The state of global payroll: facts, fears, and the future

State of Global PayrollFacts, Fears, and the Future

Karen Beaman, Managing DirectorTeilasa Global LLC

HR Tech World Congress, LondonMarch 15-16, 2016

With Support by:

About Karen Beaman

State of Global Payroll - Facts, Fears, and the Future

HR Tech World Congress, London, March 20162

• Managing Director, Teilasa Global, Research

and Advisory Services

• Founder and Lead Researcher for Global

Payroll Benchmarking Survey.

• Founder and CEO of Jeitosa Group

International, acquired by Mercer in 2014.

• 30 years of HR, Payroll and Technology

strategy and implementation expertise.

• Fluent in English, German, French, and

Spanish.

Japanese Proverb



“Strategy without action is a daydream;

Action without strategy is a nightmare."

Agenda

• Fears• Common Fictions• Myths Dispelled

• Facts• Organisational Metrics• People Metrics• Process Metrics• Technology Metrics• Cost Metrics• Operational Metrics

• Future



• Global Payroll is not for the faint of heart.True – Payroll implementations are lengthy, stressful, error-prone and complex.

• Outsourcing eliminates jobs.False – Outsourcing “changes” jobs. Strategic organisations are not looking for headcount reductions when outsourcing – they are looking for effectiveness.

• Outsourcing erodes customer service. True/False – Call Centres often have customer services issues. However, if well implemented, outsourcing can provide greater levels of service and efficiency.

• Outsourcing reduces your own inhouse expertise.True/False – It may reduce expertise in some areas, but it increases it in others.



Global Payroll Fears & Fictions

Common Global Payroll Fears

• Payroll can never be global.While local legislation and regulation play a large role, front-end and back-end payroll processes can be streamlined, standardized, and regionalized/globalized.

• Payroll can never be strategic.Payroll has the opportunity to become strategic by providing a wealth of leading metrics on the organisation’s greatest asset and (generally) largest expense.

• All outsourcing vendors offer basically the same services.Outsourcing models vary greatly not only in the type of services provided but in underlying technology architecture – which can help or hinder the function.

• It’s not possible to make the business case for global payroll.This is a case of “size matters” – Larger organisations can leverage scale.



Global Payroll Fears & Fictions

Common Global Payroll Fictions



• Originally conceived, sponsored and funded by the ADP Research Institute to demonstrate thought-leadership in the field

• Study design, research process, data collection, analysis and model development by Jeitosa

• Purchased by Mercer to be integrated with other Mercer Information Services research offerings

• Assigned to APA and GPMI (Global Payroll Management Institute) to become their flagship payroll benchmarking process

Survey Background

Research Development & Evolution

• Four years of ground-breaking research on global payroll strategies and operational metrics, representing over • 500 organisations• 27 countries• 4 continents

• Two surveys in one: • Global Payroll Strategy Survey – for strategic organisational plans and goals• Country Operations Survey – for detailed tactical country operational metrics

• Three reporting options:• FREE Executive Overview• Detailed Summary Report• Personalised Benchmarking Report



Survey Background

Research Overview

2015 Survey Demographics

Participants by Headquarters Region

35%

0%

45%

20%

2013

48%

10%

31%

11%

2014

17%

46%

24%

13%

2015

EMEA

NOAM

APAC

CALA

n = 107 n = 158 n = 185




Participants by Organisation Size

39%

39%

22%

2013

40%

45%

15%

2014

37%

44%

19%

2015

Small

Medium

Large

n = 107 n = 158 n = 185



NOTE: Small < 500 employees; Large > 5,000 employees


Participants by Industry Sector

28%

19%25%

27%

1%

2013

53%

13%

14%

19%

1%

2014

40%

16%8%

23%

13%

2015

Industrials

Services

Financials

Technology

Other

n = 107 n = 158 n = 185



Survey Framework

Global Business Model

• Payroll Organisation

• Payroll Talent

• Payroll Processes

• Payroll Technology



2015 Findings: Organisational Metrics

Payroll Reporting to HR – Year over Year

76%

83%

68%

85%

73%

56%

43%

71%

67%

56%

GLOBAL

EMEA

NOAM

APAC

CALA

20152014



Increasingly, the payroll function is moving from Finance to report to Human Resources, demonstrating the change to a more strategic and people-oriented focus.n = 177


Payroll Governance Level



n = 172

64%

54%

68%

60%

68%

22%

14%

20%

31%

26%

14%

32%

12%

9%

6%

GLOBAL

EMEA

NOAM

APAC

CALA

Local

Regional

Global

Most organisations have a local governance model in place for payroll.


Payroll Governance Type



n = 172

6%

7%

4%

5%

19%

28%

34%

31%

26%

14%

66%

59%

65%

69%

67%

GLOBAL

EMEA

NOAM

APAC

CALA

Informal

Partial

Formal

Most organisations have a formal governance structure in place for payroll.


Payroll Processing Location



n = 175

57%

70%

39%

63%

95%

20%

17%

18%

33%

5%

4%

10%

2%

2%

19%

3%

41%

2%

GLOBAL

EMEA

NOAM

APAC

CALA

Local Office

Regional SS

Global SS

HQ Office

While most payroll is processed locally, there is a growing number of organisations processing payroll from a regional shared services center.

2015 Findings: Talent Metrics

Years of Work Experience / Education / Tenure

16.9

13.6

8.9

8.3

Work Experience

4.8

3.15.0

4.7

Higher Education

10.5

8.4

4.8

6.4

Organisational Tenure

EMEA

NOAM

APAC

CALA

n = 107 n = 158 n = 185




Payroll Staff Employee Satisfaction



n = 138

1%

2%

3%

25%

16%

20%

23%

47%

39%

28%

35%

50%

42%

35%

56%

43%

24%

11%

GLOBAL

EMEA

NOAM

APAC

CALA

MostlyDissatisfied

Satisfied

MostlySatisfied

HighlySatisfied

Across the global, payroll staff appear to be quite satisfied with their role as payroll professionals.


Key Global Payroll Competencies



PROCESS MINDSET

CONTINUOUS IMPROVEMENT

BUSINESS ACUMEN

LEVEL 2:

PROCESS21%

SYSTEMS THINKING

CROSS-CULTURAL KNOWLEDGE

RESULTS-ORIENTED

GLOBAL MINDSET

LEADING & INSPIRING

STRATEGIC VISIONING

LEVEL 3:

STRATEGIC5%

STRATEGIC THINKING

GLOBAL LITERACY

PERFORMANCE-ORIENTED

CLERICAL MINDSET

ATTENTION TO DETAIL

CUSTOMER-SERVICE

LEVEL 1:

OPERATIONAL74%

OPERATIONAL THINKING

LOCAL COUNTRY EXPERTISE

TASK-ORIENTED

n = 57

There is a dire need for more Process and Strategic competencies across the payroll team to enhance overall organisational performance.

2015 Findings: Process Metrics

Payroll Processing Standards



6%

1%

12%

19%

52%

70%

38%

58%

67%

21%

10%

27%

21%

14%

5%

7%

5%

7%

16%

13%

29%

2%

GLOBAL

EMEA

NOAM

APAC

CALA

Miminal

Local

Regional

Emerging

Global

Most payroll processes are standardized locally, however, there is a significant number of organisations achieving regional and global processing standards for payroll.n = 176


Payroll Metrics Framework

• Leading Indicators

• Predictive Analytics

• Root Cause Analysis

• Custom Payroll Scorecard

• Broad Set of KPIs Defined

• Multi-Dimensional Scorecard



• Lagging Indicators

• Compliance-related

• Vendor-supplied

Operational Framework Strategic Framework


Payroll Metrics Framework 2015



6%

7%

7%

0%

0%

76%

81%

78%

77%

43%

18%

12%

15%

23%

57%

GLOBAL

EMEA

NOAM

APAC

CALA

Other

Operational

Strategic

The vast majority of organisations have extensive operational metrics for payroll; only 10-20% have developed strategic metrics with leading and predictive indicators.n = 154

Note: CALA has small number of respondents

with two very strategic organisations

2015 Findings: Technology Metrics

Technology Vendor Models



Most organisations leverage a hybrid approach to payroll technology: most typical is Adapter model for large countries, Outsourcer/Aggregator or mid-size countries,

Accountancies or local providers for small countries.


Technology Vendor Models 2015



35%

22%

25%

54%

60%

16%

11%

23%

7%

7%

49%

67%

52%

39%

33%

GLOBAL

EMEA

NOAM

APAC

CALA

Local/RegionalProvider

Global ERPSoftwareVendor

GlobalAggregator/Outsourcer

n = 122

Global outsourcing payroll is most mature in EMEA and NOAM, whereas use of local and regional providers is more common in APAC and CALA.


Payroll System Integration

• Integration between HR and Payroll systems remains one of the least developed areas in HR/Payroll technology.

• Five levels of integration:1. None – No integration – all double data entry

2. Manual – Manual process – FTP/File Uploads

3. Basic – Basic one-way integration for key fields

4. Full – Full two-way integration for all shared fields

5. One System – No integration required




Integration Between Payroll & HR



8%

4%

8%

3%

19%

41%

55%

25%

59%

47%

12%

10%

13%

11%

14%

18%

17%

22%

16%

10%

21%

14%

32%

11%

10%

GLOBAL

EMEA

NOAM

APAC

CALA

None

Manual

Basic

Full

One System

n = 165

While most organisations have integrated their HR and payroll systems, the large majority of integrations are manual FTP file uploads.


Integration Between Payroll & Finance



5%

3%

5%

6%

4%

57%

63%

53%

61%

57%

11%

11%

10%

9%

19%

16%

19%

22%

6%

10%

11%

4%

10%

18%

10%

GLOBAL

EMEA

NOAM

APAC

CALA

None

Manual

Basic

Full

One System

n = 158

Manual FTP File Uploads are an even more common method when integrating Payroll and Finance systems.

2015 Findings: Cost Metrics

Payroll Cost Models

• PEPY – Per Employee Per Year Cost ModelVendor PEPY = Total Vendor Fees / Vendor-supported Employees

Staff PEPY = Total Staff Costs / Total Employee Workforce

• FTE Ratio – Ratio of Payroll Staff to Employee Workforce SupportedFTE Staff Ratio = Total Staff Costs / Total Employee Workforce

• PPS – Per Pay Slip Cost ModelVendor PPS = Total Vendor Fees / Total Vendor Payments

Staff PPS = Total Staff Costs / Total Vendor Payments




PEPY Payroll Costs by ModelALL GLOBAL EMEA NOAM APAC CALA

Vendor Costs $94 $189 $86 $59 $81

Staff Costs $105 $187 $111 $62 $34

TOTAL $194 $341 $193 $116 $116

INHOUSE GLOBAL EMEA NOAM APAC CALA

Vendor Costs $74 $154 $83 $38 $34

Staff Costs $111 $231 $99 $112 $28

TOTAL $201 $397 $180 $170 $19

OUTSOURCED GLOBAL EMEA NOAM APAC CALA

Vendor Costs $120 $241 $92 $95 $136

Staff Costs $114 $175 $134 $24 $38

TOTAL $218 $166 $218 $75 $166



n = 115

NOTE: Totals do not add up due to

unequal number of responses


PEPY Payroll Costs by SizeSMALL GLOBAL EMEA NOAM APAC CALA

Vendor Costs $127 $168 $142 $92 $94

Staff Costs $163 $224 $144 $137 $18

TOTAL $296 $390 $308 $194 $112

MEDIUM GLOBAL EMEA NOAM APAC CALA

Vendor Costs $85 $199 $66 $22 $96

Staff Costs $101 $174 $145 $49 $35

TOTAL $191 $341 $191 $94 $116

LARGE GLOBAL EMEA NOAM APAC CALA

Vendor Costs $56 $205 $36 $45 $57

Staff Costs $45 $54 $53 $22 $33

TOTAL $79 $144 $80 $51 $116

NOTE: Totals do not add up due to

unequal number of responses



n = 115

ALL GLOBAL EMEA NOAM APAC CALA

Overall 887 538 1057 903 447

Insource 897 349 1253 551 383

Hybrid 1418 930 2100 1002 765

Outsource 664 585 538 1261 421

Small 445 443 474 434 107

Medium 671 516 687 981 436

Large 2133 1550 2512 1618 848




Employee to Payroll FTE Ratios

Hybrid sourcing models (combined inhouse/outsourced solutions) and large organisations (>10,000 employees) have the highest ratios of employees to payroll staff (FTEs).n = 135

2015 Findings: Operational Metrics

Payroll Quality Metrics



ALL ORGANIZATIONS GLOBAL EMEA NOAM APAC CALA

Payroll Accuracy Rate 96.68% 98.81% 96.10% 95.42% 98.25%

Off-Cycle Payments Percent 2.76% 4.91% 1.83% 2.18% 5.62%

Tax Corrections Percent 1.32% 17.99% 4.82% 1.17% n/a

Over-Payment Reimbursement 68.33% 73.24% 75.40% 54.42% 43.71%

LARGE ORGANIZATIONS GLOBAL EMEA NOAM APAC CALA

Payroll Accuracy Rate 98.96% 99.50% 98.87% 99.25% 98.67%

Off-Cycle Payments Percent 3.10% 2.11% 2.73% n/a 3.38%

Tax Corrections Percent 0.99% 0.12% 0.49% 1.64% n/a

Over-Payment Reimbursement 72.26% n/a 75.76% 66.67% 50.50%

n = 145

NOTE: Large Organisations > 10,000 employees

2015 Findings: Operational Metrics

Employee Online Access Metrics



ALL ORGANIZATIONS GLOBAL EMEA NOAM APAC CALA

Employee Self-Service Utilization 76.51% 76.88% 81.90% 79.57% 47.41%

Manager Self-Service Utilization 77.54% 79.01% 79.00% 80.82% 63.00%

Manager Workflow Utilization 62.59% 52.41% 67.51% 65.97% 52.06%

LARGE ORGANIZATIONS GLOBAL EMEA NOAM APAC CALA

Employee Self-Service Utilization 79.29% 56.67% 92.12% 77.43% 45.00%

Manager Self-Service Utilization 85.48% 95.00% 86.59% 81.86% 80.00%

Manager Workflow Utilization 80.19% 71.25% 93.00% 46.25% 75.00%

NOTE: Large Organisations > 10,000 employees

North America -- the USA and Canada -- lead the way in providing online employee and manager access to payroll information, thereby improving overall payroll efficiency and effectiveness.

n = 145

The Future

Organisational Projections



• Movement of Payroll from reporting to Finance to Human Resources, placing more strategic focus on payroll as a critical employee function.

• Growth in Regional Shared Services and Global Business Services to provide processing efficiencies for payroll, while ensuring high levels of employee service.

The Future

Talent Projections



• Little to no growth in number of payroll staff; continued focus on automation to keep down headcount.

• Drive for higher payroll staff to employee headcount ratios to drive down the personnel costs of managing payroll.

• Increased focus on recruiting and developing payroll staff with process improvement and strategic competencies to enhance the operations of the payroll function.

The Future

Process Projections



• Movement toward greater regional (and even global) standards for payroll processing, particularly front-end data collection and back-end reconciliation and audit processes.

• Increased focus on more strategic payroll metrics, such as correlating factors such as payroll staff overtime with accuracy and overpayment rates to predict outcomes.

The Future

Technology Projections



• Continued use of payroll outsourcing with more focus on regional and global aggregators and outsourcers to support greater standardization.

• Growth in employee and manager self-service, workflow, and mobile/social, smart phone capabilities to better support the employee workforce.

• Growth in more automated integration between payroll and other key systems, specifically HR and Finance, to improve data integrity and free up staff to focus on more strategic activities.



Questions?

Thank You!

Contact Information:

[email protected]

www.karenbeaman.com

+1.415.690.5465

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mailto:[email protected]

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The state of global payroll: facts, fears, and the future