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Using Best Practices to Improve Global Payroll Strategy

By Frank J. Mendelson

1477297437_64576Making payroll a strategic asset is vital to the overall success of an organization, a Ceridian executive said as he provided an overview of best practices in global payroll management during the Global Payroll Management Forum (part of the APA’s Annual Congress).

Aaron Hurst, Vice President of Global Partnerships and Solutions at Ceridian, presented “Strategic Global Payroll: Improve Strategy With Data Management, Compliance Best Practices, and Technology” in Nashville this past May.

Hurst explained how human capital management technology enables improved data management and reduces compliance risk through cloud-based delivery, which is now considered an industry standard. The growing globalization of the workforce increases competition to recruit and retain the best employees, he said, and HCM technology helps meet and exceed employees’ expectations for mobile access to information and self-service.

He emphasized that managing global compliance is the second most important job for payroll, after accurate and timely payment. He made two points to highlight the growing importance of the payroll professional:

  1. Governments are increasing regulatory complexity, meaning increased business risk
  2. Strong compliance management protects brands and enables rapid, albeit disciplined, growth

Regulatory complexity is driving the need for better data management and automation, he said, noting that changes in the United States—new minimum wage requirements, a worker’s bill of rights, diversity mandates, the Affordable Care Act (ACA), and pay equity reporting—are happening all over the world.

The trend for increased regulation is not going to flatten out or decrease. Hurst said, and governments are expecting a single system to provide information in real time. However, most companies do not have a single united or country-by-country system.

Greater Impacts Ahead

Big events will impact the regulatory environment and, by nature, payroll, Hurst predicted. When the U.K. exits the European Union (whether the landing is soft or hard), this will mean a change in rules for workers in the U.K. or companies who bring workers to the U.K. This includes privacy rights and governments establishing stricter rules.

Hurst also cited changes being imposed by the gig economy—characterized by temporary employments and companies contracting with workers, such as Uber. Other changes such as mass migrations and the refugee crisis also will have an impact on global payroll.

To address the demands of countries around the world, multinational companies will need to provide:

  1. Consolidated data and reporting
  2. Consistent global service
  3. Data security and compliance
  4. Global growth/scale
  5. Support for cultural and regional differences

Improving HCM Data Management

The goal for global payroll, Hurst said, is to address three areas of data management—(1) tangible and easy to understand, (2) visible and easy to analyze in real time, and (3) auditable so that it’s easy to determine “what happened,” such as who changed data and why.

Data management effectiveness depends on the quality and consistency of the data entered, the primary reason for a single data source. Good payroll data results in making global payroll a strategic business partner. Hurst explained how improved data management provides the following benefits:

  • Enables fact-based analysis and objective decision-making
  • Compresses business cycles and automates processes
  • Measures global performance, risk, efficiency, and effectiveness

Global payroll, he said, plays a significant and expanded role that goes beyond payroll processing by becoming a strategic business partner.

“You want to provide an analytical view for your company,” Hurst said. “When the executive comes to your door looking for information, you can provide data that you can stand behind with confidence.”

Understand, Manage Global HCM Risk

Hurst explained how HCM technology is the foundation upon which strategic global payroll sits. He advocated setting up frameworks in order to understand current processes, know where the data is in the system, and how to get the data into a format where it can be used and analyzed.

As the global payroll professional moves from a tactician to a member of the strategic business team, the professional profile of the practitioner is changing from that of an accurate and on-time payroll processor to a process improvement consultant, HCM data expert, and risk assessor.

A payroll professional can provide an analytical view of the company. This means payroll can provide new key performance indicators (KPIs) for business to help measure risk and inform decisions as to whether to scale up or down in a specific country or geographical area.

“Maybe taxes went up, but executives don’t know why their costs have increased,” Hurst said. “Payroll can help say, ‘We don’t want to grow here … but we want to grow somewhere else.’”

Hurst cited the need for technological and operational sophistication in the payroll department. He referenced a new government portal in Brazil, eSocial, a single system in which employees and employers will provide tax, labor, legal, HR, social security, and payroll data. Government bodies have access to the system for review, audit, and enforcement purposes.

As definitions of work requirements change, so do the compliance and tax requirements for those employees, he said.

Compliance Is at Stake

Hurst told his audience members they must play a role in compliance.

“Payroll is foundational to labor risk and financial risk—not just from the standpoint of payroll compliance, but compliance in general,” he said.

No matter how much you outsource, Hurst said, there is always a role your company can—and must— play in maintaining compliance. During the workshop, he identified a framework to understand compliance around the world. It includes three dimensions:

  1. Business activity—drives compliance policy. Understand what processes you have in a country and which ones you might need.
  2. Jurisdiction—understand where the workers are and where they are subject to compliance rules. Map out where they work and where they actually live.
  3. Applied Compliance—understand the rules that apply to your company. Create internal partnerships among payroll, human resources, legal and finance, and externally between your company and your outsourced partner. Get everyone to the table and be clear who is responsible for what, and make sure there are no gray areas. The gray areas are often where businesses get in trouble—when it is assumed someone else has responsibility.

As the role of global payroll grows, so does the corresponding need for reliable data, consolidated technology, and analytical capability to be a full partner in strategic decision-making.