Are your global payroll processes efficient and effective?

Global payroll represents a huge challenge for multinational companies.

The appetite for greater efficiency and effectiveness is strong, as 85% of multinational organisation decision-makers polled in Ernst & Young’s global payroll survey said they want improvement in their current payroll practices.

But just three in ten respondents said a single vendor exists that can handle all their company’s global payroll needs, according to the survey report. And just 22% of respondents said they currently have a global payroll model.

There was little consensus in the survey about the top obstacles to outsourced global payroll services, as cost (16%), vendors’ understanding of company-specific requirements (14%), legal and regulatory requirements (12%) and geographic capability (11%) were identified as top challenges.

Regardless of the hurdles, companies that need to compete and expand in the global marketplace cannot afford to accept the status quo, according to Ernst & Young human capital consultant Jeff Brown.

“Organisations need global payroll data to make important business decisions,” Brown said in a news release. “Managers can build the business case based on risk and compliance to improve payroll operations, but access to the payroll data is proving to be very value-added.”

Many global organisations do possess some of the most important tools needed for effective management of payroll. Almost six in ten (58%) survey respondents said they use a knowledge-based database or tracking system to help resolve payroll issues.

This allows them to quickly review and resolve potential errors, and the survey report said organisations that do not have a tracking system are vulnerable to risk because of a lack of a detailed, consistent auditing mechanism.

And more than two-thirds of respondents said that at least 60% of their internal payroll operations and internal policies are consistent across all of the countries where they operate.

But the survey report says organisations need to consider these questions:

• Is your global payroll model aligned with the overall business strategy and vision for support services?
• Do you have a five-year plan for your payroll operations with buy-in from human resources or finance, depending on your organisational structure?

“It’s time for organisations to begin viewing payroll as a critical business process that requires a global solution with local flexibility,” Brown said.

—Ken Tysiac (ktysiac@aicpa.org) is a CGMA Magazine senior editor.