EY Global Payroll Survey
New Delhi, 18 May 2013: Majority of the multinationals (85%) want improvement in their current payroll practices, yet they are skeptical about whether payroll providers can deliver a comprehensive global solution, as per Ernst & Young survey, Global Payroll: Myth or Reality. Only one in five of the respondents (22%) currently have a global payroll model, but this applies mainly to organisations that operate in the mature markets and therefore are more likely to be able to adopt a truly consistent model. Further, out of the 161 respondents comprising of global senior payroll leaders, 68 are potentially considering expansion into new markets within the next year. Only 11% of these are in the process of actively pursuing a global payroll solution implementation as part of their expansion, whereas majority with 41% have not begun considerations at all.
Seven out of 10 (70%) of the survey respondents are not confident that a global vendor currently exists that can provide a truly global payroll solution. They identified a wide range of issues as potential hurdles, from total cost of the overall solution (16%) to the vendor understanding and meeting specific requirements (14%) and legal and regulatory requirements (12%). As a result, nearly half (41%) are not considering adjusting their payroll administration model, even though a third (35%) plan to expand into new global markets.
The EY survey reveals that incorrect tax withholding (24%) is the most frequent payroll error, suggesting that the existing payroll solutions are unable to deal with increasing complexity relating to legal or regulatory requirements and therefore remain compliant. Underpayments and overpayments account for approximately 30% of payroll errors, which also suggests that basic errors in payroll processing remain prevalent across all payroll models. The risks associated with payroll errors are threefold: the tax and regulatory implications are costly and time consuming; the perceptions and confidence of employees decrease with paycheck errors; and finally, the time and expense of correcting errors creates a significant downstream impact to the general ledger.
Sonu Iyer, Tax Partner & National Leader, Human Capital services, Ernst & Young says, “Employee satisfaction spearheads business strategy in present times. Pay cheque being the biggest worry for any employee, a business can conquer this worry and ensure employee satisfaction, if its payroll function can win the trust of its employees. That is the reason it is necessary to make the payroll function a completely flawless, adaptive and efficient function. With the volatility in tax laws and tax procedures in India it is very important to have a dynamic payroll function that is quick to respond to changes, and continues to win the trust of employees. So, to be a successful business it is necessary to embrace the success of payroll function.”
Few respondents, just 12%, operate using a fully outsourced model with a single outsource provider for global payroll services, while about 28% rely solely on a complete in-house delivery model. A far larger share of the respondents, 60%, uses a hybrid approach, choosing to outsource certain payroll processes while maintaining some in-house ownership. The study also reveals that consistency in global payroll policy is paramount in having an effective payroll processing model.
Further, more than half (58%) of all respondents use a knowledge-based database or tracking system to facilitate the resolution of payroll issues, while 42% of respondents currently do not have this type of system in place. Also, the legal and regulatory requirements represent the greatest challenge to implementing a global system. This suggests that organisations lack confidence in the ability of technology to stay abreast of the numerous tax and compliance changes globally and that they believe an outsourcing provider is more likely to keep pace as this is typically their core business.
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