At LACE we’re often talking to Payroll teams about the latest developments and, as part of the regular set of Payroll community events we run, there are common themes that often emerge. Today’s blog looks in a little more detail about one of those themes, which is why we are hearing and seeing an increase in appetite for globalised multijurisdictional payroll systems, as well as what the key challenges for businesses are when they go wrong. Chris Kirby, Charlie Frost and Simon Puryer give their insights on this reoccurring debate.
The nature of the modern workforce
Whether your business operates in one, three or twenty countries, organisations will always strive for simplification in their approach to managing payroll systems; simplicity is sought above all else due to reporting governance and data management. Businesses are complex entities, and simplifying payroll processes when new people join your business is the Holy Grail.
The surge in demand for employer of record (EOR) solutions caused by the increased mobility of workers as well as the need to onboard these people quickly to become automatically compliant with local regulations, has led many organisations to look for a unified and simplified way of delivering their payroll through a single system. The challenge – one which many organisations struggle with – is whether such a system exists. Is there a silver bullet that can solve these complexities?
No payroll silver bullet
The short answer is no – there is no silver bullet. There are payroll solutions which offer EOR, and there are EOR solutions offering true payroll, but we are yet to see one provider who can offer both at a market leading level, and at the scale required for most multinationals. Most payroll providers excel in key locations while not being as strong in others, and also rely heavily on local country providers for a significant portion of their coverage.
It is therefore down to organisations to mitigate the risk they have with multiple systems not talking to each other, lack of clarity on reporting, etc.
Limiting the number of providers is an apparent aim to try to get to, but what is most important is to be able to get the service layer with your provider right to ensure that, even where the landscape is fragmented, you still receive one service. The heavy lifting should be theirs to do; otherwise, you may as well run payroll yourself!
Another point to note is your company profile because we often find that a commercial decision has to be made. Could you physically have one provider across your entire landscape? Yes, you could, but whether it is one physical system or not is a different question. ‘Is that commercially viable?’ This is a different question. The majority of companies have a ‘long tail’ with one, two, five or ten employees per location; the likelihood of one product being commercially viable for a company with 20,000 employees in one region, and a long-tail across multiple is low.
The ‘long tail’
Quite often you find businesses which have this ‘dual landscape’, i.e. core strategic locations with one provider and the ‘long tail’ on a different provider/service. This is not a bad approach; not having ‘all your eggs in one basket’ for a payroll provider/system means that you have a backup plan for each provider.
The questions that each business should be asking itself is:
- What is our strategic direction?
- Why are we trying to achieve this?
The root cause of your problems may mean that you don’t actually want one provider. But if embarking on a new solution is the right approach, then you need to make sure you get your vendor selection approach right, ensuring that it is robust enough that you can take away those pain points you are experiencing right now. Be clear on why you are undertaking any decision on moving to a different system and/or service. You can’t realise the benefits if you aren’t clear about what they will be and also that a new solution is the answer. We often work with clients who are not clear on what they want and are focused on what is currently happening. The solution may not be technology, or even your provider.
Even with a global provider offering you one service you still need to be structured internally to support this approach. It only takes one person in one country to circumvent process and you end up with a different model there; multiply that by four, five, six and you suddenly end up where you would be with multiple providers. You need to ensure you are structured enough to maintain ‘one service’ internally, and often, even with multiple providers this can resolve your challenges.
We are running a focus group in October to accompany you through our Payroll offer and learn more about your challenges. If you wish to have more information about our focus group sessions, please fill the form below.