The continued global expansion of many companies brings increasing challenges for payroll professionals as they grapple with different tax, legal and cultural environments. It also increases the need for payroll to collaborate with HR to address the issues and help win the talent war.
This is no easy task though according to EY’s 2020 Global Payroll Survey with 45 per cent of Payroll respondents and 46 per cent of HR respondents stating that their organisation has no shared services between the two functions.
As companies pursue global expansion, the biggest challenges for payroll teams will include: centralising systems, embracing automation, staying compliant, overcoming talent shortages and keeping track of a global workforce.
The shift towards centralised payroll systems is vital, as it helps companies create a global reporting capability and gain better insights about international payroll requirements. Embracing centralisation can play a key role in making both HR and payroll more agile and responsive by smoothing out and speeding up communication, as well as enabling teams to report and work together in real-time.
For example, Just Eat, an online food order and delivery service has over 3,600 employees across 12 markets. Its group director, reward and inclusion, Jane Gibbon, says: “Accurate reporting is imperative, but it can be challenging to obtain data across multiple locations without one central data platform.”
“Our HR and payroll functions partner with finance and line managers to understand the business’s requirements and build solutions to meet analytical demands. Using technology to deliver analytics through tools, such as Domo or Tableau, help us meet the criteria for global real-time reporting.”
According to EY’s new survey, more than two-in-three (68 per cent) of organisations say using a single payroll system is important to them, yet only a third (34 per cent) believe that there is single vendor who can handle all of their payroll needs globally.
This suggests that while many payroll professionals desire to consolidate their payroll vendors, there is a lack of faith that such a vendor exists.
Helen Hargreaves, associate director of policy at the Chartered Institute of Payroll and Pension Professionals (CIPP), says employers should also consider using the same software for payroll and HR, or at the least systems that can communicate.
“With ever more flexible working patterns and payment frequencies, businesses can only operate effectively by-passing timely information between managers, HR and payroll,” she says.
The new global tax survey findings suggest that organisations are slowly waking up to the potential of payroll technologies. Almost half of respondents (48 per cent) use or plan to use artificial intelligence solutions. For chatbots, the figure is 43 per cent but for blockchain it is just nine per cent.
Using AI and automation to replace repetitive processes - for example in onboarding or to address data processing errors and compliance issues - can save both costs and employee time. This allows them to focus on strategic insights and other value-adding activities.
These figures indicate a clear return on investment in payroll technology, making it relatively easy to make a business case and gain buy in from leaders. Other factors supporting the business case are that new technology can encourage self-service, improve compliance and cost less to run than legacy systems.
Rachel Duncan, head of reward and wellbeing at Experian, says to win the escalating talent war, companies need to differentiate by using digital technology.
“Employees choose where to work based on reputation,” she says. “Reputation starts with offering workers the best tailored experience, by segmenting benefits to match their different expectations. But the more choice you offer, the more providers you need, making payroll more complex to manage.
“This heaps pressure on teams, so more companies will embrace automation this year to reduce time spent on manual processing.”
The way payroll embraces more advanced technologies such as data analytics and AI will also be a major challenge for 2020.
As new products launch and trends develop, HR and payroll should meet regularly and work with technology providers to ensure they take full advantage.
Frank Klasic, Oceania Leader, Employment Taxes at EY, says: “HR and payroll can use automation much more to improve efficiency and compliance through better, more accurate reporting. For example, they can run automation on payroll data regularly to check it is compliant and they can automate onboarding of employees. It takes about eight hours to onboard a new employee manually. But we invented a robot that does it in about eight seconds, with no mistakes.”
The payroll industry faces many challenging and unknown situations. For example, in Europe, these include the effect of Brexit on workforces; in the UK, the impact of changes to IR35 tax rules for contractors; and in Australia the media has uncovered several stories about major companies underpaying staff.
It is increasingly important that payroll and HR work together to ensure the impacts of local rule changes are understood, managed and communicated to staff.
Jason Gowlett, director of HR operations at Direct Line, an insurance company, says: “Our payroll teams have always been part of HR – a close relationship that has provided enormous value.
“For example, payroll expertise has been invaluable as we worked through IR35 changes. [A collaboration of teams has] created an activity programme to clearly define roles and manage expectations of our contractors, with a consistent approach.”
A similarly collaborative approach will help teams deal with Brexit related issues as they evolve, adds Gowlett.
The timeframe to implement regulatory changes is often tight. But organisations need to show agility by meeting deadlines and avoiding hefty penalties or reputational risk.
Gibbon says: “One way we keep teams across markets updated on evolving global rules is through our membership of the Global Payroll Association. This provides regular updates and training about laws in different countries.
“HR and payroll should communicate and work together to provide guidance and training to employees. A single point of contact for information for relevant personnel across the globe also helps ensure everyone is updated.”
With data laws such as GDPR increasing regulatory demands on businesses, it is crucial to use the right monitoring tools to ensure consistency.
For example, Just Eat is testing a global payroll system in three countries. It reviews monthly performance indicators, enabling ongoing education and guidance to local markets, which helps Just Eat help maintain consistent processes in these countries.
Klasic says the stories about underpayment in Australia are the tip of the iceberg.
“About 90 per cent of payrolls we review identify one or more errors,” he says. “But it could be 50 to 100. These errors can cost companies millions.”
Silo mentality can be a cause of payroll errors, adds Klasic. So, it is crucial for HR, finance and payroll departments to work as one to help avoid them.
He says the UK and Australian tax offices have developed technology that reviews payroll information in real-time, looking for data that might reveal errors and underpayments. Tax offices around the world are starting to follow suit.
“Employers therefore need to be more vigilant,” he says. “To help, we built a replica of the real-time reporting model together with our own analytics engine. It is available globally with tweaks for local rules. This can test whether your payroll is compliant and payments are correct.”
Shortage of payroll talent
The world faces a talent deficit, which, according to management consultancy Korn Ferry, will amount to 85 million people by 2030. This creates a double challenge for HR and payroll to attract the right people throughout their organisations and in their own teams. It is particularly important to address payroll talent shortages if they are to exploit the potential of technologies such as centralised payroll platforms, RPA, data analytics and AI.
To do this, Duncan says organisations should recognise the importance of payroll professionals, not just as add-ons but as equals to their HR and finance colleagues.
“Finance and HR professionals have clear career pathways,” she says. “The same emphasis should apply to payroll professionals, for example, in encouraging them to acquire CIPP qualifications and development activities. This will help retention and building a stronger, more versatile payroll team.”
Gowlett suggests companies can also invest in payroll apprenticeships and promote payroll as a fulfilling career.
“There is a huge amount of payroll talent out there, but it’s important that payroll leaders recruit on potential, values and behaviours,” he says. “You can teach the technical side, but you want to recruit people with the right personal qualities.”
Keeping track of employee information
As workforces spread around the world, keeping track of individuals’ payroll information in different locations is increasingly difficult. This is exacerbated by companies’ greater use of remote and contingent workers around the world to beat talent shortages.
Duncan says the way to address this is to use a globally integrated payroll, HR and finance system.
“Issues can arise when the business doesn’t fully understand the complexities,” she says. “Communication and equal partnership between HR and payroll are essential to head off these issues. Accepting each other’s focus and priorities is vital for a seamless employee experience.”
Methods that HR and payroll can use to better track disparate employee data include: implementing standardised operating procedures across global regions; investing in an easy to use HR platform; and providing individuals with mobile and off-network access to it, so they can update details whenever they need to.
Simply put, collaboration is key. By having payroll and HR work in closer alignment, or even work together in the same function, organisations can help to foster the processes and information sharing that will prove pivotal in the effective management of a global workforce.