In the commercial world, it’s understood that the only constant is change. Still, organizations that might have hoped for a period of stability following the seismic shifts of the COVID-19 pandemic were probably disappointed.
Locally, nationally, and internationally, businesses have been buffeted by the winds of change. From spiralling inflation and interest rates to global skills shortages and a rapidly evolving regulatory landscape, companies have been hard hit by major challenges.
In this in-depth article, we explain how organizations that are continuing to weather the storm and grow into new territories have done so through a reliance on trusted partnerships and modern, agile payroll.
The Power of Partnership in Times of Accelerating Change
Any business expanding internationally, whether it’s through merger and acquisition, fresh or consolidated regional facilities, or local agreements, ideally needs to hit the new ground running.
That means focusing on doing what they do best, in every location. Almost everything else can be achieved by outsourcing to trusted partners who can make up for any local capability or skills shortcomings in functions such as payroll or technical support.
By working in this efficient, low risk way from the start of a new enterprise, productivity and profitability are maximized while operational and financial vulnerabilities are minimized. This enables a business to attract customers, partners, shareholders, and investors while keeping the local regulatory authorities satisfied. But, most importantly, it can improve the employee experience.
To achieve these objectives, it makes commercial sense to utilize beneficial business partnerships with others who are also the best at what they do—relationships built on quality, service, value, trust, and respect.
In fact, operations in any new overseas territory will usually mean firms need to build local partnerships to overcome local complexities.
Payroll is proven to be perfect for entrusting to the right partner.
Seven out of 10 (69%) payroll leaders say they are looking to outsource all or most of their payroll processes to support teams across all geographies..
Transforming Payroll to Support Business Strategies
The last three years have highlighted the vulnerabilities and inefficiencies of many organizations’ critical back-office functions as businesses needed to respond fast to rapid change. Payroll is a prime example of such a function.
As our recent worldwide study, The potential of payroll in 2024: Global payroll survey, highlighted, organizations transforming payroll from an unpredictable, reactive, and disjointed operation into an integrated, scalable, and future-ready resource could transform the organization itself.
How?
Well, business leaders know how complex overseas expansion can be. Responsibilities multiply exponentially, as do the complexities of running payroll. These responsibilities can include the following:
- Paying the salaries and benefits packages of a growing number of employees in an accurate and timely way
- Managing mounting processes, team roles, and responsibilities
- Addressing people’s demands and expectations on subjects as varied as career development, and diversity, equity, and inclusion
- Compiling and distributing a variety of management reports
- Dealing with the dynamics of a remote and hybrid workforce
- Coping with in-country compliance as the business is faced with a new regulatory environment
These issues will challenge fragmented payroll systems and can derail expansion plans completely.
But it’s clear that the sophistication of a firm’s HR and payroll technology can make or break how a business copes with ventures into new territories. Particularly important is the efficiency of their management of their most costly asset—their people.
Payroll transformation can help deliver the data optimization, agility, and visibility that will drive productivity and profitability in the coming years.
Less than half (44%) of payroll leaders have full visibility of all payrolls across all locations and most (65%) lack key capabilities such as a global insights dashboard. Around one in 10 (12%) are unable to access any data for global reporting.
Eight Key Considerations for Payroll Transformation
Technology, especially since the emergence of the COVID-19 pandemic, has helped to streamline payroll processes toward transformative change. However, there are other considerations that have also fostered payroll transformation to enable and encourage business growth. Some of these considerations include the following:
1. Payroll Maturity—How Modern Operations Enhance Growth
As we’ve outlined above, whichever pathway a company is taking towards international growth and whatever the current maturity of its payroll operations, the right processing solutions can support overseas expansion plans. They will give a business a head start in paying its people—whether they’re local or relocating—accurately and on time from the get-go. Plus, they will also do the following:
- Keep any new enterprise on the right side of compliance with local labor laws
- Enable a firm to recruit, reward, and retain the right talent
- Enhance the employee experience, the morale of the team, and the company’s reputation amongst the local workforce
- Help deliver immediate efficiencies that will allow for rapid headway in a new market while providing long-term assurance around sustainable business performance
We see payroll transformation moving from mature to modern in three key phases:
- Optimization: Make payroll streamlined and predictable, to release significant cost
efficiencies.
- Visibility: Build informed finance and HR practices to drive powerful insights.
- Agility: Deploy agile systems ready to seamlessly deliver pay, while easily adapting to business and regulation changes.
Nearly nine out of 10 (87%) payroll leaders see payroll information as a fundamental part of their commercial growth strategies.
2. The Vital Role of Payroll and Its Role in International Growth
As we’ve said, an enterprise can choose a range of ways to achieve international expansion. So, their resultant payroll strategy will need to deliver in different ways.
One thing is certain: C-Suite executives often want the payroll function to be ready to support business growth at a moment’s notice. Meanwhile, finance and HR leaders may seriously doubt the capability of their systems.
Nearly a third (30%) of leaders are not confident their payroll system can support their company’s plans for growth or geographical expansion.
The other key certainty is that business leaders know they need to focus on the company’s core strengths: those yielding the most profit in the present and assuring organizational resilience in the future. This is especially true as a firm prepares to take the leap into a new overseas market.
So, by partnering with a trusted provider, their payroll operation can play an active role in supporting a company’s expansion plans. Indeed, payroll is the ideal candidate for this approach, because:
- The right technology and service can quickly deliver efficiencies
- Repetitive, administrative tasks and calculations can easily be automated
- Improved accuracy can reduce costly regulatory penalties
Not only will the right global payroll partner bring an expert, experienced perspective to a development strategy, they’ll offer guidance and proven solutions for technology, service delivery, processes, and people. This should result in a payroll operation that delivers:
Data for informed commercial decision making and growth strategies
Built-in flexibility to enable a payroll operation to flex, scale, and accommodate varying sizes and locations of employee populations
- Compliance with constantly changing regulations across different countries
3. Global Compliance—Mission Critical for Growing Businesses
No matter how, why, or where a company is expanding overseas, understanding and planning for compliance to local regulations must be a priority.
Around four in 10 (41%) payroll leaders say each country has different methods of tracking compliance performance and a quarter (25%) say mistakes only come to light when they’re contacted by the authorities.
No organization wants to breach regulations and risk punitive fines, reputational damage, the unwelcome attention of the local authorities, or especially, harm employee engagement.
Businesses should, therefore, work with a global payroll partner that does the following:
- Has a team of experts in the specific challenges of the industry and territories in which they operate
- Works with, and is trusted by, government agencies to keep up to date with forthcoming legislative changes
- Responds proactively to bring the organization up to speed on changing circumstances, whatever their cause
4. Data-Driven Payroll—Delivering the Insights That Drive Growth
International expansion usually leaves businesses with numerous legacy payroll systems struggling and unable to integrate with the next. So, a single, complete global view of the entire payroll across all locations is difficult to achieve. That’s unless payroll teams waste valuable hours collating, reconciling, and sharing data. This creates its own issues, such as:
- The introduction of errors
- Reporting becoming a significant drain on payroll leaders and their teams
More than one in five (22%) payroll teams admit to spending more than 30 hours every week per country reconciling payroll and HR data.
Data-driven payroll will provide information that’s critical to the decision making around expansion, particularly as it relates to the better management of resources and reducing costs.
5. Payroll Skills—A Clear and Present Danger to Any Expansion Plan
Businesses face a global skills crisis. Payroll leaders are struggling to fill vacancies so internationally expanding firms have trouble recruiting and retaining the payroll talent they need.
Skills shortages mean that more than half (57%) of payroll leaders have seen their payroll service affected by a shortage of payroll staff.
What’s more, payroll operations are increasingly needing dedicated IT, data security, analytical/reporting, and compliance resources, skills which are also in short supply around the world.
IT resources are helping manage data flow between disparate payroll and HR or business systems. On average, this takes IT teams around 22 hours per week, per country.
By entrusting payroll to a global partner, armed with local payroll knowledge and technical expertise, a company can address skills deficits and draw up expansion plans with confidence.
6. The Price of Global Payroll—Less a Cost, More an Investment
Organizations expanding into new territories are under pressure to keep their operations lean. So being tasked with setting up payroll in one or more new markets can present a quandary to payroll, HR, and finance leaders, especially where the initial requirement is only for the hiring of a handful of staff.
Do those leaders consider a global payroll solution before dismissing this option as too costly? Do they assume instead that in-country payroll platforms would better suit their needs and budgets, despite the issues around managing multiple platforms in multiple countries?
The bottom line is that the right solution for an expanding business depends on many factors, from costs and employee numbers to locations. However, the alternative is to find a global payroll partner which can accommodate both large and small countries with a unified payroll solution because of the flexibility of their technology and service.
A study conducted by Forrester Consulting found that switching from a non-integrated payroll solution to ADP Global Payroll yielded a total ROI of 131%.
7. Payroll Partners—Making the Most of a Multi-Country Provider
Post-pandemic, entrusting payroll to a proven global partner has become increasingly popular.
Seven in 10 (69%) businesses are considering outsourcing all or most of their payroll processes to support their teams across all geographies.
This trend is not new. Historically, companies have relied on the advantages of working with external partners to help achieve key goals, including:
- Optimizing productivity and cost efficiency
- Gaining access to new technologies and talent
- Gaining support through times of change and expansion
- Enabling them to focus attention on business-critical tasks
Existing relationships with global partners have been extended post-pandemic to:
- Differentiate the employee experience by satisfying people’s higher expectations via the strategic potential of payroll
- Manage increased complexity in employment contracts around now-common practices such as gig work, remote and hybrid working, the four-day week, and staff relocating to new locations
- Focus on growth which requires streamlined payroll processes and better access to analytics, both of which aid speed and scale when entering overseas markets
Here are three essential ways to get the most from a partnership with a global payroll provider:
- Gain internal consensus on an organization’s optimal number of payroll partners.
Do you opt for one payroll provider or more? It’s not about the company’s size or location but what makes the most sense for the business. A true partner will have a client’s interests at heart.
- Mitigate the risk of interdependencies. Consider factors such as technologies working together, how cross-provider data sharing could present risk, and the need for joint intellectual property (IP) ownership in the future.
- Develop a strategy to coordinate and capitalize on interconnected relationships. How can you be sure that your network of outsourced payroll providers is collaborating in the most effective way?
8. Data Security—Protecting Payroll Data During International Expansion
The movement of payroll information across offices, territories, and time zones makes it vulnerable to data breaches. That makes data security a key part of the payroll strategy of business.
99% said data security in their payroll strategy had become important over the last 12 months, with 46% saying it had become critically important.
The trouble is, like payroll itself, cybersecurity is impacted by skills shortages. In fact, data security concerns are preventing some companies from moving to a global payroll model completely.
Delivering on digital trust for employees in any newly entered market means preparing for potential risks. So, when considering a potential global payroll partner, data privacy, security, and recovery should be an intrinsic part of their service offering.
Also, consider the potential global payroll partner’s capability to protect an expanding enterprise with tools, technologies, expertise, and safeguards that are constantly updated to stay a step ahead of the risks.
Nearly two-thirds of payroll leaders (60%) report at least one cyber security breach has impacted their payroll in the last 24 months.
Payroll—The Certain Resource in Uncertain Times
Pay matters. In the recent “People at Work 2023: A Global Workforce View” global study, from ADPRI, 61% of workers around the world said their salary was the most important aspect of their job. Yet around 43% reported that they were always, often, or sometimes paid less than they should be.
At a global level, the overall mean payroll accuracy of payroll is just 78%.
These figures are a cause for concern because of the:
- Financial impact on workers and their families
- Need to pay employees in an accurate and timely fashion as an essential aid to recruiting, retaining, and rewarding talent
- Risk that pay disparities will attract the attention of the local regulatory authorities
- Danger that errors will negatively impact the employer brand of a business
No wonder “improving the employee experience” is a priority for payroll teams worldwide. Nearly a third (30%) of companies name it as a top business driver and therefore a key component to their payroll transformation.
We will have a free PayrollOrg webinar on 17 November at 11:00 am EDT that talks more about the results from our latest global research on the potential of payroll in 2024.
If you’d like to download a free copy of our new global study, The potential of payroll in 2024: Global payroll survey, you can do so here.