How to Conquer the 5 Most Common Payroll Challenges
Theodore Roosevelt is credited with saying ‘nothing worth having comes easy,’ an adage proven endless times over. So whether you’re implementing global payroll for the first time or looking to introduce more centralized and standardized processes to your existing payroll, the good news is that the result will likely be worth it. The downside is that you can expect to encounter a few challenges along the way.
Every organization faces its own set of issues, but the five biggest hurdles tend to be common across multinational companies. Also common is the central theme that underpins the solution to each of these challenges: beginning your global payroll initiative with a thorough analysis of your existing operations and how they are performing.
Challenge One: Managing the change
Any payroll change effort can be frustrating for countries in which payroll is already performing reasonably well. A full global payroll transformation means a significant operational change, so some level of resistance is inevitable. And it’s common for that resistance to comes from in-country payroll personnel or business unit leaders.
Why so? Because it’s the payroll professional’s role and responsibilities that are most affected by the introduction of global payroll. They face the prospect of ‘unlearning’ established processes and adopting a new approach. For business unit leaders, there are also concerns about the potential for unwanted disruption.
Open and transparent communication is critical to the success of any payroll transformation. Project leaders must clearly and vocally convey the benefits of the project for both the broader organization and individual countries. A kick-off event that brings together your international payroll teams can help increase engagement from the start. Also, beginning the rollout with an ‘easy’ country can earn the project a global champion that can showcase its success to other teams.
Use the project to give your high-potential international team members new development opportunities. And if you’re concerned about key employees leaving during a project, address it ahead of time. Project bonuses or retention incentives can be introduced if there is a high probability of losing key personnel.
Challenge Two: Balancing local flexibility with global standardization
A successful global payroll project will strike a precise balance between standardizing processes and retaining flexibility at the local level. Streamline your payroll processing too much, and your in-country teams will be forced to work outside of the system to deliver against local legislation and cultural idiosyncrasies.
On the other hand, maintaining a system of local payroll platforms that account for each of those country-specific requirements can be overly complicated and extremely costly to maintain — not to mention prohibitive for greater long-term benefits like global auditability and benchmarking analysis.
A solid understanding of your payroll needs and scope both now and into the future is essential for making the right decision about the kind of payroll system your organization needs. For a complex or large-scale operation, off-the-shelf software won’t be able to cater for every local requirement in-house, which means you’ll need to integrate with a local system or build a specific interface. Both of these require significant investment in a custom solution that will need to be maintained going forward.
With a modern global payroll platform, the vendor will have already made the technological investment to create the core system, which should minimize, if not eliminate, the need for the additional scope to cover your local needs. In fact, today’s advanced global payroll solutions use centralized, cloud-based data management and processes to introduce best-practice standardization that can be modified to your specific needs without requiring heavy customization. (Customization leads to costly maintenance and difficulties in making improvements or enhancements further down the line.)
The other alternative is to outsource, which can come in different flavors. Some vendors will deliver managed payroll services in certain countries and send some services out to local partners, acting as ‘aggregators.’ Payroll providers with a unified solution leverage their own proprietary global platform to bring all of your processes and data together in a single application. Determine your scope, then find the best fit for your unique situation.
Challenge Three: Establishing effective data management and reporting
Traditionally, data management has been a huge challenge for global payroll teams, particularly because of issues around data integrity. The flow of data between global human resources and payroll software is critical for both functions to perform their duties effectively. However, the data residing in their corresponding systems of record is often out of sync, with delays in processing key changes such as promotions, terminations, and bonuses leading to data discrepancies that can require excessive workarounds and even supplemental runs.
The second data challenge is reporting. Compiling information from a variety of different payroll and HCM systems worldwide takes time. Plus, this is typically a manual process, which means the collected data may be incomplete, inaccurate, out-of-date, or all three well before it is ready for analysis. Expectations around data reporting and analysis in any function have changed, with business leaders today relying on real-time, accurate information to guide decision-making. It’s time for payroll reporting to evolve.
When it comes to insightful analytics and payroll reporting, the first step is the centralization and standardization of your data. With unified global payroll solutions, reports can be pulled together from one single source, rather than from disparate systems across your global operations.
This centralization offers the possibility for real-time reporting based on live data dashboards, supporting strategic decision-making at the highest level. Ensuring the continuous quality of your data is key here too, which also can be supported by single-source data and self-service employee data management.
Challenge Four: Technology integration, automation, and best practices
The emergence of cloud-based software and its rapid rate of adoption have created a new wave of system integrations, consolidations, migrations, and replacements.
While these new technologies offer improved user experiences, faster deployments, and lower ownership costs, they also pose a host of challenging questions. How and when do you bring your cloud and on-premise systems together? How do you get the most out of your previous technology investments? How do you get the best licensing deals and put in place the right maintenance strategies? Where do you find the new skills you need for modern integration tools and APIs?
A clear technology roadmap is required to break the integration challenge into manageable, focused projects, rolled out in stages with the assistance of cloud integration tools. However, the roadmap must be developed in line with a new payroll process and data model, with all elements directly focused on achieving better outcomes for the global payroll function.
This plan should take into consideration the need for organizational change, recognizing that customizing technology to fit with your current (potentially flawed) processes may not be the route to best practice. Cloud payroll technology is, by its nature, more standardized – putting the focus on less customization and more configuration. It is designed to introduce efficiency and best-practice processes. So, rather than view transformation as a project which shapes the technology to fit your business, view it as a means of getting your business to adopt best-practice payroll processes powered by new technology.
Challenge Five: Achieving global compliance
Global data protection and compliance is a multifaceted, evolving challenge facing all businesses today. Navigating the changing legislation on a country-by-country basis while meeting employee expectations and managing the organization’s valuable payroll data can seem all but impossible, particularly without a global system in place that is designed to meet those needs. Indeed, the quest for compliance has deterred some firms from moving to a global operation altogether, abandoning the multitude of potential payroll benefits in the process.
The primary challenge lies in monitoring global compliance in real time. After all, identifying non-compliance errors too late is of little use, especially with a multitude of governing bodies ready to hand out fines and sanctions the moment you step out of line.
A thorough understanding of the country-specific employment laws affecting your business is fundamental, which means bringing experts on board to help is a sensible move. At the same time, leveraging the real-time data management capabilities on offer through cloud technology delivers increased visibility of your payroll data and processes. This enables greater understanding of your compliance status, as well as centralized access to statutory filings and the ability to maintain records more easily.
Live compliance dashboards enable you to monitor and measure the performance of your payroll and payments processes. A well-equipped cloud payroll platform will also provide centralized compliance calendars with actionable due dates and legislation monitoring feeds to flag changes in local laws.
The move to global payroll is not without its challenges – but the rewards outweigh the risks. By identifying the likely bumps in the road in advance, you can develop a payroll implementation roadmap that gives you the greatest possible chance of success.