This document discusses the components needed to create an effective Global Payroll Control Framework (GPCF). It addresses the remaining two components of the framework - monitoring activities and information/communication. It also discusses the global payroll operating model. Key points include that monitoring activities should include regular payroll meetings to evaluate processes and receive feedback. Separate evaluations like audits are also important. Information and communication policies should define roles, responsibilities, and the tools and frequency of interactions. The operating model must balance people, systems, sourcing, and ensure an efficient, effective and transparent design and operations. Developing a complete GPCF helps organizations gain control over their global payroll.

1. BY MAX VAN DER KLIS-BUSINK
Take Charge With a
Part III
Control Framework
Global Payroll
BY MAX VAN DER KLIS-BUSINK
C
reating a Global Payroll Control Framework (GPCF)
requires the design of four sections. Previous
articles (November and December 2015 issues) have
addressed the first section, Global Payroll Objectives, and
the first three components of the second section, Global
Payroll Components. This article addresses the remaining
two components (monitoring activities and information
and communication) and the third section, the Global
Payroll Operating Model.
Monitoring Activities
Ascertaining that all five components of
internal control are present and functioning
requires ongoing and separate evaluations
as part of a framework, according to the
Committee of Sponsoring Organizations
of the Treadway Commission (COSO).
Ongoing evaluations are typically built
into business processes, and the process
GLOBAL PAYROLLThe official magazine of the Global Payroll Management Institute
Reprinted From January 2016

2. owner periodically conducts separate evaluations at set
times. Findings are evaluated against criteria established in
the GPCF and communicated to both internal and external
stakeholders in order to take the appropriate follow-
up actions. The disclosure of information is crucial to
internal control and the pursuit of full transparency. Separate
evaluations are important for mitigating non-recurring risks or
those occurring outside of payroll, as well as for evaluating the
effectiveness of the internal control system itself.
Separate evaluations could be in the form of recurring
payroll meetings, customer and stakeholder surveys, or
Audit of Control Effectiveness (ACE) reviews. In these
payroll meetings, the aim is to evaluate the periodic payroll
cycle, discuss feedback from customers and stakeholders,
and analyze the payroll dashboard. Ideally, payroll
providers also join these meetings, especially if outsourcing
is centralized, for the sake of transparency and improving
the working relationship. In these meetings, participants
assess the impact of changes to the control environment
(new businesses, changed legislation, personnel changes,
etc.) on daily operations and achieving objectives. This
enables the global payroll function and the payroll vendor
to anticipate an upcoming event (ex ante) instead of
reacting to the event once it has occurred (ex post).
Everyone who has worked for one of the Big Four
consultancy firms will recognize the weekly meeting where
attendees discuss the latest news on payroll taxes. Why not
also do this as part of the monitoring activities in payroll
meetings? It will increase the global payroll function’s
knowledge and, amongst many other benefits, enhance their
global and local risk identification capabilities. One of the
inherent risks in payroll, according to a Wolters Kluwer
2015 article by Elmer Van Lienen, is a lack of payroll tax
knowledge that leads to the inability to identify taxable
events that occur outside of payroll or to detect possible
payroll tax liabilities.
An ACE review assesses the effectiveness of control
activities and, for instance, whether documents used in the
processes are kept up to date. Start with self-audits and then
let internal audit, the SOX team, and/or an external auditor
perform the ACE reviews as part of their routine audits.
They would ideally use the self-audits as a base for
their audits, reducing their time spent on auditing
the payroll function and potentially saving the
organization money. Finally, conduct a quarterly
customer and internal stakeholder survey to
assess the satisfaction with services provided
(typically an operations objective). How will
you know if those in remote locations are
satisfied if you don’t ask them? Global payroll functions benefit
from satisfied employees who receive timely responses to
questions they find important. Employees who don’t receive
responses or who receive inaccurate payments can become
less motivated. Simply conducting such a survey establishes
a better relationship between customers and/or stakeholders
and the payroll function.
Information and Communication
In order for team members to carry out their internal
control responsibilities, they must know their roles and
responsibilities. According to COSO, communicating the
right information at the right time enables the global payroll
function and its stakeholders to make the right business
decisions every day. The GPCF should therefore include
timelines for what information and documentation is
communicated to whom and when. Disclose
the framework to everyone who has a role
in the GPCF processes or depends on
payroll output, such as accounting and
financial planning and analysis.
Another important part of this
component is to formalize the
communication method and tools:
• What is the primary
language for all
communication?
• Which communication
tools are used for
reaching out to remote
locations?
• How frequent is the
contact between regional
teams?
• What information is provided
about the global payroll
function’s performance?
The last question is especially
important because managing payroll on

3. a global scale brings unique challenges, and regular insight
into performance is a basic requirement. The information
included in a payroll dashboard (used in payroll meetings)
should ideally touch on meeting timelines, accuracy of
payroll runs, and numbers of processed starters, leavers,
and changes within identified groups of common changes.
Many more metrics and indicators should be included, but
their feasibility depends on the ability of the global payroll
function or vendor to deliver these metrics. Whatever the
dashboard looks like, discussing the contextual factors
in payroll meetings is crucial to identify root causes,
drive continuous improvement, and have constructive
discussions with payroll vendors (see May 2015 Global
Payroll article on “Importance of Context in Measuring,
Managing the Global Payroll Functions”). The ultimate next
step is internal benchmarking across regional teams and
external benchmarking of performance metrics with peers.
Global Payroll Operating Model
The first two sections of the GPCF are vital for being in
control of payroll. But without a functioning and well-
balanced Global Payroll Operating Model, it is virtually
impossible to provide reasonable assurance that payroll
objectives are being met. A Global Payroll Operating Model
should be efficient, effective, and transparent in its design
and daily operation. In this respect, efficient means doing
things right, and effective means doing the right thing.
According to Van Lienen, transparent means having proper
controls in place and fostering a culture that stimulates
disclosing information and
raising flags when events
occur that adversely affect
the achievement of objectives.
After the first two sections in
which the global payroll function
operates are made clear, the next
logical step would be a closer look
at the operating model. However,
most organizations approach this
the other way around. This can, of
course, work for some organizations, but
it seldom does in the long run. Work from
objectives (section 1) to components (section 2)
to the operating model (section 3) and then drive
continuous improvement.
Every operating model can be divided into how people,
systems, and sourcing interact in a process. Decisions must
incorporate best practices and address both global and
regional accountabilities. Aim to get the best balance of
cross-cultural competencies, standardized and automated
payroll processes, and, to a manageable extent, centralized
payroll vendors (per May 2015 Global Payroll article on
“Importance of Context in Measuring, Managing the Global
Payroll Functions). In designing processes, consider the
regulatory and internal timelines that apply to payroll.
Then incorporate control activities as regular process
steps to ensure meeting them. In these process steps,
people, systems, and sourcing all affect the way activities
are executed and thus have an effect on the design and
efficiency, effectiveness, and transparency of the operating
model.
The way global payroll function members put the GPCF
into practice, and the intrinsic motivation they must have
to be in control of the processes, lead to the payroll output
they deliver. Being aware of the required balance among
the four elements in all processes and the effect on internal
control is crucial. If there is a gap in knowledge, identify
and learn or insource it. If there is a lack of automation,
incorporate additional manual controls or improve the IT
infrastructure.
In Summary
This article addresses the remaining two components of
internal control and the four elements of a global payroll
operating model. This and the setting of global payroll
objectives lead to a GPCF. You can use the summary to
start your GPCF (see chart on next page).

4. This best-practice method applies to all organizations
regardless of their industry, how they have organized their
payroll function, or what their payroll footprint is or will
be. In this lies the great strength of approaching internal
control for payroll this way. After the first version of a
GPCF is released, it must be maintained, reflect daily
operations, and be adjusted when the control environment
changes. It would be a shame to let it be just another well-
written document that is not put into practice. When,
for instance, your organization is considering changing
its operating model,
expanding into new
markets, or switching
payroll vendors, the GPCF
is great to have and to use
as a starting point for each
discussion. A GPCF cannot
guarantee perfect outcomes and
provide absolute assurance, but that
should not stop an organization from trying. ■
Chart 1— GPCF at a Glance
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