In simple terms, global payroll is the consolidated management of all of an organisation’s payroll needs, across every country in which it has employees. The benefits of having a consolidated global payroll include improved visibility, control, consistency, compliance and accountability, along with greater efficiency.
Source: paper ‘Multi-country Payroll (MCP) Consolidation Demystified. Key Considerations for an Employee-Centric Payroll’ by Everest Group.
The concept of global payroll sounds simple enough. After all, most multinational organisations have already consolidated other key business functions globally, including accounting, IT and human resources (HR).
But having a consolidated global payroll is more complex. Employment and tax rules, regulations and practices are highly specific to each jurisdiction, and also change regularly. This was particularly evident during the pandemic when legislation was changing every month in some countries, creating significant challenges for global organisations that often struggled to ensure compliance.
Payroll is, by its nature, unique to every company and employee situation, and often involves a lot more human interaction than other business processes. It requires regular dealings with in-country tax offices, regulators, auditors and financial institutions – with all the specific language, procedural, cultural and technical nuances that entails. This complexity not only varies between regions, but also between countries in the same region – sometimes significantly.
Source: Global Business Complexity Index 2021 by TMF Group
Furthermore, from a technology perspective, there is no single platform or delivery model that can deliver global payroll, unlike for other business functions such as accounting and HR.
These complexities have driven the development of a number of different delivery models, which multinational organisations need to consider when deciding on the best way to handle their global payroll needs. These range from handling payroll fully in-house, often using Software as a Service (SaaS) solutions, through hybrid in-house/outsourced models, to a fully outsourced service.
Outsourcing can be done either through an aggregate model (main contractor plus third-party local providers), or through a single global provider that takes on all aspects of payroll delivery in all countries.
How organisations deliver global payroll is the result of a number of factors which best serve its objectives, while conforming to best practice within the region or country. Whichever model is chosen, payroll vendors will need to offer their clients a flexible solution, capable of evolving to satisfy the requirements for payroll accuracy, compliance, efficiency and accountability.
A recent paper from Everest Group analysts provides deeper insights into the challenges, benefits, and key considerations of multi-country payroll consolidation.