Global vs. Regional Payroll Approach – What to Consider

In an era of ever increasing globalisation, it is important to find the right payroll approach for your organisation. Choosing between a global or regional approach can have a significant impact on the future of your organisation. Understanding the circumstances and requirements necessary for each approach will allow you to match provider offerings to your own organisation.

This article will outline what the ideal organisation for each approach looks like, allowing you to determine the correct approach for you.

The Global Approach

Any organisation looking to implement a globalised approach to payroll will need to ensure that it has a strong centralized culture capable of supporting a global payroll.

A matrixed organizational structure is necessary for a global approach. Globalising your payroll requires each function of your organisational structure to be controlled along global lines – a structure in which regional HR leaders report directly to a central HR rather than regional or business leads, for example.

The centrality of your organisation’s systems and processes will also be a deciding factor in your choice of payroll approach. A single, recognised HR database covering all global employees will be ideally suited to a global payroll – as will a centralised, global source of financial planning data. Processes which are implemented in a consistent form across multiple geographies, functions and business units – such as a single recruitment process for different areas of your organisation or centralised finance reporting – will be of huge benefit in the integration of a global payroll.

Your organisation’s direction of travel will also determine your ability to successfully integrate a global payroll. An organisation with a proven commitment to increased centralization will find it easier to enact international expansion. A strong record of implementing successful global projects is a positive indicator that a global payroll is an achievable target. Assessing the strengths and weaknesses of these global projects will provide a useful model should you decide upon a global payroll approach.

The Regional Approach

However, a global payroll approach may be incompatible with an organisation with a more regionalized culture.

If different regions or businesses within your organisation have distinct, self-sufficient HR and Finance teams, you have a regional organisational structure. These regions will not necessarily be geographical distinctions – they could be geographical areas (e.g. EMEA), or separate industry business units. For organisations in which the structure is controlled on regional lines, a global payroll will be less compatible.

A global payroll needs a high level of consistency to function correctly. A regional approach is more appropriate for organisations that rely on multiple HR data sources and manual reports such as spreadsheets.Processes that vary between countries, regions or business units will also cause significant difficulties for a global payroll. Although headline outputs may be standardized, they can still vary at a more detailed level. Conflicting data sources – such as finance data on salaries which is not reconciled to payroll data – will continue to function better with a regional approach.

An organisation without experience of delivering successful global projects will find it particularly difficult to integrate and sustain a global payroll approach. For such an organisation, a regional approach will be more appropriate until the necessary building blocks for future global growth can be put in place.

There will be also be organisations that don’t fit wholly with either definition outlined above. Instead these organisations display a mixture of globalized and regionalized practices. In these circumstances, globalizing payroll carries significant risk factors. For these organisations, it is vital to carry out in-depth investigation and secure senior management backing to determine the most appropriate payroll approach.

Every organisation is unique, and each one needs to take its own approach to payroll. Deciding on the appropriate approach is vital for future success.

Galvin International can provide you with the expertise you need to ensure that the choice you make is the right one for you.

If you’re in the process of considering your payroll approach, please get in touch to find out how we can help.

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