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Top 5 Reasons Why Global Payroll is the “Buzz” in Outsourcing

by Julie Fernandez, Director, ISG

The demand for outsourced payroll administration has remained quite steady even during recent years plagued by a global economy in crisis. Payroll is perhaps the least glamorous of all the human resource functions; however, it has remained abuzz with activity, including a growing interest in global payroll strategy.

Here are the Top 5 ways that both clients and service providers are contributing to the growing interest in global payroll strategy:

  1. Expanding payroll services. Payroll providers have contributed to these trends by evolving their service offerings beyond traditional gross-to-net processing to fully managed payroll services that include source-to-gross, data management, timekeeping and related HR outsourcing services. Broad payroll scope becomes particularly attractive where there is sufficient scale to warrant replacing the client’s in-house administrative effort and driving cost efficiencies.
  2. Building out “global” templates. To leverage payroll operations across countries, payroll providers are building out their systems with payroll templates for additional countries. By focusing efforts on systems functionality to centralize interfaces, manage touch points and consolidate reporting, service providers have captured the interest of global clients seeking to simplify, automate, and ensure appropriate oversight.
  3. Creating third-party networks for in-country delivery. Where there is insufficient scale to build out systems, service providers are establishing broad networks of in-country payroll providers to “cover the globe.” This strategy is prevalent where clients have a great number of countries with small employee populations. Managing a broad geography with an aggregated payroll model balances the centralized coordination and control required by global clients with the localized payroll requirements and legislative nuances from country to country.
  4. Achieving global HR information systems (HRIS). Clients are increasingly advancing their core HR technology strategies to deploy a single global instance HRIS for employee data management. While data elements for outlying countries may be minimal, there is a strong desire to ensure that the global HRIS is used as the primary source for employee data and is enforced with greater interfaces and feeds to payroll, time, and other HR point solutions. Consolidation of payroll systems and vendors makes it easier and more cost effective to provide automated employee data from the central “source” HRIS.
  5. Growing into sophisticated sourcing. Client sourcing organizations have become more sophisticated with each significant procurement experience. Having successfully sourced first- generation HR and payroll relationships, clients have a greater appetite to pursue service contracts leveraged across business units and across countries. Although client governance may still be developing, their plans increasingly consider needs at local, regional and global levels.

While there is no such thing as a “global payroll” system or provider in today’s market, there is plenty of opportunity for multinational companies to formulate a global payroll strategy. Visions of single providers or systems are replaced with a global framework that is designed to identify optimal payroll delivery models and the service providers with fitting capabilities in country and in region. More and more global companies are starting with a planned global payroll strategy and governance.

Contact Julie Fernandez, Director, ISG CHRO practice, for suggestions on how to get started.

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