When an organization opts for a global payroll strategy, it moves away from the historical, fragmented, country-by-country approach to managing employee remuneration—tactics that often meant a different payroll team or outsourced service provider for every operational locale. Until recently though, adopting this approach of centralized global management of payroll across multiple countries has been cost-prohibitive for smaller workforces. Indeed, unless the employee headcount in each country was at a certain level (usually in the hundreds), the standardization and reporting benefits did not balance out the expense. However, with the increasing use of cloud payroll deployment options, that expense (and therefore the headcount threshold) has dropped significantly. In fact, as a 2011 article in Pay & Benefits magazine (A Global Payroll Challenge) points out, “[because] a SaaS platform is customizable and scales both up and down, it is a truly global solution that enables companies to affordably accommodate the payroll needs of each location—regardless of employee size”. The report goes on to cite that, “With this subscription-based solution, companies can cut costs, paying only for the services their employees need and will use; [which] tends to be more financially manageable due to economies of scale and its ‘pay-as-you-go’ structure.”
That said, the key challenge of global payroll which SaaS addresses is not cost, but rather integration. You see, both the gathering together of payroll data from the various in-country systems, as well as the use of that data to feed into other HR and business intelligence systems has previously been done only by on-premises middleware technology. However, by using a SaaS approach, integration in the cloud is possible. As multi-country payroll specialists Webster Buchanan note in 2011 research (Software as a Service and Cloud-based Integration: Assessing the Business Impact in Multi-country Payroll): “Instead of installing and running middleware on-premise, in this model, the integration architecture is managed by a vendor - which could be an independent middleware provider, or an HR/Payroll services provider. Cloud-based integration services provide pre-built links to certain payroll systems and services, as well as a platform for third parties to build their own customized integrations.”
Cloud Payroll Integration Issues
When integrating cloud payroll solutions with other business software such as HR management systems (HRMS), benefits administration, leave management, or time and attendance, the approach is often more ad hoc than strategic. As the need arises for a new integration, an interface is built and implemented. However, subscribing too fully to this strategy is just one of many potential pitfalls of cloud payroll to avoid. Indeed, as Webster Buchanan observes, this pragmatic approach to the problem can run into problems in a multi-country scenario:
Over time, multiple interfaces create unnecessary system complexity, making maintenance and support a major overhead.
Updates or changes that are made to the payroll software or services on either side may require the interface to be rewritten.
Workforce changes may see the programmers responsible for the original payroll interfaces move on, with a resulting loss of in-house knowledge.
New integrations often wind up effectively being separate new projects—with all the costs, time, and resourcing issues that brings.
The past response to this challenge was the development of a separate integration layer across an organization’s IT infrastructure in order to carry data between different software applications. While this approach has seen numerous developments over the years, in the words of Webster Buchanan, “fundamentally it remains a separate middleware stack—with a number of complex elements and its own development, testing and maintenance overheads.” As such, the next logical step is to move the stack into the cloud; reducing maintenance and other overheads, and (by making integrations easier to set up) reducing the implementation period for the move to fully-integrated global payroll.
The Potential Benefits of Cloud-Integrated Global Payroll
When implementing a global payroll strategy, the strategic use of cloud-based integration facilitates the realization of aimed-for business benefits. Namely, with a more flexible integration process, the move to global payroll does not have to be an all-or-nothing single step. Instead the shift can occur in measured stages; meaning the organization can retain high-performing providers while allowing other relationships to lapse on completion of the current contract. In this way, the SaaS model can enable a best-of-breed approach to global payroll. In fact, this combination approach can be particularly important for multi-country payroll in which it may be impossible to source a single body of expertise in all required national regulations. Further, in an environment with several providers or national payroll teams, payroll integration via the cloud can still leverage the necessary management visibility into the organization’s payroll data as a whole; making consolidated reporting and deeper insights available to C-level decision-makers.
Cloud Integration – The Bottom Line
As Webster Buchanan puts it, “In effect, cloud integration becomes an enabler for a pragmatic multi-country payroll strategy.” Indeed, by providing a manageable interface between multiple systems and providers, hybrid and multi-tier set ups can become possible—allowing an organization to realize full centralization benefits without having to dismantle and rebuild their entire payroll operation.
Both the gathering together of payroll data from the various in-country systems, as well as the use of that data to feed into other HR and business intelligence systems, has previously been done only by on-premises middleware technology.”