market. Celergo’s consolidated payroll solution helps ensure that every part of your global payroll process is under control, on-time, and accurate.
Get in touch today if you have any questions!