Global payroll: Staying afloat in international waters
In this article, Brian Vethanayagam and Jessica Cheung-Goldfarb of Ceridian’s Value Advisory and Global Strategy team explore the potential widespread negative impact of legacy global payroll solutions. Using the example of the recent stranding of the Ever Given ship in the Suez Canal, the team highlights the economic disruption caused by disparate processes and technologies, and the fiscal and operational risk exposure created by a lack of vendor accountability.
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Though the first container ship set sail 65 years ago, likely few outside the sector gave much thought to the inner workings of the operating model prior to March 2021. It was at this time that the Ever Given – one of the world’s largest container ships measuring the length of four football fields – ran aground in the Suez Canal in March 2021. As experts came together to support refloating efforts, the ship’s complex operating structure prevented the Ever Given from a timely and efficient return to sea.
The key challenges for the ship, which was described as a multinational conglomerate, were the various vendors and operators driving multiple systems without a centralized global governance model. Its operational complexity not only created chaos for its owners, but a $1B claim in total damages from regulatory authorities.
In recent times, the tidal wave of demand for multinational corporations to enter new regions rapidly has been spurred by strengthening growth outlooks in new markets. This shift presents a unique opportunity for elevating the strategic value of global payroll operations, while helping organizations stay afloat in the midst of rapid change.
For companies operating with legacy global payroll solutions or disjointed operating models, similar to the Ever Given, this market acceleration has worsened longstanding problems, and required them to wait for support from multiple vendors. Meanwhile, organizations that have chosen a single global payroll solution in the cloud are efficiently advancing with standardized global operating practices and the ability to enable agile leadership with a complete view of workforce data.
Multinationals are at an inflection point as they work to keep employees engaged, productive and connected, they are simultaneously working to future-proof their operating models and mitigate risk.
Legacy global payroll solutions have resulted in organizations operating with multiple disparate technology solutions and partners that have been pieced together with multiple user interfaces, inconsistent service-level agreements, varying applications in each country, and a clear lack of global governance. A recent EY study describes how 67% of companies recognize the importance of achieving global payroll delivery through a single vendor, while only 32% of organizations have a very high or full standardization of payroll process globally .
Organizations operating in multiple jurisdictions and markets look to leverage intelligent technology to gain the prescriptive analytics, process optimization, and visibility required to accurately and effectively scale global operations. Nelson-Hall's NextGen Payroll study shares how standardization, consolidation, and process optimization enabled by modern cloud platforms resulted in average productivity savings of more than 20%.
Global leaders across HR, Finance, IT and Operations strive for agile leadership with a complete view of workforce data to make more intelligent business decisions. While many technology investments have allowed organizations to operate more seamlessly across borders, realizing the full potential and capabilities of a single global payroll solution has historically been difficult to achieve. The transformation from a legacy global payroll model is now a reality, delivered through a single technology solution, a single service level agreement, a single contract, and a global governance model.
Organizations seeking a global payroll solution that strikes the perfect blend between flexibility and accountability are motivated by three key outcomes:
1. Decreasing system upkeep effort
Due to historically limited market availability and continually evolving global expansion strategies, today’s organizations use an average of four third-party payroll technologies to pay their employees. Companies often choose to keep existing vendors to accelerate merger integration or expansion timelines. Having separate payroll solutions in each country creates significant administrative overhead and technical complexity. By decreasing the effort required to manage multiple systems, organizations can achieve >30% in cost reduction.
2. Achieving better operational outcomes
Relying on separate technology systems results in a significant variance in the sophistication – and potentially the accuracy – of payroll from one market to the next. Whether relying on Excel spreadsheets or a mix of on-premise and cloud solutions, the payroll administration process is inefficient. These process inefficiencies contribute to unnecessary spend, limit business agility, and create blind spots within the organization, making it much harder to improve productivity. By eliminating manual effort through consolidation, organizations can see an average payroll headcount reduction of up to 50%, allowing payroll resources to be focused on more value-added tasks for the organization.
3. Mitigating enterprise risk
In an economic climate defined by an increasing velocity of regulatory change, leaders have struggled with a lack of clear data insights, resulting in reduced resilience, adaptability, and compliance. For multinational entities, up-to-date data and clear visibility into labour headcount and spend is especially critical for informed decision making and managing compliance across local, regional, and national labour legislation.
The post-pandemic rebound of the global economy has all but eliminated initial concerns of the negative impacts to globalization. With a 6.5% forecast for global GDP growth in 2021, multinational corporations looking to increase the volume of their business and achieve better profitability will need to be supported by agile and compliant business processes that seamlessly extend across the globe.
Just as the Ever Given is stranded by a lack of flexibility and accountability in its operating model, multinationals leveraging a legacy global payroll solution will be unable to easily transform their international operations at the pace required by the market. As experienced by organizations that have adopted a single global payroll solution in the cloud, the ideal solution for global payroll is indeed a market reality, and represents a better way forward for navigating international waters.
, ,  Nelson Hall, NextGen Payroll Survey, 2019