Global vs. Regional Payroll – 5 things to consider
As global payroll evolves it is increasingly becoming clear that there is no “one size fits all” solution. Finding the best global payroll approach for your organization is driven by understanding your unique circumstances and requirements and matching these to the most suitable payroll provider offerings.
This article aims to help anyone who is deciding whether to take a global vs. regional approach to payroll. It will outline and consider five key questions which you should review when deciding which is the better approach for you. It will use a simple scoring system to assess your organization’s suitability for either a global or a regional approach.
1. How global is your organization structure?
Do you have a matrixed organization structure, in which each function is controlled along global lines? Do you have a global HR department, in which regional or industry HR leaders report to HR rather than region or business leads? Do you have a global Finance team, in which all finance professionals report directly into the Global CFO?
In a regionalized organization structure, Regions can be either defined either by geography (e.g. EMEA) or industry business units. Using this definition, consider how regional is your organization structure. Do your key business units or geographic regions have their own HR and Finance teams? Do they have largely self-sustaining organizations which could easily stand alone outside of the organization?
Considering these questions, grade your organization on a global vs. regional scale of 1-10, with 1 representing the most regional and the 10 representing the most global option.
2. How global are your payroll-related systems?
Do you have a single, global HR system? If so, how extensive is the data which it contains? How global are the feeder systems which contain other data required for payroll, e.g. commissions, time and attendance systems? How global vs. regional is your finance system?
Or does your organization have multiple HR systems in different regions or business units around the world. Do these systems have different scopes and definitions, with separate technology support teams and experts? Do your business units operate a variety of finance systems or separate finance ledgers around the world?
Again please grade your systems on a global vs. regional scale of 1-10, with 1 representing the most regional and the 10 representing the most global option.
3. How global is your payroll data?
Does your organization have a single, recognized HR database covering all global employees. Does this database capture most of the data required for payroll? Do it have a global source of data for financial planning?
Or does your organization have multiple HR data sources? Does it have key data which is not captured on systems but on spreadsheets or other manual reports? Does it have conflicting data sources, e.g. finance data on salaries which is not routinely reconciled to payroll data?
Now grade your data on a scale of 1-10, with 1 representing the most regional and the 10 representing the most globalized option.
4. How globalized are your Payroll, HR and Finance processes?
Does your organization’s HR department have strong, centralized processes which operate across all geographies, functions and business units? Do you have a single recruitment process for recruitment, talent management and remuneration changes? Do you have centralized finance reporting that is used by all businesses and functions? Does your payroll team follow standard processes across the organization?
Or do you have separate processes for these functions in each country, region or business unit? Even if the headline outputs are standardized, are the processes highly variable at a detailed level?
Now grade your processes on a scale of 1-10, with 1 representing the most regional and the 10 representing the most globalized option.
5. What is your organization’s direction of travel?
Is your organization aiming to become more centralized? Are senior leaders committed to globalizing the culture and structure of the company? Are there a number of major change initiatives which will have a major impact on delivering this objective? Is there a track record of success in implementing global projects?
Or is your organization actively pursuing a regionalization strategy, in which more control is being devolved to business units or geographically based leaders? Has it tried and failed in the past to implement major global projects?
Please grade your organization’s direction of travel on a scale of 1-10, with 1 representing the most regional and the 10 representing the most globalized option.
How does your organization score?
For global payroll to work well with a single payroll provider, it needs to maintain strong centralized processes, systems and data. It is much easier to have a globalized payroll approach if the organization has a culture of successful, strong central processes, systems and data. HR and Finance are particularly important to the success of global payroll. For example, it is much easier to globalize payroll if HR works in the same way across the world.
Please now add up your total scores and see how your organization scores out of a total of 50.
If you scored between 1-19: Your organization’s systems, processes and data are all operating at a decentralized level. Your HR and Finance teams are regionalized, and your organization is not strongly committed to making global projects work. Taking these factors together, your organization does not appear ready for a globalized approach to payroll. Consider sticking for now with a regionalized approach, but look to put the building blocks in place to enable a successful globalized implementation in the future.
20-35: Your organization has a mixed approach to globalization. In some areas it operates centralized practices but other important units are regionalized. Globalizing payroll could be high risk because it may be difficult to standardize data and processes and interface with multiple systems. In order to understand whether a globalized approach to payroll would be successful, further investigation is needed to understand the particular factors and take other key items into consideration which are outside our capacity here. Senior management backing will be particularly key for this category.
36-50: Your organization looks ready to successfully implement a globalized approach to payroll. You have a strong centralized culture across the organization, and global payroll will fit well with the structure and processes of your HR and Finance teams. You also have a good record of implementing global projects successfully. Make sure you learn the lessons from other successful global projects to further increase your chances of a successful implementation.
Every organization is unique and needs to decide on a global vs. regional approach to payroll. I hope this article has helped you to consider some key questions to decide whether a globalized or regionalized approach works better for your business. If you have any further queries, please click here to find out more and see how we can help.