The impact of COVID-19 on global payroll

COVID-19 has impacted businesses in many different ways. Practically overnight, organizations had to come up with solutions to have their global teams working from home and ensure business continuity at the same time. The challenges were numerous and encompassed all business functions. One business function on which the pandemic has had a particularly significant impact is payroll. 

Payroll teams have had to overcome enormous challenges during the global health crisis. Between staff shortages, frequent changes in payroll-related legislation and adapting to the new working environment, they have struggled to ensure payroll continuity and get everyone paid on time. Even more so in the case of multinational organizations with global payroll operations.

By putting payroll departments and payroll strategies to the test, COVID-19 has revealed several weaknesses in global payroll and raised awareness among business leaders and decision-makers that global payroll needs to be transformed in order to prepare it for the future. 

But what are the crucial transformations global payroll leaders need to think about? What are the inefficiencies COVID-19 exposed which make it impossible for global payroll to keep operating in the way it did for decades? In this blog post, we will shed some light on the impact the pandemic has had on global payroll, including its implications for the future of global payroll processing.

The challenges caused by the pandemic and the measures introduced to contain it have uncovered several weaknesses in the way global payroll is operated. Although these inefficiencies had existed for many years, it’s only with the global health crisis that they have been noticed. In the aftermath of the pandemic, experts from international consulting companies such as the Hackett Group or Ernest and Young have analyzed these payroll weaknesses which concern many different aspects of the payroll process. They can be summarized as follows.

Missing remote access to systems, software and data

As soon as the pandemic started to force entire countries to shut down public life and move large parts of their working population into home office, one of the first problems faced by payroll teams was the fact that, in many cases, they couldn’t access all the systems, tools and data they needed to effectively perform their job as they were not designed to be used from a remote working environment. What’s more, accessing systems and data from outside company buildings often posed severe security risks.

Lack of strategy and process standardization to ensure business continuity

While one or two employees being out sick is a normal risk for payroll operations, the sick-related absenteeism in the corporate environment took on new dimensions during COVID-19, including in payroll departments. Situations where nearly all members of an in-country payroll team were sick and unable to work quickly showed that operating payroll across multiple geographies with disconnected systems and non-standardized processes is not a viable option. 

Without a standardized process, one country’s payroll team falling out due to medical reasons can turn into a massive problem if payroll processing can’t be taken over by a different team using the same system. Also, business continuity plans (if they even existed) proved to be outdated and did nothing to prepare companies for the global crisis - especially given that businesses have little to no insight into and control over their external service providers’ BCPs.

Lack of resources and flexibility to respond to legislative changes

During the pandemic, governments in countries all over the world introduced new laws and regulations to help businesses through the global crisis. Although this was well intentioned, it increased the burden on payroll teams. In addition to their normal tasks, payroll professionals now also had to look out for payroll-related legal changes (changed filing deadlines, calculation rules etc.). 

While keeping track of changes in legislation in one single jurisdiction already increases the workload significantly - Canada alone has seen more than 300 legislative changes impacting payroll in the course of the pandemic - payroll complexity reaches a whole new level in the context of global payroll when legislation changes frequently in a very short time. The result: Maintaining compliance becomes an overwhelming task.

Manual, inefficient payroll processes and little to no data visibility

While most business functions have kept up with the advances in digitization and technology, this hasn’t been the case for payroll. Despite the availability of payroll software and automation processes, payroll processing still largely relies on manual intervention, involving spreadsheets and seemingly endless paper trails. Not only does this reduce the overall process efficiency, but it also results in very poor data visibility - even more so when looking at payroll data for a global team. 

And where available, data is often unreliable and not up to date. During COVID-19, this has turned into a major problem for many businesses. Accurate payroll data is crucial for making well-informed business decisions. If it isn’t available, it slows down vital decision-making processes in response to a crisis.

While the pandemic has confronted payroll teams all over the world with hitherto unknown challenges, the hardship of COVID-19 has also led to a positive development: The payroll function has risen from its traditional place of operating behind the scenes and gained in awareness and recognition throughout organizations. What’s more, the learnings from the pandemic seem to have triggered important transformation processes in the way global payroll is operated. 

According to the Gartner Market Guide for Multicountry Payroll Solutions, 2020 has already seen increased interest and investment from companies looking to adapt existing multi-country payroll operations to counteract the weaknesses exposed during COVID-19. As companies are recovering from the pandemic, application leaders are looking for unified global payroll solutions to consolidate their multi-country payroll processes. 

In the aftermath of COVID-19, the following aspects are among the top priorities for global payroll leaders:

• Increase transparency of global payroll data to allow for better cost budgeting and decision-making

• Improve resilience of payroll operations by introducing business continuity plans and by standardizing processes across geographies

• Modernize payroll function in order to adapt it to the conditions of the “new normal” (i.e. remote working etc.)

Ensuring global payroll continuity in the face of a global crisis such as COVID-19 has put payroll teams to the test and revealed the necessity to change the way businesses handle their global payroll. The key learning from the pandemic is that global payroll in its current state is not fit for the future: Data transparency is poor. Payroll systems are disconnected. Processes are far from being standardized. And payroll processing still largely relies on manual tasks.   

One way to change this is to invest in a unified global payroll solution like Lano. Lano’s payroll solution allows global organizations to consolidate their multi-country payroll by integrating their external payroll providers into one smart platform. Our automated data flows allow you to view payroll data for your entire global team on one single screen. What’s more, with our network of top tier in-country payroll partners, you can quickly set up local payroll in any new market. Get in touch with us today and start simplifying your global payroll.