If your LinkedIn feed looks anything like mine, then you're seeing two concurrent topics of conversation amongst HR and global payroll professionals: The benefits and drawbacks of remote work, and the challenges brought on by a global labor shortage.
The rapid growth of remote work driven by the COVID-19 pandemic is revealed in the statistics. According to Upwork—an online program used by freelancers, contractors, and remote workers—more than half the American workforce has been working remotely in some way during this pandemic. The U.S. Bureau of Labor Statistics reports there were 10.1 million open jobs in the United States as of June 2021.
The global labor shortage is also pandemic-driven, and companies overseas are struggling. According to a report in The Guardian, the U.K. is experiencing the worst staffing shortage since 1997. Too many of these companies are trying to solve their hiring challenges without considering the talent living outside of the markets of their existing business entities. Alternatively, other organizations have broadened their search parameters to include global candidates to expand their talent pool.
The challenge of ramping up a remote work environment is precisely what has placed organizations in a position of strength to overcome their present-day labor shortages. Companies that expand their talent search to include global hires can build on the collaborative relationship that HR and IT leadership established when they were responding to the pandemic-accelerated remote work needs.
Those that do so will see the biggest payoff in workforce retention and acquisition. The efficacy at which your organization can expand its hiring practices overseas depends significantly upon how well your teams achieve global fluency. Globally fluent companies excel at acquiring and applying knowledge about the global markets where they plan to expand. A globally proficient organization needs an HR team with insights on recruiting, employing, and managing workers in other countries and a supporting team that can capitalize on that knowledge.
When the World Is Your New Talent Pool
One of the key challenges that HR, payroll, and IT teams face in supporting organizations with big plans for international operations lies in executing HR practices and payroll distribution in an unknown market. Challenges such as multiple languages, foreign currencies, and cultural differences may challenge companies. How successfully an organization can expand into a global market depends upon a company’s confidence in its compliance risk mitigation, its ability to process international payments on a timely basis, and its understanding of the cultural nuances affecting its in-country workforce. This presupposes the need to integrate HR and payroll processes in a globally consistent way.
The process of centralizing a company's payroll systems worldwide with one provider is not easy. This process requires standardized data, streamlined processes, and ensured global compliance. Thus, organizations, especially those that prioritize growth, often choose to work with a payroll outsourcing service provider. An overhaul involving a centralized solution is an investment to drive business efficiency and keep pace with regulatory changes worldwide.
It’s important to remember that the company’s outsourced payroll partner will be handling the details and the phases of implementation, so having consistent and clear lines of communication between HR, IT, and the payroll partner are essential. After all, overhauling your payroll system to meet global needs is a large change management project that impacts multiple departments in the company.
Many underestimate how labor intensive this undertaking can be, so ensuring precise and consistent communication with external partners and internal stakeholders will help avoid mistakes that can derail the project. Both IT and HR should also roll out training and support programs to ensure that all features of your new global payroll system are understood.
Vetting a Global Payroll Provider Together
If your organization chooses to partner with a payroll provider, below are some best practices that IT and HR should keep in mind while working together to vet potential partners:
- Prioritize countries with the largest employee populations: Generally speaking, the larger your employee population in a certain country, the more complex the payroll transition. Prioritizing your biggest countries—population-wise—with a lens towards country-level complexity will help you earn some early victories. It will also help you to quickly establish a global standard that can be applied across the rest of your locations.
- Take a phased approach: Consider all the various factors before implementation. This isn't a small project, and the change management will need to account for other projects you have running. If your payroll vendor pushes for a "big bang" approach to implementation that affects all markets at the same time, that's a red flag. When too many regions undergo implementation simultaneously, the complexity increases and may overload your core project team. By staggering your rollout, you and your provider can reduce the risk of critical mistakes when navigating in-country nuances, like currency conversions and data reporting requirements.
- Develop a strategic timeline: Timing is critical when it comes to large-scale payroll projects. There may be countries where your payroll provider should opt out of mid-quarter deployments to avoid complications when reporting to local tax authorities.
- Clean and standardize data before conversion: HR and finance teams share payroll data ownership at many multinational organizations, leading to version control and reliability issues. To reconcile data discrepancies and initiate a plan for global standardization, your payroll provider needs to work closely with your finance and HR teams. Ensure your provider implements a collaborative and transparent process for aligning and signing off on global payroll standards.
When your IT and HR leadership are working in tandem, expanding your global workforce and managing complex payroll nuances are achievable. Should your company choose to partner with an outside team of global payroll experts, the experience will be more efficient when HR and IT are working in sync. Whether hiring a payroll partner or outsourcing global payroll altogether, the implementation of global payroll is critical in upgrading the HR and IT necessary to compete globally.
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Tristan Woods is the Chief Product Officer at Safeguard Global, a workforce technology company, who has spent more than 20 years architecting payroll models to support their operations and growth. At Safeguard Global, Woods leads strategy development for technology solutions, including operations, implementation, and development of the company's global payroll and workforce enablement platform and employee portal.