Global organisations will often update and improve their enterprise technology solutions to meet the demands of their workforce, whilst reducing costs and risk. The payroll department can represent one of the most sensitive areas of the business to change, so ensuring it keeps pace with the rest of the organisation is key. Here, we look at some of the key drivers behind changes in global payroll and their influences on current trends.
Modern payment technology has helped companies expand their operations across borders to find new opportunities and revenue streams. A 2017 survey indicated that 55% of businesses plan to expand their operations into new global markets. Moreover, at the same time the number of companies with fully outsourced payroll operations reduced from 26% in 2015, to 19% today.
Increased legislative oversight on money services has made it more complex for global companies to comply with tax laws and keep up with the pace of change. Both GDPR and Brexit are examples of current and future legislative and political changes that may have a significant effect on the ability to innovate in global payroll departments.
Advancements in digital technology
Advances in digital technology have meant that businesses are now able to respond to change faster, and be more agile. Companies can scale their operations more efficiently today than at many points in the past; combined with an unprecedented level of access to information, they can make effective, data-driven decisions like never before. Specifically, relatively new technologies such as cloud sharing, access to analytics, fraud detection and optimal e-security capabilities are enabling payroll departments to keep pace with an increasingly globalized business landscape.
With this in mind, we can take a closer look at some of the emerging trends in global payroll, and how they are influenced by these driving forces.
Global Payroll Cloud Migration
As globalisation increases, the ability to scale business systems takes on a greater level of importance. Payroll capabilities need to be agile enough to be deployed anywhere in the world quickly, and cost effectively.
Legislative initiatives such as GDPR can also be disruptive to payroll departments, especially those still using legacy on-premise payroll systems. When a business doesn’t have the internal resources to make the necessary improvements or updates to the system, they have to rely on third party providers to ensure their payroll systems are working optimally, and are compliant. However, executing this level of change on a global scale can be extremely costly.
Cloud-based payroll applications can solve both of these challenges. They can be deployed anywhere, anytime (and usually quickly) without the need for additional infrastructure or locally installed software. Moreover, these updates can be deployed and managed by payroll application providers in order to keep pace with legislative changes, thus removing the responsibility and burden from the customer.
The trend towards cloud-based payroll application is evidently in full swing, as evidenced by a recent survey of HR professionals. This survey shows that 40% of those queried have already moved their core applications to the cloud. In the same survey, we learn that 30% of those who don’t operate in the cloud yet are planning on doing so in the near future.
Moving from legacy on-premise software to cloud-based payroll applications can offers the following key advantages:
Reduction in payroll staff as employees are better able to self-serve
Greater ability to integrate with existing business systems
Reduction in total operating cost of the business
Standardised reporting tools become available
While migrating to cloud-based applications is the trending direction for payroll departments, it can be advisable for the business to manage this change carefully, and do due diligence in considering all factors before implementation, including resource requirements, timescales, costs and most importantly, data security.
Global Payroll System Integration
As many business applications move towards SaaS and PaaS models, the ability to integrate various internal systems is improving across the board. Companies are starting to realize that disparate systems add additional costs, processes and error rates due to a greater need for manual data entry.
Seemingly, globalisation has only increased the incidence of disparate business systems, as businesses scale piecemeal and organically. For example, regional business leaders will deploy different payroll systems that are best suited to their local needs. However, despite this, there may still be one central HR system globally. If these systems do not integrate, then payroll can be more time intensive and more prone to error.
Another consideration when implementing a new payroll system is the reporting capabilities – for instance, audit information needs to be readily available. If it’s spread across multiple systems globally, then gathering this data may be a time intensive process.
Additionally, payroll is an area that can derive multiple benefits from a more integrated approach. Jointly, the HR and Payroll departments often need to share significant amounts of employee professional and personal data. As a result, there are somewhat obvious benefits to both of those department’s systems being integrated with one another. For example, when employees update their bank account information within an HR self-service portal, having an automatic data sync with the payroll department would create conveniences. This alone will greatly reduce the incidence of failed payroll payments.
Datafication in Global Payroll
Advances in technology, increased system integration and the movement towards cloud-based applications are giving businesses the ability to manage employee data in a more effective way.
Globalisation has made it more important for business leaders to have access to meaningful data about their organisations’ and their employees’ performance in order to determine the success of their expansion into new territories.
At the same time, data laws are placing greater emphasis on the control and security of employees’ personal data. Any sort of data breach could end in significant fines.
Advances in data analytics and payment technologies means businesses are now harnessing data to store and analyse information across global organisations.
At a basic level, payroll managers need to access data around compensation, benefits, pay rates and time off. Quick access to data like this enables them to carry out their tasks efficiently.
Further up the organisation’s hierarchy, global HR directors are looking at this data holistically. It enables them to cross-reference payroll data with factors such as staff turnover, demographics and employee productivity. Analysing data at this level can help make decisions on hiring, on pay grades and in determining which regions have the best staff cost-to-productivity ratios – all of which may drive future growth strategy.
As businesses scale globally, the need to be able to deliver high volumes of salary payments accurately and on time, becomes more challenging. Businesses looking to seek revenue streams in developing countries need more sophisticated payment systems that can cope with currency units that have less liquidity.
In addition, more compliance hurdles need to be overcome and businesses need to improve their knowledge of payment requirements in harder-to-reach jurisdictions.
Global payroll payment technology providers are offering businesses alternative payment methods to reach employees and more efficient systems to process multiple payments. Integration of payment systems with HR, accounting and ERP systems can provide a seamless payment process with minimal manual intervention resulting in significantly reduced costs and instances of error.
While many global businesses previously had to rely on different liquidity providers in different regions, Fintech payment providers now provide an overlay that can allow all payments to be distributed on time and accurately using one system.
At the same time specialist payment providers have the expert knowledge, and functionality within their platforms to pre-validate payments and ensure bank details are correct and compliant before the salary payment is released to the employee.
Globalisation, legislative changes and advances in technology are all major influencing factors in the direction of global payroll. The changes they are bringing about will ultimately improve the efficiency of global payroll operations. This will lead to more business bringing global payroll back in house as they realise many of their challenges that caused them to outsource in the first place can be overcome.
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