The challenges of global payroll begin way before the actual processing takes place. The first hurdle international organizations face on their way to an efficient international payroll operation is how to implement it.
Global payroll implementation is a difficult project to manage, and definitely nothing that can be accomplished overnight. But what is the key to successfully implementing a global payroll? What makes the implementation process so difficult in the first place? And why should businesses go down that road anyway?
In an earlier chapter of the Lano Payroll Academy, we defined global payroll as a way of processing payroll on an international scale that allows businesses to streamline processes across locations and consolidate various local payroll processes, data, and more in a standardized global system. Based on this definition, global payroll implementation is the process through which businesses can make all of this happen.
In other words, global payroll implementation is the process of creating the necessary payroll infrastructure to enable payroll consolidation across multiple geographies. This includes setting up partnerships with in-country payroll providers as well as getting access to the technology that is needed to manage different systems and vendors efficiently.
The implementation stage of global payroll basically sits between developing a global payroll strategy and starting to process a multi-country payroll. Before businesses can begin with the implementation, they first need to decide on a global payroll model—i. e. whether they want to run a centralized or decentralized payroll.
Global payroll implementation is the key to unlocking the benefits that come with having a unified payroll solution for different geographies. These benefits include:
Improved efficiency in payroll
More time to focus on other activities
Better cost control
Enhanced global payroll compliance
Improved payroll data transparency
Financial advantages due to higher process efficiency
So, even though global payroll implementation projects are a challenge, organizations can be sure to benefit in the long run.
Without external help or vast internal knowledge and experience, implementing a global payroll is a very difficult undertaking. Many of the implementation difficulties come directly from the inherent challenges of global payroll. Here are some examples:
Payroll is local: The rules and regulations around payroll (e. g. payroll taxes, reporting requirements, and compensation rules) differ from one country to the next, which means that the payroll process is slightly different for each country. Businesses that want to implement a compliant global payroll need to take all these local differences into account and find a solution to combine their payrolls anyway.
Data protection needs to be guaranteed: Data security is a major issue in global payroll. Not only do businesses have to comply with country-specific data protection rules, but they also have to ensure their payroll data is safe when being transferred between different systems (e. g. from the in-country system to the organization’s central HCM).
Global expansion demands for scalability: Global payroll implementation is not just about setting up a system that works for the organization’s current situation. It’s very likely that the business will expand into new markets in the future, which means that the global payroll system needs to be designed in a way that allows for quick onboarding of new payroll countries and in-country partners.
Global payroll implementation works differently depending on whether payroll for all geographies is processed in-house or outsourced, or whether there will be a hybrid approach combining in-house payroll and payroll outsourcing.
Businesses building an in-house global payroll system are themselves responsible for their payroll transformation project. Outsourcing, on the other hand, means handing over all the legwork to a global payroll provider who will oversee the operation.
The key principles of payroll transformation, however, remain the same. Implementing a global payroll means creating a unified global payroll system through:
Payroll integration with HR systems and other tools
To get there, organizations (and global payroll vendors alike) should remember to:
Plan the roll-out in different phases while clearly defining what steps need to be completed before the next phase can begin
Prioritize geographies with large employee populations
Time the operation in a way that significant implementation steps don’t overlap with busy periods in payroll such as year end
Set up a payroll and compliance calendar for each geography and define other important payroll metrics such as pay periods, payroll components, payroll cycles, and more
Map all their processes end-to-end along with the respective data flows
Global payroll implementation is a complex project to manage, which is why businesses should make sure not to miss any of the following steps:
Choosing a global payroll model (in-house, outsourced, hybrid) based on factors like budget, available expertise, existing IT infrastructure, and more
Identifying the organization’s global payroll needs (number of countries, level of automation, reporting capabilities, and more) along with potential risks
Getting the support and input from all important stakeholders in the organization
Analyzing the current partnerships with local payroll vendors to see if some of them need to be replaced
Researching global payroll solutions and potential new ICPs
Working out a proper roll-out plan and timeline for the global payroll implementation project
Defining roles and responsibilities for the project
Collecting all the necessary documentation and data
Establishing OKRs and KPIs to track the progress of the implementation project
The Lano Academy is for informational purposes only and should not be construed as legal advice. Lano Software GmbH disclaims any liability for any actions you take or refrain from taking based on the content contained in this article.
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