The aggregator services model is a common form of global payroll delivery at multinational companies around the world. The origins of this model can be found in the need to outsource payroll for several countries at once to a single provider.
The logic is sound and understandable, and the model delivered successfully for several years. But then it quickly stopped being effective, as it was not designed to keep pace with the changing complexities associated with multi-country global payroll delivery and management.
In this article, we are going to look at some of the reasons why this model is no longer suitable for 2022 payroll delivery. We will also look at three key myths associated with the aggregator services model. The reality is that any multinational company considering this model should pause and really look to define what they need in terms of a global payroll solution before making a hasty decision that many of their peers in the market have come to regret.
Myth 1: All Countries, One Contract
One of the biggest myths of the aggregator model is the simplicity promise—essentially that a single provider says is that it will cover all your payroll countries and that everything is taken care of under a single contract.
However, that’s not the case. Simply put, no aggregator can service all the countries that you are either currently in or wish to be in in the future. The aggregator model is a business model, and there are often attempts for a one-size-fits-all product to be used on every client they manage to convince. They will have a set number of local country payroll providers within their network, which are likely some of the common payroll countries across Europe and Asia. These countries may not suit your current needs, and all global employers should be wary of any promises made during the early sales process about an aggregator's plans to expand their network to include more local countries.
If the aggregator you are speaking to does not currently have payroll vendors in all the countries where you are located, they will be unable to provide the services you presently need. Furthermore, you are likely to have growth and expansion plans that require a move into other countries where you will need payroll services. So, once again, if the aggregator does not have a presence in these countries, they cannot offer you services. You are essentially limited and restricted to the scope of their network.
For this reason, you may end up having a single contract with the aggregator but there will be a need for more contracts and business relationships with other payroll providers who are in the countries that you are in. It’s a nice marketing line, but you’ll end up with multiple contracts, and you may find that your aggregator only covers a small percentage of the actual number of countries where you need to manage payroll. Multiple contracts were never really the problem that needed to be solved. The issue is finding a way to manage the local payroll providers in an effective way.
Ultimately, no aggregator has unlimited country coverage. In fact, most focus on the large employer nations and restrict the number of countries to what suits their expenditure limits inside their own business models. It quickly becomes all about what they can provide versus what you need.
Myth 2: We Do the Work, So You Don’t Have To
Sounds attractive, doesn't it? Unfortunately, many global companies have discovered this isn’t actually the case long after a lengthy contract has been signed and they have passed the point of no return. We speak to people all the time who used the phrase, “I wish I had known this before we started!”
The reality is that global payroll professionals working at organizations that use the aggregator model still find themselves processing large amounts of data every month. This is because the aggregator services model requires the client to transfer large amounts of data into another platform. The client is required to match the data to the aggregator’s software-specific formats for upload to the aggregator’s platform. This is done monthly for each payroll in each country. The client is given a “workbook” with instructions on how the aggregator wishes to receive the data, so the client is then forced to collate their data into this workbook format every time.
The reason for this is so the aggregator can collate your data inside their platform and then transfer it across to their network of local country payroll providers that make the calculations and process the payroll in the individual countries.
But is this really what you signed up for? Does this take all the work out of your hands, cut down on the administration, and reduce the complexity you are facing? Not at all. In fact, you’re still working with payroll data and still stuck with manual data uploads and processes. Your workload hasn’t really decreased, and there will probably still be glitches with the data you provide.
Myth 3: Our Vendors Are the Best
Another myth is the common line about the quality and scope of the local country vendor network. Aggregators will talk about their years of payroll experience and how they have searched the globe to carefully select only the best-in-class local country payroll providers.
But these aggregators are running a business just like everybody else. Cost management and what they view as sensible business practices will come into play when they are developing their vendor network.
Vendor quality is often an issue with many global companies that are seeking better quality local country payroll providers. The unfortunate reality of the aggregator model is sometimes you find yourself switched over to an even worse payroll provider.
And, of course, once you sign on the dotted line, you are stuck with that provider for the length of the contract. You are restricted to the quality and number of vendors within the aggregator’s network, and you really have very few options when it comes to quality control. If there are a lot of payroll errors or customer service issues with the local vendor, you can only bring it up with the aggregator and deal with whatever response they provide. They will make promises about speaking to the local vendor, but they will not break a contract with this vendor because it would be expensive and counterproductive. It is simply not to their advantage.
When speaking to global payroll professionals across the industry, we find two common issues come up when they are dealing with vendors inside an aggregator network:
- They are unable to communicate directly with the vendor to quickly resolve issues and improve quality. The relationship is managed entirely by an account manager who acts as a go between. This account manager won't necessarily have payroll knowledge or expertise, and it could be days before a response to a simple query is received.
- Despite promises of account management and swift query resolution, it is sometimes the case that the global payroll professional on the client side must do all the work when communicating and resolving an issue. The client has paid for a service, but they end up doing a lot of the work themselves to ensure that payroll is processed correctly.
Neither of these outcomes is what clients sign up for when looking for a global payroll solution.
The aggregator services model worked successfully in a previous era when things were simpler and easier to manage. But it was simply not designed to cope with the modern challenges of multi-country payroll delivery and management. It is a one-size-fits-all model that promises a lot but tends to under deliver in practice.
It does not improve manual processes with widespread automated data flows and powerful integrations. Instead, it relies on the client to supply data every month in a specific format.
It does not give multinational companies full control over their local country payroll provider network. It restricts them to the scope and quality of vendors inside the aggregator model.
More and more global organizations are looking for something different and better when it comes to processing and managing their multi-country payroll. They want an innovative platform that takes the work out of their hands and solves payroll challenges that are specific to their business. They do not want to get boxed into a lengthy contract in a one-size-fits-all model that is no longer fit for their purpose when it comes to market needs around payroll. They want digital innovation, flexibility, and the ability to choose, control, and manage their own network of local country providers. They want to manage their global payroll on their terms, not somebody else’s.