As businesses grow and expand beyond their initial locations, gain diverse employee types, and need to comply with varying labor laws, centralized payroll becomes a challenging issue with respect to managing growth. And by extension, global time and gross pay — which directly contributes to 60% of time and effort in payroll — becomes a high priority item on any multi-location company’s list. Applying and maintaining consistent business processes across the globe can be a particularly difficult, especially for multi-location organizations that operate without true centralized visibility and control.
In Part 1 of our three-part Global Time and Gross Pay blog series, we discussed the pitfalls of partial compliance, and today in Part 2 we will cover common challenges in global payroll:
Download our Global Time and Gross Pay Automation Datasheet to learn more about streamlining global time data management & gross pay compliance.
Inconsistencies in global payroll processes
Applying consistent business processes across a variety of locations is both difficult and time-consuming — but failing to do so can have a number of ramifications for a business’s bottom line.
Businesses need the ability to set up global rules and processes across their organization to enable both centralized visibility and control over their time and gross pay data. But, often the systems in place make it challenging to modify these processes based on unique local requirements. The result is that most multi-location companies will have each location set up its own systems and processes, which are typically manual and spreadsheet-based). This leaves the company with islands of data that are useful for either global administration or local reporting, but not both. Without a single source of truth for gross pay data, companies end up with data silos and poor quality information, riddled with inconsistencies and errors.
Additionally, working with different processes and systems across these regions means that businesses end up with different levels of services or other inconsistencies in services across these regions — a problem that 42% of companies surveyed by SD Worx cited as a top concern.
While this may not initially seem like a high priority issue, recent statistics indicate otherwise:
- 56% of businesses admit to having issues with payroll accuracy
- Less than 29% of global organizations have all-encompassing payroll services on a global scale
- Manual processes in managing time and gross pay can cause between 2% to 7% errors, leading to inaccurate paychecks, according to the American Payroll Association
Can you imagine what a modest 1% error and payroll leakage over a $100 million payroll cost would look like?
Resulting administrative inefficiencies
Global organizations need global time and gross pay information to keep payroll running efficiently, but those lacking a single source of truth, have to dedicate a significant amount of time and effort to collating this information. Resorting to spreadsheets and manual processes across diverse locations can add substantial (and unnecessary) administrative overhead to payroll teams. Manually calculating hours, applying policies, managing compliance, validating data, and checking for exceptions can set back any payroll team by weeks. This is, to say the least, decidedly inconvenient for a team that has to have payroll data ready to go before each payroll run, as well as readily available whenever an executive requests specific payroll information.
In theory, the payroll team should be able to review and manage “gross pay” before it is used for any payroll calculation, thus greatly increasing the accuracy of the “net pay.” But when relying on manual, disparate processes, payroll teams have to pull data from each local system, identify the gaps in local needs, perform those calculations across different regions, and then eventually collate all this separate data to arrive at that company-level figure. These additional manual tasks add administrative overheads and unnecessary double-work that results in frustration, errors, delays, and loss of productivity. In Replicon’s experience with global customers, payroll teams can spend 16 to 20 hours each week dealing with these inefficiencies.
Businesses often believe they can outsource these processes to reduce overhead, but this, too, can prove costly. Successful outsourcing requires the payroll team to carefully manage these vendors, and engage in a perpetual back-and-forth of manually sending information — all of which is time-consuming and not typically a core skill of payroll employees. Associated costs, as well, can quickly become prohibitive with a large number of outside vendors. Often the fixed costs of these vendors prohibit businesses from using them until they reach a certain employee threshold, and in the meantime businesses must overstaff their payroll teams to compensate, ultimately building additional inefficiencies in the process.
This global, modernized world requires globally-focused, modern solutions. Businesses should automate global time and gross pay everywhere they operate, and thereby achieve a single source of truth for payroll, and alleviate data collation administrative overheads all at once.
Stay tuned for Part 3 of our series, where we’ll discuss what steps multi-location businesses can take to completely streamline global time and gross pay.