Expansion from a domestic to a global payroll can be daunting. Each country has its own rules and regulations. Furthermore, your company may have different human resources and payroll policies for each of those countries. When each country communicates in a different language, it adds another level of complexity. Rules. Regulations. Policies. Language. How do you manage all of it?
A large piece of the solution is selecting global payroll partners and developing successful partnerships with them. It’s possible that you won’t find one partner that fully fits your global footprint. Regardless of the number of global payroll partners you have, how you select the vendor and maintain that relationship is the same. There are five steps you can take to better help you find the right global payroll partner.
1. Define Current State
Identify your current state regarding people, processes, and technologies to help you build requirements for the vendor selection process. When identifying your current state, consider the information in Table 1.
2. Understand Business Strategy
To know what your global payroll strategy is, you need to know the following:
- Where are you now?
- Where are you going?
- What parameters are laid out in your vision, mission, and scope?
The business strategy does not have to be focused on a single item. Your company can—and more than likely does—have multiple reasons for embarking on the global payroll journey. The first objective might be to identify a more cost-efficient model. Multiple vendors and multiple delivery models can become quite costly over time.
Addressing compliance issues can have short-term and long-term effects. Compliance avoids fines and penalties and is needed to continue doing business in the country. Enhanced compliance may also result from standardized processes and data repositories.
Addressing challenges with global reporting might be the next objective. Companies that have different global solutions may have challenges in something as simple as knowing total headcount for the company. One of the goals of your project might be to streamline global reporting.
Your company also may experience gaps in customer service. For example, maybe your current solution doesn’t provide self-service to employees or managers. Or, maybe your current team members do not work hours that correlate to supporting the teammates they support.
3. Design Service Delivery Model
When determining what service delivery model you should have, there are many options. Since the model may be determined based on the payroll provider options, let’s talk about the different types of global payroll providers first:
The Global Payroll Processor
There are multiple types of global payroll processors. A global payroll processor is typically a single in-house or outsourced solution under one contract. While the solution may be single, the provider may need to use in-country providers (ICPs). This provider offers a single vendor to manage, as well as consolidated reporting and management.
Companies can also choose to have agreements directly with the ICPs. In this instance, the company would potentially have a different vendor or provider in each country. While this would result in needing an expanded vendor management function, the services provided would be direct and, more than likely, the vendor would have greater subject matter expertise.
The Global Payroll Aggregator
The next type of processor is a blend of global payroll processor and ICP: the global payroll aggregator. In this situation, the company contracts with one global payroll aggregator, and the global payroll aggregator has contracts with ICPs. Your company would have just one contract to manage, while the global payroll aggregator would manage the contracts with the ICPs. The aggregator typically provides consolidated reporting and a single user interface regardless of the country. These benefits are typically offset with higher processing costs.
As with global payroll providers, there are also multiple types of service delivery models. Will your resources be centralized, regional, in-country, or a combination? If the model isn’t centralized, will the regional or in-country resources perform autonomously? Or will they interact with some type of headquarter function? There are two decisions to make: (1) where will the resources physically work, and (2) to whom will the resources report in the organization. Let’s look at each of the types of service delivery models:
- Service Delivery Model: Centralized—Resources can be centralized into one location for the enterprise around the globe. On one hand, having employees in one location could make the team easier to manage and foster employee engagement. On the other hand, to support team members around the globe you may have to staff your team around the clock. In addition, because the resources will be from one culture, in-depth culture training for the areas you support will need to be provided.
- Service Delivery Model: Regional—To better accommodate culture and time zone requirements, another option is a regional support center. In this variety, resources are set up to serve a particular region, such as Latin America or Asia Pacific. Regional groups are more aligned with the culture and the time zones of the team members to whom they provide services.
- Service Delivery Model: In-Country—The next model based on geography is in-country. In this model, teams reside in the country they support. While this option may be costly by having team members in each country, your business may need to have someone physically in the country or there may be a regulatory need to have a resource in-country.
- Service Delivery Model: Combination--Another option is to have a combination of these. Let’s look at ABC Company, a U.S.-based company. ABC Company uses a common HR system around the globe. Employees need support during their work day. And, ABC Company has operations in Russia. Given this dynamic, ABC Company could have HR and payroll resources set up for all three of these options: (1) standard, enterprise-wide processes are performed out of the headquarters in the United States; (2) individuals work in Europe to take calls from employees who need support during daytime in Europe; and (3) an HR/payroll person also works in Russia due to data privacy and language requirements. Depending on your business and your countries of operations, there may not be just one answer for your company.
4. Select a Vendor
Once you have identified your requirements, objectives, and desired model, it’s time to find a vendor that complements those concepts. Here are some specifics to include in your selection process:
Project Governance
When starting on a new project to select a global partner, establishing project governance is one of the first steps. A key element is your governance committee, which should include individuals who are key decision-makers and can help guide the project team by defining goals and objectives. The governance committee identifies requirements for budget, the business plan, the timing, and the resources.
Most of the time, the head governance meeting is made up of more senior leaders for the functions being represented: HR, finance, IT, the business, sourcing, and so on. While there will be other governance layers on the project, the lead governance committee sets the main stage for the project.
Don’t forget that after the governance committee is formed, appointed team members need to evaluate vendors. You should have clear, prioritized requirements specified that reflect the current state, as well as your company or organization’s business objectives.
- What is the change impact? If your team members are familiar with automated and/or electronic processes, moving to a solution that’s manual or paper-based may be a step backward.
- Consider language requirements. Does the solution have to be in the local language due to that country’s language requirements? Or, does the solution need to handle multiple languages due to different languages your employees speak?
- Ensure the team and the vendor understand the timeline for the project.
When my company did our first global expansion, we were very clear with our vendors that we had to stand up 18 countries in just under four months. Based on your timeline alone, some vendors may excuse themselves.
Research the Vendor
Vendor selection is a critical decision. Take your time. Do your homework. Make an educated decision. As you research vendors—whether you’re asking them directly or asking client references—here are some questions you can ask:
- Other services—For example, in Russia it’s important for payroll and accounting to be tightly linked. Russia also has specific data privacy rules. So, you may want to see if the provider in Russia can also provide accounting services or data storage.
- Vendor location—My global payroll aggregator has multiple offices in the Americas, Europe, and Asia. Having the vendor in multiple regions and countries allows our team members across the globe to work with the vendor in their own time zone. When going through vendor selection, we also discussed our language options and requirements.
- Data storage—In addition to knowing where the vendor’s account managers are located, it’s also important to know where data is stored. If you have employees in countries that have data storage or privacy laws, it’s important to know where your data will reside.
- Data security—Ask about the security the data center has. When visiting a global payroll processor’s data center, we were a little surprised when the employees weighed us as we walked in. This was so they could compare our weight when we left. We found ourselves paranoid all day of what we ate or drank to make sure we didn’t set off any alarms.
- Scalability—Companies grow, so you need to ensure your vendor can grow with you. Does it plan to expand into more countries? Does it plan on enhancing technology?
- Corporate culture—Just as important as any technology fit is a culture fit. My company, Cardinal Health, is a fast-acting company, so we need a fast-acting vendor that can respond quickly to new requirements.
Ask the Vendor
When you meet with vendors, there are some items you need to ask them:
- When it comes to compliance, it’s not just whether the vendor is compliant. How does it maintain compliance? If you’re looking at a vendor that is a global aggregator, it may rely on its in-country partners for compliance. Ask some probing questions to find out.
- Compliance extends into data privacy. Where does the vendor store data? How does it secure access to data?
- Can the vendor provide audit trails for who submitted or changed which data element?
- What capabilities does the vendor’s technology have? Do they offer self-service? Do they offer online tools for employees, such as online pay slips? Can they handle integrations to other internal or third-party systems? How many systems might you need the vendor to integrate with?
- Does the vendor offer a global reporting solution? If its solution can’t be a data warehouse, are you at least able to extract information that you may want to load into your data warehouse? Reporting solutions make or break many vendor responses. A vendor may be able to provide you reports, but those reports might only be online or available in a PDF format.
- Do you require your vendor to speak a particular language, such as English? Or, maybe you have a vendor in Latin America that needs to have resources who speak Spanish and Portuguese because those are the languages your team speaks.
5. Build the Partnership
After the vendor is selected and even beyond the contracting and implementation, it’s important to have a strategy with your vendor.
During contracting, it’s important to define the foundation for building the relationship, including:
- Define roles and responsibilities—A thorough Statement of Work will detail what you are responsible for and what your vendor is responsible for.
- Agree on the escalation process—What is escalated locally versus escalated to a global account manager?
- Define the response time—Especially if your vendor isn’t in all of the same time zones as your team, it’s important to know how an issue can be resolved regardless of time of day.
- Create a Service Level Agreement—This is a formal agreement between you and your vendor that defines scope of services, minimal performance expectations, and fees at risk if performance is not met. The agreement should cover these areas:
- Track issues—Be sure there is a method to track and report service delivery issues. This will identify patterns and help monitor service level credits.
- Set business reviews—Set up a regular cadence of meetings with the vendor to review the vendor’s performance and discuss strategies.
Throughout the vendor partnership, it’s important to ensure there is a strong commitment to communication. Agreeing to a governance structure will provide timely reporting of issues. Too many times, issues are lost and outdated because a team member may not know exactly who to contact. It’s also important to ensure the team’s performance is shared. Not only should you provide feedback on the vendor’s performance, but seek out feedback on your own team.
Selecting the right vendor and building a successful, strategic partnership with that vendor is fundamental to building a successful global payroll organization.
Robyn Maslouski, CPP, has been a Certified Payroll Professional (CPP) since 1996. Maslouski spent many years in the payroll profession in the telecommunications, banking, and health care industries, and currently is Director, HR Services at Cardinal Health, a Fortune 15 company headquartered in Dublin, Ohio. She maintains responsibility for identifying the strategy for HR and payroll operations for Cardinal Health’s operations outside of the United States. Maslouski has been named American Payroll Association’s Payroll Woman of the Year in 2013.