Global Payroll – Questions to ask
Establishing a robust, secure and accurate global payroll can be a particular challenge for some organisations, especially if there is a high number of countries involved and the organisation is liable to change on a constant basis. Therefore, payroll outsourcing – while appealing in the sense of removing the burden – is daunting as a lack of visibility and control may cause further difficulties. But with such a strong return on investment and cost saving argument to support it, can global payroll outsourcing really be ignored as an option?
Neil Lagden, Head of Bond Payroll Services, a Division of Bond International Software, and Justin Cottrell, Sales Director of FMP Europe – Bond Payroll Services’ global payroll partner – run through the crucial questions to ask yourself and your potential global payroll agency so that the fears can be allayed.
How will I be looked after?
Many global payroll services companies will promise a traditional international payroll model with a central point of contact in the customer’s core location, who is responsible for the operation of all the country’s payroll. What in fact happens is the local payroll provider actually devolves operational control and responsibility to external third party providers within each territory, each with its own processes and even cultural or linguistic obstacles, and each with a contact for the client to manage.
This means that one of the core reasons for pursuing a global payroll policy – the ability to have one place of control and accountability – is immediately undermined and the business is left in exactly the same situation of disparate control that it started with, but now there is a charge for it!
It is therefore essential that before signing the contract, you ascertain exactly how the service delivery and account management is structured, who your primary point(s) of contact would be, who is actually doing the work, and who your escalation points are if necessary.
The model of international payroll bases its value on the removal of multiple points of contact, eliminating any duplication of processes and a central point of both salary payment and cost. But for these to be realised, outsourcing a global payroll cannot be done half-heartedly. For example, if there are 20 global locations – of whatever size – outsourcing them in piecemeal or in regional groups will not allow a full return as there is still a selection of responsible parties, a degree of duplication of effort and no central point at all.
Only by outsourcing the payroll in its international entirety to a single provider can the full ROI potential be achieved. Crucially though, be certain to analyse, with the outsourcing agency, precisely where, how and even when the ROI is seen, and then make the agency accountable for achieving it.
What if my business changes?
Any organisations moving into a global payroll environment must ensure that the agency is able to accommodate any substantial changes to the structure of the organisation without difficulty and that the contract is not constructed in a penalising fashion. For example, some agencies will devise the contract on an inflexible basis so that should an international location be moved or even closed, there will still be fees payable if this is done before the point of contract renewal. Therefore the crucial question is not “Can the agency meet my current needs?” but instead, “Can the agency meet any future needs I may have, even if that is actually a reduction in requirements?”
How can you help my business grow globally?
It is not just about providing payroll. If a new location is set up in a new country, how much support will be providing in ensuring compliance with any new legislative requirements there may be for payroll operations? Or will the payroll agency only become involved once it has been set up?
Also, new countries may have their own HR requirements beyond just the payroll itself – will the payroll agency help with this too, and what if anything is the cost of any help? Outsourced relationships are built on trust, reliability, core value and added value, and by proactively helping the organisation to expand smoothly into a new territory, and even proactively challenging the client’s requirements where appropriate and necessary, the last on this list can be evidenced all the clearer.
How will the salaries actually be paid?
The global payment process itself can be a trial. Will the agency undertake the salary and tax payments themselves, and be able to accommodate the various currencies? In an ideal world, there should be a single payment method across all the countries, with funds deposited into a single bank account and treasury management conducted centrally for all the territories – a far better solution than several foreign bank accounts paying each employee individually.
Connected to this is the way in which the organisation is billed for this service. From a global P&L perspective, invoices from various territories in their own currencies can be a particular problem, as again multiple bank accounts and payment schemes may have to be established. Instead, being sent a single invoice to the ‘lead’ territory, which can be paid in a single currency, can remove an otherwise dramatic administrative burden.
Global Payroll - contact us now on 01293 789 940 to discuss your global payroll requirements.