Part one of this series focused on recent developments in payroll administration in North America. Now we turn our attention to the global payroll market.
In 2010 and 2011, global payroll outsourcing opportunities continued to draw the attention of large, mid-size, and small clients alike. Last year, TPI released a filtering tool that evaluates a client’s global payroll needs with an articulated country-by-country strategy for rationalized outsourcing of payroll administration. We have since seen a very favorable response from global leaders in HR, procurement and shared services and are frequently engaged to help clients articulate their global payroll strategy and help build a business case for change.
Heritage payroll providers are taking the lead in multi-country payroll outsourcing, with ADP and NorthgateArinso having the broadest reach. These providers are investing significant resources in developing global payroll templates while expanding their offerings to include pre-configured templates featuring more sophisticated country-level payroll rules for countries with the payroll scale to deploy multi-client services. These global payroll platforms are generally designed for the most commonly served markets, including Western Europe, the U.S., Mexico, Brazil, and some Asia Pacific countries, including Australia, China, India, Japan, Hong Kong, Singapore and Thailand.
HRO providers take a different approach. Rather than developing a broad global template and reusable country configurations, they are focused on leveraging clients’ custom ERP by extending their payroll modules to the largest countries where payroll scale can generate savings or efficiencies to the client. Typically only a portion of a client’s population is concentrated in geographies that can implement such global ERP payroll solutions cost effectively. As a result, HRO providers usually punt in-country payroll services to third party solutions that they may agree to manage.
In recent years, the global payroll market has seen the emergence and growth of more service providers focused on the “tail end” of global client populations – the 20% of employees who are scattered across 80% of the globe. Some refer to these providers as “payroll aggregators” because the term is a fitting description of the primary value proposition.
There are payroll providers whose approach and technology are specifically designed to normalize data for consolidated interfaces and coordinate with in-country third party vendors. Patersons, SafeGuard World International, Celergo and others with a regional focus will directly serve clients who seek bundled payroll outsourcing for multiple countries. Providers like these have also become important partners for HRO and SaaS providers seeking to round out services and geographic coverage. Heritage providers are working to imbed such a model within their larger global offerings — ADP with StreamLine, Ceridian with exclusive in-country providers and NorthgateArinso with its BDO and agoHRa relationships.
The global payroll outsourcing industry, as a whole, is facing a critical challenge. We must ensure that global payroll outsourcing can create a track record of success. Clients continue to need assistance in defining the scope that is “right-sized” for each country before wildly pursuing a whole world’s worth of payroll. And finally, knowledge of the market to target the appropriate providers and articulate actionable business cases will help to create an awareness of the value in strategic sourcing of payroll across the globe.
About the authorWith more than 25 years of industry and consulting experience, Julie is an invaluable advisor for enterprises needing to evaluate and assess alternatives for multi-process HR service delivery, including workforce administration, payroll, benefits, compensation, recruiting, technology, learning, and talent management. Julie leads complex global HR assessments and transactions around the world. Prior to joining ISG, Julie worked for nearly a decade as an independent consultant, providing market research, vendor assessments, systems testing and implementation consulting to a broad community of benefits administration vendors and human resources departments. Julie started her career in human resources outsourcing, establishing shared service centers for a national benefits consulting and administration firm. She is a well-published thought leader in her field.
