Multinationals failing to adopt transformative payroll techniques to compete and expand in the global marketplace
New York, 30 April 2013
The majority of multinational companies (85%) want improvement in their current payroll practices, yet they are skeptical about whether payroll providers can deliver a comprehensive global solution, according to EY’s Global Payroll: Myth or Reality survey of 161 global senior payroll leaders.
Survey respondents showed little confidence that a global vendor with a truly global payroll solution even exists. In fact, 78% of US respondents do not believe that there is a single payroll vendor that could support them on all their global payroll needs. Global respondents 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%).
Only one in five of all respondents (22%) currently have a global payroll model, but this applies mainly to organizations that operate in mature markets and therefore are more likely to be able to adopt a truly consistent model.
Jeff Brown, Principal, Human Capital, Ernst & Young LLP, says: “Accepting the status quo in payroll solutions may have worked in the past, but it is no longer adequate for companies that need to compete and expand in the global marketplace. Organizations need global payroll data to make important business decisions. Managers can build the business case based on risk and compliance to improve payroll operations, but access to the payroll data is proving to be valuable. It’s time for organizations to begin viewing payroll as a critical business process that requires a global solution with local flexibility.”
Seeking a different approach, 56% of US respondents are planning to change their payroll vendor in the next 12 months. Global respondents concluded the top three criteria for selecting a new global payroll vendor are cost (19%), geographical/global capability (18%) and technology platform (10%).
More than half (51%) of US companies surveyed were planning to expand into new markets in the next 12 months, yet only 24% of US respondents were actively planning or implementing payroll solutions to enable these expansions.
“Companies should consider the potential hurdles when payroll planning is left off the table,” says Elizebeth Varghese, leader of Ernst & Young LLP’s HR Performance Improvement group. “Companies often underestimate the complexity and needs of payroll administration, rushing to manage risks at the last minute. Despite valiant efforts, we often see manual, risky and faulty processes in countries where expansion was not planned well in advance.”
The survey also reveals that:
- Just 15% of all respondents believe that the effectiveness of their current payroll policies and practices are excellent and meeting best practice
- More than half of all respondents (54%) regard their current payroll setup as good, with room for improvement
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This news release has been issued by Ernst & Young LLP, member firm of Ernst & Young Global Limited serving clients in the US.