Going Global and leaving payroll behind: Addressing the gap

The Growing Complexity of Global Payroll

As businesses grow and expand their footprint internationally, they often find themselves facing a new set of challenges. With each new region comes a web of local payroll regulations, diverse currencies, and varied compliance requirements that can be difficult to navigate. For many mid-sized multinational companies, the ambition to modernise their operations through global HR systems is driven by the need for efficiency, accuracy, and scalability. However, despite the progress in many HR functions, payroll often lags behind, requiring tailored solutions to address the complexities of managing compensation across different countries. The path to optimising global payroll is anything but straightforward, requiring a strategic approach that balances local needs with global oversight.

The Journey to Global HR Systems

We have observed numerous mid-sized, multinational companies taking their first steps into the world of Global HR Systems. Each firm has its motivations: growth, consolidation, divestment, or digital transformation.  This journey from initial motivation to tangible outcomes offers a clear view of how strategic HR technology decisions can gradually deliver meaningful value to global payroll operations.

Technology’s Evolving Role in Global Payroll

We’ve had front row tickets, repeatedly, to witness these firms evolving their technology capabilities to operate more effectively on a global scale. These projects often produce ‘some’ value to payroll – whether that’s establishing a single source of truth for all employees globally, generating a monthly payroll changes report in a useable format or even better, implementing an integrated payroll module, particularly in the UK, where headcount is typically highest.

The Challenge of a One-Size-Fits-All Solution

Let's admit it, there is no single payroll technology that can compute and process payroll for every country while adhering to all local regulatory compliance requirements.  The prevailing model is and will always be a shining front end supported by various payroll tools or local bureau partners in the background that handle the actual payroll processing. There are some amazing solutions available that are making significant advancements in global payroll. The complexity of this issue has even led to the creation of a Global Payroll Complexity Index, which ranks countries based on the difficulty and intricacy of their payroll processes.

To optimise global payroll operations, you must break it down into three key considerations:

• Collecting the data required to run payroll in each country in its entirety.
• Run the payroll calculation and pay employees in their designated currencies.
• Consolidate the results from each payroll cycle into a common set of data points, metrics or reporting currency.

Collection

The first challenge with transforming global payroll operations is that each country's payroll will have its own unique data requirement, and sure, having a global HRIS will probably mean some improved data submission streams for things like starters and leavers.  What happens if this isn’t the full picture and some of the data you need is missing?  You will no longer be on the ‘Global Standard’ and will need to deviate from it and create a new process to gather the data required for payroll processing.

Technology that helps create a new payroll standard for data collection and aggregation from multiple sources can be extremely valuable.  Such technology can help identify the gaps between what is required and what has been received from the HR System (a gap analysis). Once the data preparation is complete, it's time to run payroll.

Processing

Is it that important where the payroll calculation is performed? The reality is that the calculation depends on specific inputs, a defined set of rules as to how the calculations are executed, and the results and outputs of those calculations.  The challenging aspect is ensuring the system produces the result you are expecting - errors typically stem from incorrect inputs or rules, rather than flaws in the calculator itself.  The time-consuming part lies in the human investigation into these inputs and rules.

For global companies to manage the payroll calculation in-house, they would need a specialised payroll calculator (tailored to each local requirement), along with a skilled individual to complete and troubleshoot the process.  While I realise we're getting into the weeds on payroll terminology here, another option is to engage a local payroll bureau/partner to handle these calculations on your behalf. This partnership should be able to clearly define the inputs and outputs for how they will work with you.

When thinking about transforming payroll technology, it may be beneficial for the ‘global payroll’ provider to handle the processing. However, it is also important to determine whether they can work with your existing payroll bureau. Additionally, they can assume responsibility for the processing in areas where issues or problems arise.

Consolidation

So, you now have X number of payroll reports, each stored on separate spreadsheets, with inconsistent data labels and formats. They are all in different local currencies, making it impossible to have a unified view of your global payroll operations process or a view of the consolidated final result.  This lack of visibility leads to limited control and metrics.  The challenges may vary depending on who owns ‘payroll’. While there may be some consolidation of the payroll cost at a finance level, the real cost comes from the complexity of ensuring employees are paid accurately and on time. Understanding what each step in the payroll process looks like globally, knowing where you stand in each cycle, and establishing clear Service Level Agreements (SLAS) for data and processing can provide benefits. This is the most significant area of opportunity for digital transformation in your global payroll operations.

So what is the secret?

You can drive change and efficiency into your global payroll operations in a range of areas, but achieving meaningful transformation requires more than just implementing new technology. It demands a strategic approach to integration, collaboration, and process refinement. While technology can enable better data collection, more accurate processing, and streamlined consolidation, success comes from aligning these tools with local expertise and understanding the specific needs of each payroll jurisdiction.

Businesses can enhance visibility and reduce complexity across their global payroll operations by focusing on areas such as standardising data collection methods, optimising payroll calculations, and consolidating reporting. However, to realise the full potential of these improvements, companies must also foster strong partnerships with local payroll bureaus and ensure that global solutions can adapt to local requirements without sacrificing compliance or accuracy.

Ultimately, the key to transforming global payroll operations lies in recognising its strategic importance within the broader HR landscape. Companies that invest in the right blend of technology, expertise, and processes will be better equipped to navigate the complexities of global payroll and unlock greater operational efficiencies, compliance, and value for the business.

Ready to simplify your global payroll operations?

At Tugela People, we work with partners like Lano to help mid-sized multinational companies bridge the gap between global HR systems and local payroll compliance. Whether you're just beginning your global transformation or looking to optimise existing processes, we can support you with the right mix of strategy, technology, and expertise.

Let’s talk about how we can make global payroll work for your business, without leaving payroll behind.

Reach out to us on  +44 1908 030360 or  info@tugelapeople.com. Alternatively, complete the ‘Get in touch’ form, and a member of our team will be in contact.