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Handling vast amounts of data in payroll is complex, especially when payroll leaders in MNCs have to handle systems across different geographies. Akankasha Dewan speaks with Anjana Harish, APAC payroll and HR operations manager at Sabre Holdings, on the topic.
The global payroll landscape has continued to change dramatically over the past 10 years. New providers, technology, vendor service delivery models and global capabilities have made payroll administration possible across complex global organisations.
However, research has suggested many businesses responded to the initial wave of expansions and acquisitions by working with in-country payroll providers as needed – but with little or no connection established with each company’s individual requirements.
This has led to a challenging environment for many companies because of the lack of vendor governance, compliance, process standardisation and reporting.
“Initially when we started, we had outsourced to different vendors, but all these vendors were local ones – they were experts in their own countries,” recounts Anjana Harish, APAC payroll and HR operations manager at Sabre Holdings.
Her payroll team in Singapore was not getting full support from these vendors and it was not being provided with the advice or specific controls her company required.
“For example, this vendor was handling many clients in a country and when making statutory submissions, they did it for all companies collectively. So they were not able to give us receipts for individual payments that they had made. And we were not able to track if this vendor was making the payment on time or not.
“That was one big problem for us and I was feeling very uncomfortable.”
“That is why we looked for a global vendor who is in Asia Pacific, who could handle many countries while having local expertise in all these countries,” she says, adding a streamlined process significantly aids in the process of making and tracking payments across countries.
“We don’t have finance or HR departments in all countries, so we need to make sure vendors in individual countries are capable of handling everything. These factors were taken into consideration when choosing our outsourced vendor.”
The multinational company currently outsources its payroll services to ADP Streamline, which is a global vendor. After Sabre went live with it in the region, Harish’s team also employed it for other countries in Europe, the Middle East, Africa and in the Americas.
“The biggest advantage of going with ADP is management of all these different vendors. They do not process payroll directly, they outsource it to different vendors in different countries,” she says.
“The advantage is that you don’t have to deal with these individual vendors yourself, you can handle it centrally through ADP. This makes the process much more streamlined.”
Another advantage Harish identifies is how ADP’s vendors use local software in each country, instead of adopting a global software which is expensive and not so flexible.
“For instance, in Singapore, there is a change in the way income tax is reported. All of ADP’s vendors are aware of this change, and are able to change their systems to suit that. I wanted to take advantage of that system, and that is why we went with them.”
Organisations need to pay employees in a timely, accurate and compliant manner. How do multinationals decide which approach to take, especially if entering new or emerging markets?
Deciding on an outsourced or in-house model
According to the Global Payroll Survey conducted by Ernst & Young in April 2013, only 12% of respondents operate using a fully outsourced model with a single outsource provider for global payroll services.
About 28% relied solely on a complete in-house delivery model. A far larger share of the respondents, 60%, used a hybrid approach, choosing to outsource certain payroll processes while maintaining some in-house ownership.
The fact is organisations, both public and private, need to pay their employees in a timely, accurate and compliant manner. Thus a question remains: how do multinational organisations decide which approach to take, especially when entering new or emerging markets?
“At Sabre, we do not have an HR department in all the countries – we are centrally located here and we need people to do remittances in local countries, so outsourcing is the best answer,” Harish says.
She admits that while in-house ownership of payroll systems does have its own advantages, the main one being flexibility, she “doesn’t vouch for it so much”.
With in-house payroll systems, she says, there is less of a strict adherence to following the timelines of the process – a flexibility which is not usually encouraged considering timeliness is an integral component of the payroll process.
“For those companies who are planning to have an in-house payroll system, flexibility should not shadow controls. So at any point of time, we should be able to see who has made changes to what and to ensure there is a backup document to everything.”
Additionally, the commonly cited lack of manpower in payroll functions of organisations deters many companies from setting up an in-house payroll system.
“With attrition rates being so high (in the payroll department), it’s a problem when you train one employee on the system and he or she leaves and then you need to quickly find and train another. It becomes a mess.”
Not only are such problems easily avoided with outsourcing payroll services, companies also get an upper-hand in keeping track of legal and technical changes made to payroll processes.
“We get updates on employment laws, statutory changes, etc, from our outsourced vendors – which is a very big advantage of having outsourced vendors who are locally present and who are aware of the changes.”
Focusing on the right services
Choosing such vendors is easier said than done though – considering the range of providers and services available.
After surveying companies in 16 countries across five continents, the Ernst & Young survey found just 15% of respondents believed that the effectiveness of their current payroll policies and practices could be considered excellent and meeting best-practices. The majority of respondents (54%) regarded their current situation as good, with room for improvement.
Clearly more can be done to improve the efficiency of payroll practices in companies, which all boils down to keeping the unique characteristics of each company in mind, according to Harish.
“There are a lot of outsourced vendors in the market. We have to see what is our requirement.
“If you are looking at only one country, you need to have someone who is specialised in that one country. But now, with big multinational corporations in multiple countries, we have to look at those vendors which are able to give us consolidated reporting, which goes a long way. Additionally, they should have good resources in the different countries.”
For example, all companies based in the US should employ vendors which are SOX (Sarbanes-Oxley) compliant, she adds.
“If you’re looking for a multinational vendor, it is good to have someone who is SOX compliant because then it ensures your vendor is of quality standard, and you can be rest assured your payroll is done correctly.”
Delegating tasks and ensuring that set processes are set in place in organisations is also integral if payroll processes are to be improved.
“In Sabre, we split countries among the entire payroll team, so that one person doesn’t handle more than 300 employees. We divide our responsibilities in terms of headcount.”
RETURN TO FEATURE: Changing the perception of payroll