This document discusses why companies are adopting global payroll systems. As companies have expanded globally over the past decade, they face new challenges in standardizing processes and ensuring compliance with different countries' tax laws. A global payroll system can help companies better navigate foreign government taxes, manage payroll across a large and growing number of countries, and support offshoring initiatives. While global payroll providers focus on technology and support, they rely on clients for strategic planning and implementation. A third-party global payroll advisor can help companies select the right provider, prepare for implementation, balance their general ledger, and account for cultural differences between regions.

1. Why Global Payroll?
Over the past decade the global economy has exploded
and many companies have expanded their global
operations, resulting in new performance demands and
challenges to standardize processes and efficiencies.
Multinational organizations are striving to come to terms
with enterprise-wide payroll. Companies have historically
employed decentralized models to pay employees in
different countries, but several key factors are emerging
to drive fresh, consolidated approaches to paying
employees. The decision to employ a global payroll
system can be driven by:
1. Foreign Government Taxes: Governments need
money and the primary source of it is taxes. Legislatures within
countries continuously change their tax laws to match political
circumstances and shifting budgets. Challenges in how you
structure, account for, and pay foreign taxes can have significant
compliance and financial impact on your company. Are there
complianceguaranteesinyourlocalcontracts?Probablynot.Audit
risks and fines can weigh heavily on your company’s risk posture
and financial performance. You may have 1,000 people in
France closely monitored by your attorney or accountant firms,
but what’s happening in Bosnia? Or Brazil? Many companies
don’t pay close enough attention until they’re in deep trouble.
Fines and penalties can add up quickly and end up costing as
much or more than your payroll costs in country.An optimal global
payroll provider pays attention−staying on top of legislative
changes, ensuring systems and processes remain compliant, and
providing contractual guarantees to support it.
2. The Environment Becomes Too Big: Payrollis
usually one of the top corporate expenses. Whether
multinational companies have grown organically or through
acquisition, the environment can expand to an unmanageable
size, with too many vendors and contracts to effectively navigate.
Different regions require different contracts using in-country pay-
roll services, leaving no clear line of sight into aggregate payroll.
It’s estimated that only 39% of companies have enterprise-wide
reporting capabilities, and the cross-regional data show that
an even smaller fraction of global companies have enterprise
reporting capabilities.With a single payroll vendor comes a single
contract, invoice, and reporting, providing a comprehensive view
of enterprise-wide payroll data.This allows HR and finance leaders
to analyze critical data, such as compensation rates, benefits,
and paid time off for the enterprise and provides for comparison
across multiple views of the organization.This ultimately leads to
better forecasting, an enhanced negotiating position with global
providers, increased reporting capabilities, and greater insight
into where that massive payroll expense is going.
3. Off-Shoring/COEs: Your company may also have
been given a corporate directive to build a shared service
model in a lower cost location or a Center of Excellence
where back office business processes are to be consolidated.
Poland, Hungary, India, Philippines, Costa Rica, and Mexico are
all examples of common locations for shared services because
of lower cost, educated, and multi-lingual labor forces. The
right Global Payroll Advisor will guide you to build a strategic,
long-term shared services model and help you manage the
integration with your internal teams and processes.They can also
provide industry expertise on how to best complement your global
payroll provider’s service center footprint.
SPENCER THOMAS GROUP
Aligning intelligence with business™
By Chris Klein, SVP, Global HCM Practice, Spencer Thomas Group
Global Payroll
and the Third-Party
Advisor Advantage
“The STG difference is realized
through our streamlined
operating costs, our nimble
team of exceptionally talented
STG-Sourced consultants, and
our deep knowledge of
global markets.”
To learn how Spencer Thomas Group can help improve your organization’s
multinational capabilities with our superior third-party global payroll
advisory services, please contact:
Chris Klein SVP, Global HCM Practice, Spencer Thomas Group
Phone: +1.941.465.9493 Chris.Klein@Spencer-Thomas.comSpencer-Thomas.com/GlobalPayrollPractice Sales@Spencer-Thomas.com

2. Third-Party Payroll
Advisor Advantages
Global payroll providers focus on offering leading
technology and ongoing service and support to help you
address your Human Capital Management in a way that
is compliant and value added. However, they rely heavily
on the customer for key up-front information to define an
effective global payroll strategy. The end game is only as
good as the pre-implementation strategy and planning.
Additionally,global payroll providers are typically not in the
business of transforming how you do things, but rather in
recreating existing paradigms and getting people paid as
quickly as possible. What more and more multinationals
want, in addition to execution, is true payroll transfor-
mation. There are several challenges that an experienced
third-party Global Payroll Advisor like STG can help you
navigate. Consider:
1. Selecting the Right Vendor for Your Company:
There are a handful of truly “global” payroll vendors that can
deliver optimal services for your company. If you’re just beginning,
whom do you choose? A third-party Global Payroll Advisor has
insight into vendor capability, can help you build the RFP, and
select the right vendor for your organization. STG understands
the strengths and weaknesses of different global payroll
providers and has your best interests in mind. We not only
know the providers, but also have assembled a team of
experienced industry specialiststhat have successfully worked
with the top performing vendors in over 100 countries.
2. Pre-Implementation: Global payroll companies some-
times over-promise what will be delivered, leading to expecta-
tion gaps (i.e., you don’t get what you thought you were getting).
You need a realistic assessment of your readiness to take on a
project that considers competing budgets, priorities and projects
to align your company for success, accompanied by a timeline
to achieve it. The customer’s role in successful implementation is
robust and requires significant commitment and resources.
Global payroll providers will request voluminous amounts of key
data to accurately implement a global payroll system and won’t
gather this information for you. You must talk with your current
payroll vendor in every single country you’re operating in. When
does the contract expire? What other “beyond payroll” services
might that vendor be providing to you? Is your contract even
written in English so you can read it? Another critical area that
is often overlooked is the harmonization of key data elements
within the organization. Most likely each country will have their
own earnings codes, deductions, departments, job titles, etc.
A global payroll project provides an excellent opportunity to
standardize these factors,resulting in easier reporting.Your global
payroll provider won’t do that for you, but an advisor like STG can
guide you on how to best proceed, provide in-country resources
to do the work, and advise on how long it will take, and how it
can impact timelines that seem aggressive, but may in fact be
unrealistic.
3. Balancing the General Ledger: Your company
needs to account for how much it pays on payroll, taxes, benefits,
etc. It must reconcile and report what was paid to whom, where,
and when. This information must be gathered from different
regions and is typically combined into multiple spreadsheets
with various formatting and can be a major time and resource
drain to consolidate. Nevertheless, this is information that’s
critical to rolling out a streamlined, standardized global solution
that results in ease of reporting so you can close your books on
a timely basis and with confidence. A third-party Global Payroll
Advisor like STG can help you assess your G/L needs early on
and determine how to best structure the implementation of a
new global payroll system.
4. Cultural Differences: What can be eye-opening is
the major impact that cultural differences have on a region’s
productivity. Extended summer vacations in Europe, holidays in
Latin America, and Chinese New Year in the APAC region are
just some examples that can influence employee availability
and productivity worldwide. Each region brings unique nuances
that may not be taken into account by a global payroll provider.
A good third-party Global Payroll Advisor has deep experience
working within each region and understands how to define
strategies to fully engage resources around these times and
events. If you make plans in a vacuum based on anything other
than actual cultural availability and tendencies, success may
be elusive.
Spencer-Thomas.com/GlobalPayrollPractice Sales@Spencer-Thomas.com