How to master global payroll transformation

Global hiring and expansion typically lead to accelerated business growth. As the number of employees and foreign business entities increases, weaknesses in formerly smooth global payroll operations can quickly become exposed.

Global payroll transformation is the answer to inefficient payroll processes, data inconsistencies, and lack of standardization. However, successfully managing payroll transformation from start to finish is a major challenge for multinationals.

According to McKinsey, 70 percent of transformation projects fail. Since transformation projects carry large financial and time commitments, ensuring transformation success is a top priority for business leaders, especially when it comes to business functions as crucial as payroll.

How to approach global payroll transformation? What is the payroll transformation process? What are the benefits organizations can gain from transforming their global payroll?

Before we dive deep into the ins and outs of global payroll transformation, let’s quickly cover the basics. What is payroll transformation? What exactly does it entail?

Transformation is defined as a change or alteration that is characterized by a certain radicality. Payroll transformation hence means to make radical changes in the way an organization manages payroll.

Global payroll transformation is the same process, but on a global scale. It encompasses various different aspects and processes, including:

• Adjusting processes and workflows,

• Changing to different payroll software, systems, and tools,

• Leveraging payroll integration and new technologies,

• Increasing the level of payroll automation,

• Restructuring the global payroll team,

• Moving to a different global payroll delivery model,

• Unifying payroll infrastructures across different geographies,

• Consolidating global payroll data, and

• Rethinking global payroll reporting.

Driving digital transformation in payroll requires a significant financial and time investment. Many businesses therefore wonder if the investment is really worth it. Here are the major improvement potentials organizations can unlock by transforming their global payroll.

• Standardization: Streamlining and standardizing international payroll operations is a major driver behind payroll transformation. Standardized processes are more robust, efficient, and cost-effective.

• Reduced global payroll complexity: Payroll transformation also involves evaluating the current global payroll model and infrastructure to identify areas of improvement, with the aim of reducing complexity in global payroll delivery.

• Increased efficiency: Increasing global payroll efficiency is a declared objective in many organizations. Digital transformation in payroll is an important enabler for this.

• Better employee experience: Creating a great employee experience is an important means for businesses to improve employee retention and foster employee engagement. Payroll and employee experience are closely intertwined. Digitizing payroll is an important step to creating a better digital experience for employees.

• Fewer payroll errors: Payroll errors should be avoided at all costs. Global payroll transformation reduces the number of manual processes and streamlines global workflows, which eliminates two major sources of errors.

• Enhanced global view of processes and systems: Maintaining a comprehensive global view of processes, systems, and service providers in international payroll is a difficult task for organizations. Global payroll transformation is an important step towards balancing global oversight and local objectives and requirements.

Lano Blog

Why invest in a global payroll solution?

Read more

Global payroll transformation requires careful planning and preparation. Here are a few tips for getting your transformation project off to a good start.

• Develop a global payroll strategy: No global payroll transformation project should ever be undertaken without a firm strategy in place that determines where the organization is headed in terms of payroll. The first step when preparing for payroll transformation is to work out a detailed global payroll strategy that describes how payroll is supposed to be managed at the organization.

• Identify current problems in payroll delivery: Successful payroll transformation requires a clear understanding of what you want to achieve with the project. Checking your payroll KPIs and comparing the current status quo to what global payroll should be like can help identify current pain points and areas of improvement.

• Map out the desired future state of your global payroll: The next step consists in developing a clear vision of what you want your organization's international payroll set-up to look like. Many aspects will already be included in your global payroll strategy, but this is where you focus more on the operational details and global payroll delivery.

• Create a business case for payroll transformation: Global payroll transformation is a very time-intensive project that requires a lot of resources, both in terms of money and people. Leadership won’t be easily swayed to make such a significant investment and commitment. That’s why you first need a compelling business case for global payroll.

• Evaluate your current payroll vendors: Payroll outsourcing holds many benefits for organizations. But given the crucial importance of payroll, businesses should carefully choose who they entrust their payroll process to. Preparing for global payroll transformation is the perfect opportunity to evaluate your current payroll providers. This is best done by looking at the agreed payroll SLAs and comparing the agreed service levels to actual service delivery. If switching payroll providers becomes necessary, the first step will be to send out a global payroll RFP.

• Prepare a project timeline: Transforming global payroll is a huge project that needs to be planned carefully. This means that you need to prepare a detailed timeline with what needs to be done during the different project phases. Also, map out the manpower requirement for each project stage and set important project milestones that will help you keep track of your progress.

Digital transformation projects are at a high risk of failing. Project leads in global payroll transformation need to be aware of common pitfalls and hurdles. Here are a few things to keep in mind that will help you ensure project success.

• Make it a combined global HR and payroll transformation: Payroll and HR are closely intertwined, which is why payroll transformation projects are typically more successful when done alongside HR transformation. If HR systems and workflows are inefficient and not properly connected to other workforce management systems, any attempts at preparing payroll for the digital era are likely to fail.

• Remember that payroll is local: Global payroll transformation creates important opportunities to standardize and streamline payroll workflows and processes. However, businesses aiming at transforming their multi-country payroll should not forget that there will always be certain aspects of payroll that need to be handled locally. Don’t expect complete standardization across all geographies and entities, but concentrate on maintaining payroll compliance with local regulations.

• Focus on outcomes rather than activities: Transformation projects are highly complex, involve many different people, and require project leads to manage a large variety of moving pieces. Instead of getting lost in the tiny details and micromanaging tasks and project steps, monitor the achievement of important milestones and keep an eye on project outcomes.

• Minimize disruptions: Transforming payroll means undertaking fundamental changes in the way payroll is processed and managed at an organization. Fundamental changes are likely to bring about disruptions. Payroll is vital for employee financial stability and wellbeing, which is why disruptions should be kept to an absolute minimum. Whatever measures you have planned, schedule their execution carefully to avoid clashes with payroll runs and salary payments.

• Align payroll transformation and corporate strategy: Global payroll transformation is a great chance for businesses to leverage the strategic potential of their payroll. To do this, organizations need to align the transformation project with their company goals and vision. Also, the more aligned the payroll transformation project with the organization’s general strategy, the easier to convince management that the project will bring the promised ROI.

• Build a successful change management process: Global payroll transformation is not only about operational changes, but also involves a cultural shift in the organization. An important success factor is to educate employees about the processes, technologies, and workflows. Implementing adequate change management strategies can help employees ease into new processes and fosters acceptance.

Transformation projects require a significant investment of time, money, and resources. After making such an important investment, leadership is likely to inquire about ROI and the achieved improvements once the project has been completed. Here are a few tips on how to evaluate global payroll transformation success.

• Global payroll compliance: Payroll transformation should result in significant improvements in global payroll compliance. Creating detailed reports on compliance issues, changes, and more can help measure improvements.

• Time savings: Efficiency gains are an important driver behind payroll transformation. One way to measure project success is to determine how much faster global payroll is processed compared to before the transformation project.

• Level of human intervention: An important part of payroll transformation is to leverage the power of automation to reduce the need for human intervention in payroll processes. The less manual intervention is needed, the more successful the transformation project.

• Payroll accuracy: Reducing the number of payroll errors is another reason for businesses to transform their global payroll. When measuring payroll transformation success, organizations should assess the new level of payroll accuracy and compare it to previous accuracy levels.

Businesses that want to transform their multi-country payroll need a reliable global payroll partner who brings the necessary compliance expertise to the table. Lano can equip multinational organizations with everything they need to take their international payroll to the next level.

With Lano’s Global Payroll Services, businesses can easily choose a suitable local payroll provider from our global network of experienced payroll partners. With our Global Payroll Consolidation Platform, it’s easier than ever to manage multiple payroll service providers and unify payroll infrastructures and data across geographies. Book a demo with one of our payroll experts to learn more.