HR and Payroll Harmonization: Fundamental Strength to Business Agility

HR.PAYROLL.BENEFITS.

EXPERT OPINION Q&A

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International expansion is an exciting time for multinational businesses, but managing the HR challenges that arise with it can become central to the organization’s success or failure. Many organizations find themselves in a situation where a lack of standardized and integrated HR and payroll has become a business critical problem affecting their daily operations. What are the common challenges and why is HR and Payroll harmonization so important for international organizations?

BY MICHAEL VAN DEN BRAND MANAGING DIRECTOR, ADP STREAMLINE

HR and Payroll Harmonization: Fundamental Strength to Business Agility

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MULTINATIONAL ORGANIZATIONS WORK IN A COMPLEX ENVIRONMENT WHERE DEPARTMENTS OFTEN BECOME DISCONNECTED. WHY IS IT IMPORTANT FOR HR AND PAYROLL TO WORK TOGETHER?

T he roles of HR and payroll professionals have evolved over the past decade, and both have established their position as

business critical elements. Ultimately HR and payroll share the same goal – to support the people within the organization. It could be said that HR is a company’s backbone, with payroll being the key way to recognize its most important asset. In order to support their employees, HR must look to drive these two functions towards a more integrated model.

A harmonized HR and payroll operation is a cornerstone of managing Human Capital, enabling the organization to become more productive and meet its strategic business goals. By standardizing, automating and outsourcing transactional and administrative tasks, HR and payroll can become more strategic and focused on value-adding activities such as employee engagement.

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HOW CAN ORGANIZATIONS BETTER UNDERSTAND THE COST IMPLICATIONS OF THEIR WORKFORCE?

W hen making strategic decisions, organizations need to consider the Total Cost of Ownership (TCO) and how

it relates to their workforce. It is important to combine the actual spending on employees plus the management of those employees, as focusing solely on the cost of salaries and benefits can be misleading and result in poor business decisions. Companies that have a successful Human Capital strategy in place can reduce their TCO by as much as 26%i, while enjoying the benefits of higher retention rates, employee engagement and more efficient HR systems and processes.

Return on Investment (ROI) is a serious consideration for HR and payroll, and Human Capital Management (HCM) strategies need to ensure it is maximized by making both functions

more agile. Streamlining payroll is often the most efficient way to achieve cost efficiencies across the HR sphere. When this function isn’t structured correctly, payroll costs combined with personnel and benefits administration could account for up to 35% of total HR costsii.

On top of this comes the required technology infrastructure, which can become particularly expensive when a company operates in multiple locations across the world. However, in order to reap the benefits of standardization and automation, HR and payroll must work in harmony. Working with a single supplier and implementing a Human Capital Management system will help organizations move forward on this journey and further reduce vendor technology costs.

WHAT ARE SOME OF THE COMMON CHALLENGES THAT BUSINESSES FACE WHEN THEY EXPAND INTERNATIONALLY?

I nternational expansion is always a big step for any business, and can often bring about the challenges of global human capital

management. HR’s focus is often on finding and onboarding staff, which can draw its attention away from long-term planning or detailed thinking. Even more so, organizations are often overwhelmed by the new local employment laws, taxation, and payroll practices, and failure to comply with these policies could possess a significant business risk.

For example, the complexity of international payroll can slow down the pace of expanding into new lucrative markets, thus limiting growth opportunities. Instead of trying to understand and manage the volume of changes when adjusting to different markets, HR’s attention should be on more value-adding activities such as the management of human

capital. By working with a global HCM partner with local expertise, companies can transfer the responsibilities and risks to a third party provider. This will not only ensure compliance across all markets, but will make the expansion process smoother, faster and more efficient

Even though more than two-thirds of HR leaders desire unification and coordination in payroll and HR systems worldwideiii, organizations often fail to extend past their local systems and implement a global HR and payroll system as part of the global expansion. Consequently, these local systems are often disconnected, redundant or no longer meet the growing organization’s requirements. The challenges and barriers to succeed internationally often come down to standardization, and a lack of an integrated Human Capital Management system can fast become a problem.

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Referencesi NelsonHall (2014) Targeting Payroll Outsourcing ii ADP (2013) ‘Payroll at the heart of HR Outsourcing’iii ADP (2015) Harnessing Big Data: The Human Capital Management Journey

to Achieving Business Growth

HOW CAN STANDARDIZED PROCESSES HELP BUSINESSES ADAPT TO CHANGES IN THE BUSINESS WORLD?

H armonizing HR and payroll presents a significant opportunity to make processes more efficient, cost-effective

and streamlined. When all country operations are covered by the same system, processes and data, it’s easier for teams to be more aligned and share best practice. This also enables greater transparency and ensures that everyone speaks the same language, resulting in improved reporting and greater accountability.

When choosing a Human Capital Management provider, organizations should always be one step ahead. As the organization grows and market conditions change, the chosen solution must be able to respond to the demands of Human Capital resource management. Even though the main purpose of Human Capital Management systems should be to support the business,

inflexible processes can limit the organization’s performance and agility. It is therefore important that the service offering and operating models can work with all sizes and types of organizations, across different geographies.

Despite the numerous benefits, implementing a global HCM solution may seem like an enormous task and a step that many international companies are hesitant to take. In these situations it’s often easier to move all regions to the single platform, meaning that team will feel the impact only once. Working with an experienced HCM partner can ensure that the shift goes smoothly, enabling HR to focus on the internal change management process and making sure that workforce is fully engaged.

HOW CAN HR BETTER USE THEIR DATA?

T he value of having all data accessible to HR, leadership, managers and employees should not be underestimated. Disparate

systems are rarely able to meet wider HR and business requirements, and organizations may find themselves in an alarming situation where there is lots of local information but no global visibility. The resources required to manage complex information add to the total cost, while also impacting the organization’s ability to make accurate and timely business decisions. Working with several vendors and fragmented systems not only adds to the administrative burden and increases costs, but also impacts the organization’s ability to make accurate and timely business decisions.

By implementing an integrated HCM solution, organizations are not only able to overcome these challenges but become more strategic in Human Capital and talent management. HR professionals are under constant pressure to demonstrate their value to the organization, and a standardized system enables them to have consistent key performance indicators across the international organization. However, the benefits extend well beyond the HR function, as a single system gives organizations a global view of their workforce and the tools to make fully informed decisions.

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