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Global Payroll Management Demystified—Part 1: Using a Best Practices Approach

By Max van der Klis-Busink, RPP

Global payroll is rapidly evolving as a function and as a profession. Successful payroll professionals appreciate the challenges of the complex landscape and cultural excitement a global payroll career provides. Companies, in return, have elevated global payroll in their strategic roadmaps and often as a critical part of their global HR transformation projects.

As a practitioner who values a collegial global network—from countless peer connections, industry forums, the Global Payroll Management Institute (GPMI), and networking events—I can safely conclude that professionals and companies are actively looking at how to best manage global payroll.

This article, part one of three, aims to demystify how to manage global payroll and how to introduce a best practices approach. This approach is composed of four fundamental and interrelated components that includes the following (see Figure 1):

  1. Global payroll strategy
  2. Global payroll governance model
  3. Global payroll operating model
  4. Global payroll operations

This best practices model is built from practical experience, continuous education, and the inspiring approaches of my peers. It can be applied (in full or in parts—cherry picking is allowed!) by global payroll professionals at every level, in all countries and industry sectors.

The components and the sections in the model are up for debate. I encourage every reader and leader to participate in these discussions to help us further elevate and clarify our professional thinking.

In Part I of this article, I introduce the components of global payroll management and their sections. The second part will take a deep dive into global payroll strategy and governance. The third and final article in the series will further examine the global payroll operating model and global payroll operations, with closing thoughts and considerations.

Figure 1—Four Components of Global Payroll Management

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Global Payroll Management—Now, Everywhere, Always

In a global economy, international expansion is a given. Technology has freed companies to be accessible everywhere, every day, and all the time. Traditional constraints such as fixed work locations have changed; the sky is no longer the limit. The global economy goes beyond that.

Global payroll professionals understand very well that where there is international expansion and work, there are people, and where there are people, there is pay. Employees expect to receive their promised wages accurately and on time. At its core, this is where our profession is pivotal. The generational and technological expectations of a global workforce must be met to reduce costly turnover and increase engagement. We need to operate payrolls that tap into the culture of our companies. For instance, payroll should mirror how customers of their company are treated and lead to a paycheck with a user-friendly delivery. Or to quote the Beatles, “Here, There and Everywhere.”
This is the company directive to its global payroll function: Enable international expansion and ensure we pay our workforce in a way that is appreciated and innovative.

With these imperatives, we need to manage global payroll and ensure best practices to do this holistically. For this, all four components of global payroll management and the 20 sections must be present and functioning, whether fully or pinned on the roadmap (see Figure 2).

Figure 2—Components’ Sections of Global Payroll Management

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Keep in mind the following functions of each of the four components:

  • Global payroll strategy—Drives the direction of the other three components
  • Global payroll governance—Aims to ensure the strategic direction is properly monitored
  • The global payroll operating model—Develops, via a tactical approach, a model that delivers on the strategic promise
  • Global payroll operations—Delivers the payroll processes or where the daily magic happens! Operations includes project delivery and continuous improvement.

Let’s take a look at all components and sections.

Global Payroll Strategy

Like any other business function, global payroll requires a clear strategy, regardless of maturity and overall scope of countries. This component of global payroll management sets the direction for most, if not all, choices and design decisions in the other components. This is the ideal first step in managing a global payroll function. Practice, however, teaches us that in reality we find ourselves paying colleagues in many countries and regions and, in fact, have already established a global payroll to meet business requirements without first composing a global payroll strategy. 

Does that prevent us from taking a step back and strategically thinking about global payroll? No, it does not! We must think strategically about global payroll wherever we are in our journey.

Global payroll strategy is all about articulating the purpose statement of global payroll with strategic objectives (for operations, compliance, and reporting) based on that statement that should rarely change in the mid-to long term. Both the statement and strategic objectives should be aligned with those of functions such as HR, finance, IT, and possibly shared services. 

Design principles define what matters most and inform critical decisions, especially when tradeoffs are required, as well as explain which capabilities are essential for fulfilling the purpose statement. One best practice is to have no more than seven to 10 principles. Global payroll brand is the perception of what employees and stakeholders think when they interact with or hear about global payroll. This brand is hard to build but easy to lose. A brand is what we all have, knowingly or unknowingly. The brand is the outcome of our delivery and our people. This is where staffing plays a crucial role. Global payroll is a people’s business, enabled by technology and executed with processes. Thinking strategically about staffing in global payroll is fully understanding the skill sets required to deliver on the purpose and build the brand.

Global Payroll Governance Model

Governance is a component of global payroll management with which experienced global payroll professionals are familiar. Governance ensures that the strategic objectives and design principles are put in practice, based on an adopted mantra in global payroll called “global where you can, local where you must.” Striking the right balance in global payroll is of the essence—and in practice is hard. Where does global end and where does local start?

We are familiar with the response of local teams who state that, “We are truly just different due to local complexities and therefore justify local exceptions to global standards.” This component of global payroll management aims to put stronger governance around global payroll.

In the first place, global payroll requires strong governance to ensure control and compliance, adherence to (inter)national laws and regulations, and internal and external financial and non-financial standards. This often requires a risk-based approach on a global level and on a local level: managing risks that raise the specter of not meeting objectives. What follows is effective control design and deployment, driven by the application of policies and standards. Policies are mid- to long-term directives on how global payroll is operated and drive standards in processes and delivery and are followed by procedures that are more operational.

Partnerships in global payroll, in a more sourced landscape with multiple vendors and stakeholders, are becoming more pivotal in the success of delivery. Governing how these partnerships are built, maintained, and deepened are becoming increasingly complex due to the global scope of global payroll. Who connects with whom, when, and how requires planning and governance.

Innovation in global payroll, with the exponential technological development and more broadly shared best practices, is the best-kept-secret part of governance. Embedding innovation on a strategic level (not solely focused on technology!) is key to keeping the overall global payroll landscape at the highest standards. The organizational structure, meaning the location of where work gets done, reporting lines, and roles and responsibilities in global payroll, should enable ownership and responsibility.

Global Payroll Operating Model

An operating model is the part of global payroll management that, surprisingly, gets the most traction in courses, webinars, and position papers. This is mainly driven by vendors that are advocating a certain service and technological solution. Whether to choose a local solution, aggregator, technology platform that consolidates services, or a global payroll provider—there will be no one-size-fits-all approach, as the only one size that fits all is typically the hybrid approach. This is either a concise choice or built from legacy or merger and acquisitions that prevented consolidation. Global payroll operation models include more than the services outsourced or vendor(s) chosen and are the tactical link between strategy and governance to operational execution.

Service delivery models are the balance of technology offerings, degrees of outsourcing, and the spread of country payroll across the globe. The combination of these three key elements makes up the service delivery model(s) best fit for the current and future country scope. Performance is about delivery of services, as global payroll often takes accountability for the end-to-end payroll process. Performance measures include, but are not limited to, vendor performance and are directly linked to strategic objectives of global payroll strategy.

Global payroll has been, is, and will always be a people business, but we must appreciate the increasingly important role of technology. This is more than the payroll software and middleware we use. It’s about the whole global payroll technology ecosystem from pre-payroll, to payroll run, to post-payroll. Data utilization is the future of global payroll as the answers to our questions can be found in our data and our interpretation. Using this data will enable data-driven approaches to compliance, process improvement, and being a business partner for other functions and the business. Ways of working describes the expected cultural norms for how people collaborate and provides important context for behaviors. In an increasing physically disconnected—but virtually connected working world—setting ways of working is important to the people aspect of global payroll and your global payroll brand.

Global Payroll Operations

Global payroll is as strong as its delivery.

Professionals who interact with employees daily, adhere to payroll calendars, ensure that HR really doesn’t submit late changes, and reconcile payroll postings are positive examples of the delivery of good customer service. Service delivery is inclusive of all interactions with employees and partners; it’s where we operationalize the other sections.

Global payroll processes include pre-payroll, payroll run, and post-payroll activities. They are the core processes that we all recognize. There are many other processes of equal importance, such as functional management, risk and control reviews, and continuous improvement initiatives. These initiatives, in global payroll especially, should drive operational excellence as an integral part of operational reviews, and is closely linked to innovation. Over are the days where we could say that we have simply always done it this way! Let’s challenge ourselves to always be better.

Managing data and documents in global payroll has always been a key focus, but since the increased focus on data privacy, such as the General Data Protection Regulation (GDPR) in the EU, companies often adopt a more formal approach to records and information. This section is housed deliberately in global payroll operations, as this is the place where sensitive data is touched and record retention is of the essence. Global and local project delivery is an integral part of operations. Given the strategic place of global payroll, there is rarely a project not touching payroll and requiring our involvement.

A Holistic Approach

Global payroll management is best approached holistically, incorporating strategy, governance, operating models, and operations. The best practices approach introduced here can be used to design, review, or improve your existing global payroll function. It will get you started, but it is open for your own interpretation, definitions, and usage.

Stay tuned for a deeper dive into the components in the next two articles.

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Max_VanDerKlis-Busink

Max van der Klis-Busink, RPP, holds a Bachelor of Business Administration in Human Resource Management and is a Registered Payroll Professional (RPP) in The Netherlands. He currently holds the position of Payroll Manager Netherlands and Policy Lead, Global Payroll Strategy, at Shell’s global headquarters in The Hague. Over the past 13 years, Van der Klis-Busink held various roles in global payroll and has been active in developing the profession. He has developed a best practice method for being in control of global payroll and specializes in building payroll functions that continue to adapt to ever-changing business needs. Van der Klis-Busink has shared his passion for payroll through multiple articles in global payroll, webinars, and by co-developing and instructing certificated programs in global payroll, together with the Global Payroll Management Institute (GPMI). In 2018, Van der Klis-Busink was the first-ever recipient of the GPMI’s Global Vision Award.