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Since their emergence in the early 1990s, many multinational companies have utilized shared service centers (SSCs) as part of their global operations. It’s easy to see why: As organizations grow through acquisitions or expand into new markets, shifting certain administrative functions to the shared services model can help them control costs and manage tasks in a more streamlined way.
In the typical enterprise, the first areas to be concentrated into an SSC are finance and accounting – which lend themselves well to an SSC approach, given their reliance on a global set of standards and processes. The next department to follow is usually human resources; since the many global HCM platforms on the market make it simple for HR heads to operate and monitor multiple SSCs in different geographies, HR likewise adapts well to shared services.
Yet in order for SSC models to generate value over time, multinational companies must incorporate additional elements of the business into the SSC approach. Once finance, accounting, and HR are on board, the next logical business arm to concentrate in a global SSC would be global payroll – but that’s where many companies face challenges.
Payroll lessons from the SSC model
Though cost and efficiency concerns are the most common motivators behind a global shared services approach, the model can also be a high-value avenue for broader performance improvement. A well-managed SSC ecosystem, backed by an agile back-office platform, can support a company’s growth through improved decision support, heightened service levels, and more standardized data.
But the leadership of a global SSC is paramount to the results it can achieve. When SSC governance operates with an exclusive focus on cost-cutting, it can lead to understaffed centers, poorly designed processes, inadequate technology investments, or low staff morale.
More effective SSC governance requires a strategic, big-picture outlook. Cost savings should never be the sole focus of an SSC initiative; by prioritizing longer-term benefits – such as supporting the growth of the business, improving the customer experience, or enabling analytical insights – enterprises can see stronger outcomes on the back of a holistic strategy.
A holistic SSC strategy also demands respect for the significance of all business functions linked to the SSC team’s responsibilities. Performance gaps often emerge when sister components of a company’s back-office operations – such as payroll – are executed outside the global SSC. For companies that manage global HR through a global SSC model, operating payroll separately can create issues related to data quality, workflow efficiency, reporting, and so on.
Why payroll is ready for global shared services
Traditionally, payroll has not been as perfect a fit for a global SSC approach as finance and HR. Since global payroll must comply with a massive amount of legislation and tax requirements at both local and country levels, it is often managed via a variety of fragmented systems and outsourcing partners.
While payroll is often handled by an individual, local shared services team, many small and mid-size enterprises find the challenges of incorporating global payroll services into their global SSC to be too immense to overcome: In a recent Deloitte survey, 60% of respondents had a Payroll Shared Service Center, but companies with fewer than 10,000 employees were “much less likely to have a payroll shared service center” than larger companies were.
Thankfully, however, recent advancements in global payroll software are making the function far more conducive to inclusion in a global SSC. The introduction of unified, cloud-based global payroll technology has enabled greater centralization and introduced much needed standardization into the global payroll process.
Today’s most advanced cloud-based systems integrate with the existing technologies used to run global SSCs – particularly HR information systems (HRIS) – thus enabling companies to load payroll data from third party solutions into the global payroll application in a standardized way. With the data then housed in a single solution, SSC stakeholders achieve greater visibility into (and control over) the entire global payroll operation.
With greater standardization, SSC teams can be more productive and efficient – reducing errors and minimizing the time spent resolving repeated payroll issues. With vastly improved data, exposure to the risk of non-compliance can be dramatically reduced – minimizing the time SSC leadership spends on regulatory and legislative requirements. With improved integrations, global SSC processes also become more unified – creating more streamlined, effective end-to-end processes that can drive stronger alignment between the back office and the overall corporate strategy.
Setting up payroll for SSC success
In reporting on findings from a global SSC survey, PwC said that a multinational company “must have a global organizational structure in place before implementation begins” in order to make shared services work. But when payroll is involved, it takes more than a global structure – it also takes a global strategy, mindful of the five core pillars to a successful payroll-SCC initiative.
- A unified technology platform: A truly global payroll solution is a prerequisite to achieving any notable outcomes with an SSC approach, and the ideal solution should deliver real-time visibility into performance in all geographies served. When evaluating the best option, stakeholders should assess the software’s ability to integrate with existing SSC technologies, scale to the enterprise’s needs across existing and future global markets, and deliver useful reporting and analytics.
- Standardized processes and data: Ultimately, the only truly useful reporting and analytics are those driven from accurate, high-quality data – and high-quality data only stems from standardized processes and well-validated information. Global payroll providers that don’t automate the global payroll process (creating rules to meet the specific requirements of each individual country) won’t be able to provide actionable intelligence over the long term.
- Compliance monitoring and reporting: To ensure payroll compliance, stakeholders need a clear understanding of the legislation and regulations affecting the entire global base of operations. Compliance control can be one of the greatest benefits of successful payroll shared services; enterprises should seek out platforms that simplify compliance monitoring, issue tracking, and statutory filing management.
- Simplified SSC team management: The right functional leadership of qualified, knowledgeable payroll talent is key to global payroll SSC success. But even the most talented team is only as effective as the systems it utilizes every day; repeatable processes, common-sense automation, and strong management tools are critical to establishing a consistently high-performing global payroll SSC operation.
- Integration with other systems: A well-equipped global payroll solution for SSCs should offer seamless integration with other commonly used SSC systems, whether running on-premise or in the cloud. Careful evaluation can help stakeholders ensure that the systems they use connect appropriately –avoiding unnecessary complexity or costly errors down the line.
For more on incorporating global payroll into global shared services, contact CloudPay.