As companies expand globally, many are looking for opportunities to create a global payroll process. To implement global, or any other, best practices, payroll needs to be ready. For some time, payroll migrated to the finance umbrella to ensure appropriate audit and controls. However, as more companies become comfortable with the effectiveness of their audit and control processes, payroll has shifted more toward human resources. A shift toward HR also allows payroll to play its role for any company managing the entire HR hire-to-retire continuum.
"It does not really matter where payroll is aligned in your organization as long as it is aligned based on the corporate and goals objectives," says Felicia Cheek, director of the global payroll advisory program with The Hackett Group in Atlanta. "Payroll has a strong connection to accounting and finance and to human resources, so where it is aligned does not impact payroll’s performance or impact payroll’s ability to implement the best practices."
When best practices extend globally, the issues become more complex. Although global payroll may sound like an oxymoron, companies can develop a global process. However, a global payroll process looks quite different from a domestic payroll process. For one thing, it is not possible to have a single system solution or provider for every country. "There is no one provider that offers payroll services in every single country," says Cheek. "There is generally no resource that knows how to process payroll in every country around the world."
This lack of integration often leads to less productivity and higher cost. Payroll processes and operations in many countries still require a lot of manual processes. The key for companies is to determine what level of resources are required to manage global payroll and where those resources need to be—for example, at the global, regional, local or corporate level. Part of this will be driven by local laws and requirements. At least some of those payroll resources must reside at the local level, says Cheek. For example, most of the companies in Latin America require employees to sign for their paychecks to indicate that the employee confirms the correctness of their paycheck. "This is a very intricate process and a very manual one," says Cheek.
If a company is trying to implement a best practice around electronic distribution of pay statements, it needs to understand how both local legislative requirements and local customs could affect those efforts. "If employees routinely sign for their paychecks, that does not mean that those checks cannot be distributed electronically," says Cheek. "It means that companies operating in those countries need to include an additional step in the process where employees have to sign for their checks, perhaps using an electronic signature."
Although global payroll sounds daunting, the key is to think creatively and work around the laws of various countries. In many ways, a global approach to payroll is similar to the challenges companies operating in the U.S. face when having to accommodate various state and local laws affecting payroll.