2011 Global Payroll Metrics, Trends And Best Practices

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Insight from 2011 Global Payroll Performance Study

2011 Global Payroll Metrics, Trends And Best Practices

  1. 1. GLOBAL PAYROLLPERFORMANCE STUDY 2011RESULTS PRESENTATIONPresented to: Study ParticipantsThe Hackett GroupFelicia Cheek– Practice Leader, Global Time to Pay Advisory ProgramFall, 2011 © 2011 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. 2011 Payroll Performance Study Results| 1
  2. 2. Statement of Confidentiality and Usage Restrictions This document contains trade secrets and other information that are company sensitive, proprietary, and confidential, the disclosure of which would provide a competitive advantage to others. As a result, the reproduction, copying, or redistribution of this document or the contents contained herein, in whole or in part, for any purpose is strictly prohibited without the prior written consent of The Hackett Group. Copyright © 2011 The Hackett Group, World-Class Defined. All rights reserved.© 2011 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. 2011 Payroll Performance Study Results| 2
  3. 3. Today’s Hackett Facilitator Ms. Cheek is the leader of the Global Time-to-Pay Advisory Program with primary responsibility for payroll and WFM advisory services as well as setting the agenda for payroll research. Ms. Cheek works closely with Finance, HR and Shared Services professionals who own the payroll process to provide strategic insight, metrics and best practices. The current agenda for the program includes providing global insight necessary to create a comprehensive payroll globalization strategy and a Service Delivery Model that leverages best practices in a global environment. A major part of the advisory program framework focuses on facilitating peer interaction with top performing payroll organizations. She has passion for payroll and enjoys empowering payroll leaders by providing strategic and tactical insight necessary to increase the value and support of payroll organizations. She is a 2009 recipient of the APA’s Meritorious Award and a 2009 APA Hall of Fame Inductee.© 2011 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. 2011 Payroll Performance Study Results| 3
  4. 4. Contents Key Observations From the 2011 Global Payroll Performance Study Top Performer Overview and Trends Global Observations & Metrics Next Steps Closing Statements© 2011 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. 2011 Payroll Performance Study Results| 4
  5. 5. Four Major Findings From the 2011 Global Payroll PerformanceStudy… More Than <1/2 30% Of Payroll Organizations have a Global Payroll Process of Top Performers are in a Owner leveraged (Shared Services) environment Only 34% Of Payroll Organizations have >1/2 Of Multinational Companies a formal governance model Outsource payroll in the EMEA in place and Asia/Pacific Region © 2011 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. 2011 Payroll Performance Study Results| 5
  6. 6. 1. A global payroll process owner ensures the properaccountability and ownership of payroll around the globe… Consistent Corporate Global Data Alignment Standards Across the Enterprise Globalized Business Processes Clear Payroll Accountability and Decision Making © 2011 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. 2011 Payroll Performance Study Results| 6
  7. 7. 2a. Shared Services comes in different shapes and sizes forpayroll, and affiliation continues to grow, regardless of corporatealignment… Shared Services © 2011 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. 2011 Payroll Performance Study Results| 7
  8. 8. 2b. Workforce Management continues to be an orphan process,that is highly decentralized and no clear corporate alignment… Shared Services © 2011 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. 2011 Payroll Performance Study Results| 8
  9. 9. 3. Savvy payroll organizations realize the benefit of a formalgovernance model and the importance of using it to linkpayroll to the business… Ensure the goals and objectives of the payroll organization are In line with that of the broader business 7% have no formal governance model in place © 2011 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. 2011 Payroll Performance Study Results| 9
  10. 10. 4. Payroll Leaders are becoming more comfortable leveragingoutsourcing as a means of delivering services through the bestservice point… © 2011 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. 2011 Payroll Performance Study Results| 10
  11. 11. Contents Key Observations From the 2011 Global Payroll Performance Study Top Performer Overview and Trends Global Observations & Metrics Next Steps Closing Statements © 2011 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. 2011 Payroll Performance Study Results| 11
  12. 12. What Top Performers Are Doing To Increase Efficiency andEffectiveness… 1. Top performing payroll organizations realize the importance of building internal relationships and as such customer satisfaction surveys are used 85% of the time for employees and 62% of the time to business units. 2. The proper sourcing solution continues to be a big question for all companies. In our top performer peer group, 40% of companies outsource the payroll process. Globally, this number is even higher in the EMEA and Asia/Pacific regions. 3. Expertise in payroll and educational level is important to the top performer peer group with 75% of managers being certified in payroll and 64% possessing at least a 4 year college degree. 4. Top performing payroll organizations only spend 36% of their time on transactional activities 5. Employee self service is being leveraged 65% of the time to reduce the focus on transactional activities at top performing payroll organizations. Working with Human Resources to ensure corporate policies and procedures are in place to encourage utilization is key to success in this area. 6. Top performers process the payroll at a 42% lower cost per employee than the peer group and use 45% less resources. © 2011 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. 2011 Payroll Performance Study Results| 12
  13. 13. Top Performers process payroll at a 42% lower cost per employeethan the peer group $127.02 …Top Performers are leveraging scalability and using creative sourcing solutions to lower the cost of paying employees in countries with small employee populations. $74.05 Top Performer Global Peer Group © 2011 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. 2011 Payroll Performance Study Results| 13
  14. 14. Top Performers process payroll at a 37% lower cost per paymentthan the peer group… …Top Performers are eliminating, simplifying, standardizing and automating to increase productivity and reduce the cost of payroll administration! $5.75 $3.60 Top Performer Global Peer Group © 2011 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. 2011 Payroll Performance Study Results| 14
  15. 15. Top Performers Vision for Payroll in 2013… Focus of Payroll 16% Process ImprovementTop Performing payroll organizations expect to decrease their focus 19%on transactional activities by 10% by 2013. They intend to shifttheir focus to work on more analytical type activities (Root cause 17% Technicalanalysis, building strategic internal relationships) and process 18% Todayimprovement initiatives aimed at increasing their payrollperformance. 2013 35% Transactional 25%As they spend time on more analytical and process improvementactivities, they don’t expect changes in the percent of management 32%resources but do expect to increase the number of professional Analytical 38%resources by 2% by 2013.Regionally, the biggest changes will be in the EMEA region wherethey expect an 18% decrease in their current 54% transactional Type of Resourcesfocus. The shift in focus will drastically reduce the number ofclerical resources and increase the number of professionalresources in the payroll organization. 49% Clerical 50%Changes in the maturity of global payroll solutions will play asignificant role in helping companies in the EMEA region better 29% Todayleverage technology and outsourcing to decrease their highly Professionaltransactional focus. 27% 2013 22% Managerial 22% © 2011 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. 2011 Payroll Performance Study Results| 15
  16. 16. Top Performers Vision for Payroll in 2013… Time Entry Tools Biometric Tool 0% 1%Top performing payroll organizations work with Human Resourcesto implement policies and procedures that encourage a culture of Web Based Time Entry - 10% Superviosr 12%employee self service. Effective utilization of employee self servicein the areas of time and attendance and employee data Time Clocks 12% 0% Todaymaintenance help increase payroll productivity. 24% 2013 Badge Swipe 30%Although utilization of paper timesheets is almost non existent,unfortunately there will still be a very small amount of paper Web Based Time Entry - 52%timesheets in 2013. Web based time entry will increase slightly by Employee 57%2013, but most employees will continue to enter time through badge 1.47% Paper Timesheets 0.66%swipes. Biometric web entry tools are not expected to increasesignificantly over the next two years.Employee self service for personal data maintenance usage will Employee Self Service for Datacontinue to increase over the next two years. In fact, for topperformers usage will increase by 16%. When payroll resources Maintenanceare not entering tax withholding data, direct deposit and otheremployee personal data, they are free to work on other more value 3%added activities. Other 0% 3rd Party Interface 7% 9% Today 25% 2013 Payroll Resources 10% Employee Self Service 65% 81% © 2011 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. 2011 Payroll Performance Study Results| 16
  17. 17. Top Performers Vision for Payroll in 2013… Key System Integration 94%Data integrity and protection are easier to ensure with system Time Reporting 95%integration. Top Performing payroll organizations have a100%integration between the payroll and accounting system. With 100%globalization, some companies do not have 100% integration with Accounting 100%the Human Resources system. And, time reporting is usually Todayadministered and managed locally and often not integrated with the 2013payroll system. Unfortunately, this can have a negative impact on 92% Benefits 94%productivity and the overall quality of the payroll. Looking to 2013,we don’t see much change in the integration of key systems and tothe payroll system. 99% Human Resources 100%Although globally many countries don’t require employee year endstatements, in those countries that do, there is a trend towardelectronic distribution to employees. Specifically, in the UnitedStates, United Kingdom and Canada legislation has been approved Employee Year End Statementleading the way for employers to exercise this practice. Thus far, Distributionadaptation has been slow, but it is expected to increase over thenext two years. In fact, Top Performers indicate that by the year2013, they will distribute 66% of employee year end statements 29% Paper and Electronicelectronically and paper only distribution will only account for 13% 21%of employee year end statements. 41% Today Paper Only 13% 2013 30% Electronic Only 66% © 2011 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. 2011 Payroll Performance Study Results| 17
  18. 18. Contents  Key Observations From the 2011 Global Payroll Performance Study  Top Performer Overview and Trends  Global Observations & Metrics  Next Steps  Closing Statements © 2011 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. 2011 Payroll Performance Study Results| 18
  19. 19. The challenges of globalization have a noticeable impact on payrollperformance… 1. The multitude of languages, currencies, cultures and countries in the EMEA Region make it the most complex region to pay employees with the average cost per payslip being almost 8 times higher than that in the Asia/Pacific Region and almost 5 times higher than in the North American Region. 2. Multinational companies based in the United States almost always outsource the payroll process in the EMEA and Asia/Pacific Regions. However, most times the outsourcing solution is not scalable or cost effective for smaller employee populations requiring a third solution or the need to continue to manage multiple small in country solution providers. 3. Multinational companies frequently leverage payroll best practices in North America, but are challenged to overcome local practices and cultural preferences in other regions around the globe. 4. Globally, system integration is challenging, as such manual processes and duplicate data entry are common negatively impacting productivity in payroll. 5. Globally, time reporting is almost always handled on the local country level, forcing multinational companies to maintain and support a multitude of local time and attendance systems. © 2011 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. 2011 Payroll Performance Study Results| 19
  20. 20. Globalization has been particularly challenging for payrollorganizations … United States EMEA Region Americas Region Asia/Pacific Region Regional Americas EMEA Asia/Pacific Complexity Level High √ Medium √ √ Low © 2011 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. 2011 Payroll Performance Study Results| 20
  21. 21. LowOverview of the Americas Region High Medium The majority of the companies that participated in the 2011 Global Payroll Performance Study are multinational companies headquartered in the United States. Approximately 21 countries, 6 languages, and 10 currencies are represented in this region. Corporate alignment is almost equally split between Human Resources and Finance. While more companies that participated in the study process payroll in-house, the number of companies outsourcing continues to increase. Overall, North America is the most mature country for payroll processing solutions. Although we are continuing to increase Participation in Latin and South America, our data shows a large amount of In house processing and limited usage of global payroll solutions, with most of the work being performed on the local level. © 2011 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. 2011 Payroll Performance Study Results| 21
  22. 22. Low HighOverview of the EMEA Region Medium The EMEA (Europe, Middle East, and Africa) is the most complex region for processing payroll. The multitude of countries, languages and currencies coupled with local legislative requirements are add to this complexity rating. Most of the multinational companies in our performance study have a large geographical footprint in this region but it consists of small employee populations in each country. As a result, the cost of payroll processing is much higher because the ability to leverage scale is limited. In addition, overall payroll performance is inhibited by a lack of one global payroll solution and the inability to integrate the multitude of systems necessary to perform the payroll administration process. Data collected in this region is highly influenced by the activities in continental Europe. As payroll solution providers continue to tailor their service offerings to meet the needs of this region, we expect to continue to see significant increases in payroll performance. © 2011 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. 2011 Payroll Performance Study Results| 22
  23. 23. LowOverview of the Asia/Pacific Region High Medium The Asia/Pacific Region is unique in many ways and the data in the performance study reflects this uniqueness. Approximately 16 countries, 14 different currencies and 11 languages are included in the profile of this region. When looking at the cost of payroll processing in this region, labor makes up the largest percent of total costs (i.e. labor, outsourcing, technology and overhead); mostly because in some countries labor costs are so low, they often replace money that would be spent on technology elsewhere. This region also has several countries that require a minimal effort to process payroll. On the opposite end of the spectrum, some countries have legislative requirements that require in country resources to maintain compliance. Our data shows larger employee populations in each country, which allows multinationals to better leverage scale when negotiating pricing. Participation from companies in Australia continues to grow and has a significant impact on performance in this region. © 2011 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. 2011 Payroll Performance Study Results| 23
  24. 24. The progression from Stage 1 to Stage 2 is challenging and theexperience is largely influenced by a companys global footprint… Maturity Payroll Globalization Journey •A Fully Integrated Solution •A Leveraged Environment D Stage 3 •End to End Business Processes Strategic Business Enablement •Global Compliance (Business Intelligence, Collaboration, •Global Process Owner Capability, Flexibility/Agility) Consolidation •Cost Effective Solution for Smaller Employee Population •Regional Process Owner •Gloco Business Process C Stage •Key System Integration Global Awareness 2 •Local Solution for Smaller Employee Populations Market (Compliance, Analytics and Reporting) Fluctuation •Shared Service Centers •Global Service Delivery Model Globalization •Standardization •Consolidation B •Local Payroll Ownership •Local Payroll Processing System Stage Local Focus 1 •Local Time Reporting System Local (No global visibility or ownership) Expertise •Local Practices and CultureDecentralization A Localization Global Payroll Standardization © 2011 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. 2011 Payroll Performance Study Results| 24
  25. 25. Regional resource requirements are heavily influenced by localpractices and the maturity of the payroll solution… Resources/1,000 Employees 3.549 Resources 2.975 often substituted for technology due to low labor rates 2.471 Multiple languages, cultures and legislative requirements sometimes limit the ability to leverage resources 1.708 1.357 Top Performer Peer Group Americas Region EMEA Region APAC Region © 2011 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. 2011 Payroll Performance Study Results| 25
  26. 26. Total Payroll Cost/Employee on a Regional Basis… $121 $371 $198 $9 $11 $46 $19 $36 Total outsourcing $47 Is much more Selective outsourcing common for is more common multinational than companies. Data total outsourcing. $185 is also heavily Data is heavily reflective of $5 influenced by continental Europe $107 North America Very common to leverage resources in $60 countries with low wage rates $121 $44 Americas Region EMEA Region APAC Region Labor Outsourcing Technology Overhead © 2011 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. 2011 Payroll Performance Study Results| 26
  27. 27. Total Payroll Cost/Payslip on a Regional Basis… $4.45 $32.23 $17.25 $0.36 $3.81 $2.55 $1.61 $1.84 $1.70 Monthly pay Biweekly pay cycle is most cycle is most common in common in $15.90 these regions; not the Americas common to have $7.03 $0.17 Region; common to multiple pay cycles have multiple pay cycles $2.23 $10.91 $5.83 Americas Region EMEA Region APAC Region Labor Outsourcing Technology Overhead © 2011 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. 2011 Payroll Performance Study Results| 27
  28. 28. Contents  Key Observations From the 2011 Global Payroll Performance Study  Top Performer Overview and Trends  Global Observations & Metrics  Next Steps  Closing Statements © 2011 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. 2011 Payroll Performance Study Results| 28
  29. 29. Our payroll research includes hot topics, case studies and monthlypayroll metrics that can be used for decision support and businesscases… © 2011 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. 2011 Payroll Performance Study Results| 29
  30. 30. What can you do next?  Meet with a Hackett Senior Advisor to socialize these findings with a wider audience in your organization  Find out more about building a Hackett Advisory relationship to further explore topics of interest such as where your performance falls short of Top Performance in payroll organizations through: – the Advisory portal – Advisory inquiries – Participation in Webcast – Peer interactions – Participation in other performance studies such as our forthcoming performance study, launching in January 2011  Find out more about how to develop a payroll strategy by setting up a meeting with a Senior Consultant from our Payroll Transformation Practice  Find out how your costs compare to others with similar agreements by setting up a meeting with a Senior Consultant from our Globalisation and Outsourcing Practice. © 2011 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. 2011 Payroll Performance Study Results| 30
  31. 31. Contents Key Observations From the 2011 Global Payroll Performance Study Top Performer Overview and Trends Global Observations & Metrics Next Steps Closing Statements © 2011 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. 2011 Payroll Performance Study Results| 31
  32. 32. Questions, Comments and Closing Comments… © 2011 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited. 2011 Payroll Performance Study Results| 32
  33. 33. Suite N500 Felicia Cheek1117 Perimeter Center WestAtlanta, GA 30338 Senior Advisor – Global Time to Pay Advisory ProgramPhone: +1 770 225 3600 Phone: + 1.770.703.7470Martin House Mobile: +1.404.218.86665 Martin LaneLondon EC4R 0DP fcheek@thehackettgroup.comPhone: +44 207 398 9100 www.thehackettgroup.comTorhaus WesthafenSpeicherstrasse 5960327 Frankfurt am Main, GermanyPhone: +49 69 900217 08, rue de Port Mahon75002 Paris, FrancePhone: +33 1 53 43 0400Strawinskylaan 3051G, 1077 ZXAmsterdam, The NetherlandsPhone: +31 20 301 2210Suite 40335 Lime StreetSydney, NSW2000AustraliaPhone +61 2 9299 8830

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