Here’s a sobering thought: The difference between a successful outsourced global payroll project and years of frustration may come down to how carefully you word a handful of questions to prospective vendors.
Many experienced payroll professionals start global sourcing projects by assuming they can rework what they’ve already done in domestic payroll procurement and simply shape it for an international set-up. And to an extent, they can. After all, payroll is payroll regardless of where you process it. It follows the same cycle of preparing data, calculating, checking, making payments, and generating pay slips and other reports. True, there may be significant variances between individual country operations—such as the requirements for signing, stamping, and storing hard copies of documents in some Central and Eastern European countries—but the underlying process flow is fundamentally consistent.
That’s why some of the core building blocks of a national request for proposal (RFP) slide easily into a multi-country procurement cycle. The questions you ask your domestic payroll providers about the way they handle customer queries, for example—about their ticketing systems, their escalation processes, and so on—are just as relevant for a global payroll procurement cycle (although in global payroll, you’ll also want to factor in the handoffs between international partners). Likewise, many of the “boilerplate” questions companies typically include in all of their RFPs are reusable, particularly for generic topics such as probing a vendor’s financial history and viability.
But domestic payroll RFPs and corporate templates only take you so far. What they won’t do is help you tackle the unique requirements of multi-country payroll service provision. Some of these requirements are glaringly obvious. It goes without saying that you’re going to need to investigate the breadth and depth of each supplier’s geographical coverage and match that to your own employee footprint, for example. But others require a little more thought.
Take a simple example. It’s common for companies to ask vendors to provide customer references from clients operating in the same industry sector. But does that really help you in global payroll? A vendor could be servicing a client in exactly the same sector as yours but doing so in countries with far less regulatory requirements and legislative complexity. Or it could count one of your rivals as a customer but actually only provide services to a small regional subset of that company’s countries with no experience in its home base or larger overseas territories. And just because a vendor has clients from, say, the same complex sector as yours, that’s not necessarily proof that it can handle the complexities of performance-related payments or collective bargaining agreements. In practice, it may just be paying monthly salaried employees in international sales offices.
There’s nothing wrong with asking for vertical market experience. A better test, however, may be to find references in an environment with similar characteristics and similar complexity to yours (e.g. heavily unionized, or with a high preponderance of weekly pay) and pay particular attention to getting proof of relevant experience in your largest or most challenging countries.
Likewise, standard procurement templates often will ask respondents to describe the size of their customer base. But in multi-country payroll, that doesn’t go far enough. As a global payroll outsourcer, I might tell you I have 100 customers when 95 of them are in one or two countries, and only a handful are truly global. Or I might tell you I have 50 global payroll clients but fail to mention that 48 of them are a fraction of your size and footprint.
Then there are the service delivery models. The “aggregator” model is a well-established global payroll model where an outsourcer uses in-country partners to process payroll on its behalf. But there’s more than one way to be an aggregator. The model comes in many shapes and sizes, and the variations between models can impact everything from the fees you get charged to partner governance and scalability. It’s not enough to ask vendors to describe their service delivery model. Buyers need to dive down into each vendor’s approach to ensure you understand how services will be provided and the impact on your own operations.
Over the years at Webster Buchanan Research, we’ve worked with companies to develop questionnaires that tackle these kinds of issues. More recently, we released a series of self-help tools that enable multinationals to address some of them for themselves. No set of questions is ever foolproof, of course, and inevitably some vendors will come back with pre-canned responses or ignore a “difficult” question altogether. But you can always follow up and ask again. The important point is to make sure you ask the most relevant questions in the first place.