2011 Global Payroll Metrics, Trends And Best Practices

GLOBAL PAYROLL
PERFORMANCE STUDY 2011

RESULTS PRESENTATION

Presented to: Study Participants

The Hackett Group
Felicia Cheek– Practice Leader, Global Time to Pay Advisory Program
Fall, 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

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Copyright © 2011 The Hackett Group, World-Class Defined. All rights reserved.


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.


Contents
 Key Observations From the 2011 Global Payroll Performance
Study
 Top Performer Overview and Trends
 Global Observations & Metrics
 Next Steps
 Closing Statements


Four Major Findings From the 2011 Global Payroll Performance
Study…

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


1. A global payroll process owner ensures the proper
accountability 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


2a. Shared Services comes in different shapes and sizes for
payroll, and affiliation continues to grow, regardless of corporate
alignment…

Shared
Services


2b. Workforce Management continues to be an orphan process,
that is highly decentralized and no clear corporate alignment…

Shared Services


3. Savvy payroll organizations realize the benefit of a formal
governance model and the importance of using it to link
payroll 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

4. Payroll Leaders are becoming more comfortable leveraging
outsourcing as a means of delivering services through the best
service point…


Contents
 Key Observations From the 2011 Global Payroll Performance Study
 Next Steps


What Top Performers Are Doing To Increase Efficiency and
Effectiveness…
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.


Top Performers process payroll at a 42% lower cost per employee
than 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


Top Performers process payroll at a 37% lower cost per payment
than 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


Top Performers Vision for Payroll in 2013…

Focus of Payroll
16%
Process Improvement
Top Performing payroll organizations expect to decrease their focus 19%
on transactional activities by 10% by 2013. They intend to shift
their focus to work on more analytical type activities (Root cause 17%
Technical
analysis, building strategic internal relationships) and process 18%
Today
improvement initiatives aimed at increasing their payroll
performance. 2013
35%
Transactional
25%
As they spend time on more analytical and process improvement
activities, 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 where
they expect an 18% decrease in their current 54% transactional Type of Resources
focus. The shift in focus will drastically reduce the number of
clerical resources and increase the number of professional
resources in the payroll organization. 49%
Clerical
50%
Changes in the maturity of global payroll solutions will play a
significant role in helping companies in the EMEA region better
29% Today
leverage technology and outsourcing to decrease their highly Professional
transactional focus. 27% 2013

22%
Managerial
22%


Time Entry Tools
Biometric Tool 0%
1%
Top performing payroll organizations work with Human Resources
to implement policies and procedures that encourage a culture of Web Based Time Entry - 10%
Superviosr 12%
employee self service. Effective utilization of employee self service
in the areas of time and attendance and employee data Time Clocks 12%
0% Today
maintenance 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 increase
significantly over the next two years.

Employee self service for personal data maintenance usage will Employee Self Service for Data
continue to increase over the next two years. In fact, for top
performers usage will increase by 16%. When payroll resources Maintenance
are not entering tax withholding data, direct deposit and other
employee 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%


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 Today
administered and managed locally and often not integrated with the 2013
payroll 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 to
the payroll system. 99%
Human Resources
100%
Although globally many countries don’t require employee year end
statements, in those countries that do, there is a trend toward
electronic distribution to employees. Specifically, in the United
States, United Kingdom and Canada legislation has been approved
Employee Year End Statement
leading the way for employers to exercise this practice. Thus far, Distribution
adaptation has been slow, but it is expected to increase over the
next two years. In fact, Top Performers indicate that by the year
2013, they will distribute 66% of employee year end statements 29%
Paper and Electronic
electronically 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%


Contents
 Next Steps


The challenges of globalization have a noticeable impact on payroll
performance…
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.


Globalization has been particularly challenging for payroll
organizations …

United States EMEA Region

Americas Region Asia/Pacific Region

Regional Americas EMEA Asia/Pacific
Complexity Level
High √
Medium √ √
Low

Low
Overview of the America's 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.


Low High
Overview 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.

Low
Overview 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.


The progression from Stage 1 to Stage 2 is challenging and the
experience is largely influenced by a company's 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 Culture

Decentralization A
Localization Global Payroll Standardization


Regional resource requirements are heavily influenced by local
practices 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


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


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


Contents
 Next Steps


Our payroll research includes hot topics, case studies and monthly
payroll metrics that can be used for decision support and business
cases…


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.

Contents
 Next Steps


Questions, Comments and Closing Comments…


Suite N500 Felicia Cheek
1117 Perimeter Center West
Atlanta, GA 30338 Senior Advisor – Global Time to Pay Advisory Program
Phone: +1 770 225 3600
Phone: + 1.770.703.7470
Martin House Mobile: +1.404.218.8666
5 Martin Lane
London EC4R 0DP fcheek@thehackettgroup.com
Phone: +44 207 398 9100 www.thehackettgroup.com

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Amsterdam, The Netherlands
Phone: +31 20 301 2210

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Sydney, NSW2000
Australia
Phone +61 2 9299 8830

2011 Global Payroll Metrics, Trends And Best Practices

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