In early 2022, I noticed something I had not seen before. Payroll projects were making the news. Or rather, payroll go-lives that went wrong became national headlines. That had happened before, but what struck me this time was the sheer number of issues. I started to investigate, and I discovered that it wasn’t one vendor or one solution. In fact, go-lives with different vendors and solutions went wrong across the world. Unfortunately, in 2023, similar headlines continue to appear.
In Part I of this article, I gave you three reasons why payroll projects go wrong during the preparation phase and what you can do to avoid that from happening. In this article, I focus on the implementation and go-live part—and give you three different additional areas that require attention.
Resistance to Change
Implementing a global payroll project is a significant challenge due to the complexity of managing diverse regulations, practices, and cultural expectations in the countries in scope. And, even though you’ve done all the leg work and kept everyone informed, it’s not unusual if one or a few countries continue to resist the replacement of their payroll. They are not against a new payroll, but they have a local payroll that they understand. For them, it works well. They have a great relationship with the vendor, and they don’t view the global payroll project as a priority.
And even though you’ve invested time in the early stages of the project to educate all local teams about the benefits, and everyone showed support for the strategy, once the country is up for implementation, the whole project stops. The local team doesn’t show up for meetings, the project deadlines are not met, and the data you need is not ready.
Pay Attention to the Indicators or Early Warning Signs
The following are early warning signs you should look out for:
- Local payroll teams that participate in the project preparation work but are consistently late in sharing deliverables
- Countries with local payroll solutions that offer more functionality than the global solution
- Local payroll administrators who are close to retirement or have a long working relationship with the local vendor (they might even be former employees of that vendor)
- Countries where local management has a reputation for deviating from corporate standards
What Can You Do?
First, acknowledge that the new global payroll isn’t an improvement for every country. The reason to bring it all together is insight and control at the corporate level, and that cascades down. This inevitably though comes with some loss of control at the local level. You can’t just call the local vendor anymore when you want something done. Be open to the fact that—for some countries in scope—it might even be a (temporary) step back because some of the extra features they had in their old solution will not be available right away in the new global payroll.
If there is still time, you could onboard other countries first while providing extra change management and attention to the country in question. Ultimately, a situation like this might have to be resolved through a formal escalation to the project’s executive board. But if you watch the early indicators and act swiftly on them, you stand a good chance of avoiding this scenario.
Design the Simplest Process Possible
The payroll regulatory environment is growing more complex every year and company policies factor into that complexity. A global payroll program is an excellent time to evaluate if there’s potential to simplify payroll.
When it comes to the payroll process, if you work with a vendor, you can assume they know the local payroll process. It’s their business to run it as efficiently as possible. I’d recommend that you don’t waste time on documenting your process but, instead, ask the vendor for their standard, including the local variations. Then have the country teams compare the vendor version to what they currently have in place. Undoubtedly, you will receive a list of proposed deviations. But here’s the thing: every deviation adds steps to the process, is a potential disruption, costs money, and must be maintained throughout the contract. A careful evaluation of the proposals is required.
What I have seen work well is an approach where a project steering committee takes responsibility for all suggested process deviations. The two evaluation criteria that will always be accepted are the following:
- A change is necessary because of a local legislative requirement.
- A change is necessary because of a local collective or corporate labor agreement.
But an experienced local payroll vendor should already incorporate those. All deviations that do not fall under these two categories must be defended before the committee and include a total cost of ownership calculation over the contract term to show the budget impact. This approach is usually successful and most often turns most “must-have” requirements into “nice-to-have” features. Of course, you should remember to adapt the criteria above to your circumstances.
Legacy compensation policies also offer great potential for simplification. This is especially the case when a company has a history of mergers and acquisitions (M&A) and continues to have pay policies in place that apply to former employees of these companies. Over time, those might only still apply to a handful of people. The new payroll solution could be used as an opportunity to move these employees to current plans and compensate them for the difference with a lump sum payment. You’ll want to ensure this is legal before you proceed. And while you are at it, some of your current plans could be also simplified. This usually leads to a conversation with unions or works councils, but if you have a lot of custom-designed plans, streamlining them might be an effort that saves money.
Follow Your Go-Live Criteria to the Letter
You’ve done all the work, sent out the communication, and you’re ready to go live. There’s only one problem: when you look at the results of your parallel runs, they don’t match your go-live criteria. What to do now? Your company leaders and employees expect the new payroll to go live, your current vendor has started to prepare for your exit, and your new vendor is trying to convince you that these are minor issues that will be fixed before the first payroll is due. The pressure to go live as announced is enormous.
Despite the pressure, take a moment and remember why you set the go-live criteria in the first place. Those reasons might include the following:
- Clear Expectations: The criteria set a clear benchmark that everyone agrees on, ensuring that all project stakeholders have a shared understanding of what "good" looks like.
- Risk Management: Go-live criteria help to identify and manage risks associated with the project. If the project doesn't meet agreed criteria, like the agreed net pay deviation, it's an indication that there may be significant risks associated with going live.
- Quality Assurance: The criteria help ensure that your payroll has met a certain level of quality before it is launched. This can include factors such as the number of payslips that are (still) incorrect.
- Stakeholder Confidence: When you meet your go-live criteria, you boost confidence among stakeholders, as it demonstrates that the project has met the agreed-upon standards and is ready to go.
The go-live criteria you set up gives you a clear target, helps with risk management and quality, and builds confidence in the new payroll among everyone involved. You created them for a reason, and it would be foolish to throw the criteria that haven’t been met as the pressure increases.
The projects that made the news all had one thing in common: they went live under time pressure, even though the payroll team knew they were not ready. And that meant that the go-live date took precedence over all other criteria. I’ve seen that happen many times, and the assumption is always that the project team thinks they have enough time to fix a few last-minute mistakes. But fixing these always takes longer than everyone anticipates.
When payroll projects go live before they are ready, the first payroll run comes with errors. This results in incorrect paychecks and payments, and sometimes even no payments at all. Correcting these errors can take months, and the payroll team must do the work on top of their regular activities. It’s a recipe for failure.
Fixing payroll problems after the launch is significantly more expensive and time-consuming than addressing them before going live. Go live criteria are designed to ensure that your project meets all necessary quality standards. When you ignore these checks at the end, you deliver a payroll that doesn't meet expectations, which will lead to mistrust among employees and damage your reputation.
The pressure from your executives to hit your deadlines will be strong, so make sure to keep them closely aligned to your project and don’t surprise them with a last-minute extension. Communicate your go-live key performance indicators (KPIs) at the start of the project, then start sharing them three months before go-live and provide an in-depth update every week. These reports help you tell a story.
Navigating the complexities of global payroll projects is a daunting task, driven by a series of challenges, such as regulatory compliance, data privacy, integration, and cultural nuances. However, with a solid strategy, proper planning, and attention to the unique needs of each country, you can succeed. By prioritizing communication, working with an experienced vendor, and leveraging the expertise of local teams, you can run a successful global payroll project. While the journey might be filled with potential pitfalls, I hope this information helps you address them before they happen and allow you to run a successful payroll implementation and go-live.
Find out more about the author in this issue’s Professional Spotlight.