| By Micah Fairchild
A New Multi-country Payroll Model May Be On the Rise
Choosing a provider to handle your multi-country payroll needs is a little bit like choosing a new car. Your decision has to take into account the car’s color, snazzy new dashboard features, how fast it will go, etc. Sooner or later though, the savvy buyer knows that a look under the hood at what’s driving the vehicle’s performance is in order. And so it also goes with choosing which vendor will be driving your company’s multi-country payroll. On the one hand, selecting a payroll provider (that can cross country and territory boundaries) means finding a partner who can effectively handle different languages, currencies, cultures, and legislative compliance. However, according to global research and consulting company Webster Buchanan, at least 70% of those payroll processes are common regardless of where they are performed. So the question then is how do you differentiate between vendors in that remaining 30%?
Well, much like our analogy of the car buying process, the key to your decision may well lie “under the hood” in the method by which a vendor manages to bring some corporate uniformity to differing national requirements. In the past, differentiation was fairly straightforward with two broad categories driving a vendor’s approach to payroll services: that of the integrator and that of the aggregator. While both of these styles had positive and negative attributes (and suited different companies for different reasons), recently the European Payroll Services Alliance (PSA) has started to offer what has been described by Webster Buchanan’s David Longworth as, “the basis for a new type of regional multi-country payroll offering”. In a world of diesel and gasoline-powered engines, this new PSA offering is akin to that of a hybrid.
Understanding the Traditional Multi-Country Payroll Models
First up is the integrated model in which some vendors offer a system that allows a single, uniform payroll process for multiple countries. This centralized approach usually involves a rules-based core application and single database (accessible from anywhere in the world, naturally); with an array of different national business rules, legislation, currencies, and languages layered on top via optional extensions. One of the notable examples of this sort of approach is Oracle’s PeopleSoft Enterprise Global Payroll. Such software and services usually work off the employee data in a global HR management system (HRMS) and as such you don’t often see them as stand-alone payroll packages.
The aggregator model on the other hand is more in line with what is considered to be a pure payroll provider—typically not requiring integration into wider HR automation. Also referred to as the broker model, what sets this option apart is that the client has a single point of contact and access but the provider effectively sub-contracts the actual payroll processing to members of its network of in-country partners (ICPs)—entities who by virtue of their operation in a single location provide local expertise in cultural and regulatory norms. The data is then fed back up the chain via middleware technologies to be consolidated by the provider before presentation to the client. Well-known examples of the aggregated service approach are Ceridian and SafeGuard World International, both of whom operate broad ICP networks.
Understanding the New PSA Multi-Country Payroll Model
For nearly a decade the PSA have attempted to offer something different to the pan-European payroll market. Consisting now of six members: SD Worx (Belgium, France, Netherlands, Germany, Luxembourg); Aditro (Sweden, Finland, Norway, Denmark, Estonia); Elanor (Central and Eastern Europe); Seresco (Spain and Portugal); Trianon (Switzerland) and Cintra (the UK); the Alliance recently told Webster Buchanan that it hopes, “to offer a single point of contact for pan-European payroll and cross-continent reporting”. Indeed, rather than sub-contracting, the members have back-to-back agreements and a common Service Level Agreement. Each member is capable of taking the lead contact role and harnessing the services of the others depending on in which of almost 30 countries the client’s workforce is located. Although, the PSA doesn’t offer a single integrator software solution or aggregator-style middleware, it does provide a set of analytical services that pull data from the various member systems to present a unified reporting capability to the client.
Multi-Country Payroll Models: The Selection Process Bottom Line
Trying to decipher which of these models is best, is (to jump back over to our analogy) largely dependent on what kind of car you want. For instance, a large multinational corporation (with significant numbers of employees in its various national locations) may prefer an integrated option. Although this approach could mean higher costs, the fact of the matter is that the level of client control and data access (together with the uniformity of process, procedure, and policy that such a system can lay across national boundaries) could make this option the best fit. Yes, such a system benefits from (and often even requires) a global HRMS, but this is exactly the type of organization that is likely to have one.
On the other hand, a provider sitting at the head of a comprehensive network of ICPs could be cheaper and better able to deal economically with smaller employee populations—making this aggregation approach particularly well-suited to clients who are expanding internationally and as yet have only smaller teams in many territories. The flexibility of this approach might be appreciated where there is less need for identical processes and the production of centralized reporting is less important. Not to be forgotten though, there is of course the new PSA option for multi-country payroll. While this approach does appear to only be available in Europe (plus Turkey and Russia) at the moment, even if it is unique to that territory, its success is likely to spawn imitators elsewhere soon. Offering a strong, consolidated approach to both data and processing for organizations of all sizes, the PSA model incorporates flexibility alongside conformity and a roster of partners that are all leading providers in their own regions.
Ultimately though, as it is with cars, the decision is yours. Just keep in mind that the “how” is just as important a factor as the “what” when it comes to comparing multi-country payroll services.
Categories: Global Payroll
Tags: Multi-Country Payroll Models
Author: Micah Fairchild