What makes a great global payroll provider, and why payroll will never be easy

21 December 2023
For decades, global payroll providers have struggled to keep up with client demands, from maintaining compliance in all countries of operation to consolidating data across jurisdictions, all while delivering payslips accurately and on time.

Those client demands in many ways have remained the same, and some — such as the need to comply with all applicable payroll-related rules and achieve cost efficiencies — have become even more pressing amid global economic headwinds, heightened regulatory scrutiny and other realities.

But client demands are also changing. In its most recent report on multi-country payroll solutions, the Everest Group points out that organisations “are now seeking assistance beyond just conventional payroll management.” Leading payroll providers have responded by offering flexible payroll solutions that involve sophisticated platforms and global compliance expertise. Some enhance their payroll offering by providing other services, such as legal entity management, corporate compliance, HR advice and more.

To understand these evolving trends, and to put the Everest Group’s latest multi-country payroll assessment in context, we interviewed Allan Harness, Vistra’s director of global payroll services. Based in London, Harness has held leadership roles at TMF and Ceridian, among other organisations. He joined Vistra in 2022.

You’ve been in the business of providing global payroll services and technology for three decades. What do you see as the most important changes in the industry during that time?

I’ll start with the obvious, which is technology. If you provided multinational payroll services 30 years ago, you had limited visibility into local activity and were dependent on spreadsheets, emails and often the phone. Pay day was always a chaotic, anxious time. No matter how hard you tried to ensure success, you were waiting for the phone to ring or were actually trying to understand and solve problems unfolding in one or more countries. It was not a comfortable experience.

Since then, we’ve seen the introduction of notable technologies. Middleware, for example, has significantly improved global governance by integrating a global payroll provider’s platform with a client’s own systems. It greatly enhances the visibility of payroll processes and employee data and provides greater controls around approval and permissions.

Sophisticated middleware allows a payroll provider to integrate many critical systems with payroll. Data can be captured from areas such as HCMs [human capital management systems], time and absence systems, benefits providers and so on. The information can be captured from countries around the world and integrated on a single platform, rather than on multiple local payroll systems. Outputs from the middleware are also providing finance data and payslips through self-service portals, creating flexibility and efficiencies.

This has been an evolution. When middleware was first introduced, it was purely a technology solution, and the underlying services typically were delivered by a myriad of third-party sub-contractors. This was the so-called aggregator model, which solved many of the visibility problems, but not the service-quality issues. Multinational organisations — that is, the clients — were often frustrated by being prevented from talking to the local payroll experts because the global payroll was delivered through multiple vendors by means of a convoluted contract model.

Those multinationals are now demanding more enhanced service models, which may include access to other services such as accounting, CoSec [company secretarial services] and corporate compliance. They are also looking to support the evolving demands of their own employees. The more sophisticated payroll providers are able to support earned wage access, employee wellness programs and other emerging trends that affect payroll.

The Everest Group recently released its Multi-country Payroll (MCP) Solutions PEAK Matrix® Assessment 2023, which assesses 27 payroll providers “based on their overall capability and market impact across different global services markets.” What stood out to you in this year’s assessment?

For me, the most astonishing change is the payroll provider landscape. Many providers that appear in the Matrix today were not there even five years ago. Yes, there are the traditional global providers in the assessment, but many have come and gone, often with a bang! Choosing a payroll provider nowadays can be so difficult, in part because you must ask the question: Who will be around in five years’ time? Many of the current providers running hard at growth with short-term strategies may not be.

The latest assessment recognised Vistra’s in-house payroll delivery. Aside from cutting out the middleman, what are some of the benefits of providing in-house multi-country payroll, as distinct from sub-contracting payroll?

Having your own local payroll teams is gold in our industry. They offer so many benefits. There’s no doubt, for example, that global payroll providers are standardising their processes to create efficiencies and consistent global services. What is often missed is the need to tweak local payroll services to meet client needs, which can vary greatly. A payroll service for five employees in one country is very different from a service supporting 500 employees. Local teams allow you to accommodate specific in-country client needs and still not compromise global standards.

I believe in the value of local payroll teams because, while the narrative from many providers is “we make payroll easy,” the reality is that payroll is complex and is not easy. One of the main reasons for this complexity is the different — and changing — compliance obligations across different countries. While global providers seek to control payroll processes, they can’t control local compliance. It is local compliance that clients want to understand so they can provide employee support when payments are made but not understood. Giving access to local subject-matter experts is a key differentiator in the market.

You spoke of the importance of technology to delivering payroll. What should an organisation look for when reviewing a provider’s payroll platform?

The basic question you need to ask is: Is it real? As I mentioned, the narrative on global middleware is changing from one that emphasises visibility to one that emphasises speed. Getting a payroll live quickly almost necessarily assumes small employee volumes without any requirements beyond paying employee salaries. Outside this very narrow window, payroll is complex and requires both local and global experts to deliver successfully.

In short, middleware enables a service, it does not perform the service. Those vetting global payroll providers should understand that the delivery model in almost all situations is not just the shiny technology that catches your eye, but all the experts and processes in place that complement the technology and support the client.

Many leading global payroll providers, including Vistra, manage payroll with the help of shared service centres (SSCs). What are some of the benefits and pitfalls of this approach?

As you say, many global payroll providers use a shared service centre model. The question in each case should be why. I am not an advocate of the idea that 100 percent of payroll can be delivered within an SSC model. But I certainly believe in the ability to provide excellent service by incorporating various skills, processes and strategies to support end-to-end global payroll.

SSCs offer a number of benefits, including enhanced controls, process management, validation and coordination, along with improved costs and time-zone coverage. A centre can, and I think should, be supported by local payroll teams undertaking payroll compliance and localised engagements where necessary. SSCs, then, can help optimise payroll processing by working hand-in-hand with local payroll teams to ensure the highest levels of quality, accuracy and compliance.

Global payroll involves fulfilling a range of compliance obligations, from insurance to labour benefits. How important is it for an organisation that delivers global payroll to have a robust network of tax, HR, legal and other experts?

Payroll is only one part of the jigsaw puzzle of international expansion and operations. Working with one provider that can support numerous requirements — as opposed to vetting and managing several providers — is obviously beneficial from the standpoint of reducing administrative burdens and usually overall costs.

It’s specific to our company, but I think the idea is something multinational organisations should keep in mind when vetting global payroll providers. That is, we use the term “the Vistra Passport.” Organisations want to enter a market whenever and wherever they want. We enable them to do that, not just with global payroll but with legal entity, corporate compliance and other support. This greatly reduces our clients’ administrative burdens and gives them freedom and flexibility, which is something organisations should look for in a provider.

The Everest report specifically includes innovation as a parameter of success. What do you see as some recent important innovations in this space, and what are some emerging trends?

Inevitably a number of terms and buzzwords come to mind, such as AI [artificial intelligence], RPA [robotic process automation] and chatbots. Clearly, we will see far greater use of these technologies by global payroll providers. Those technologies help us gain access to information and make sense of complex regulations and local terminology, among other things.

I understand, then, that technology will continue to play a massive part in global payroll processing in years to come. That said, I am not convinced payroll will ever become fully automated. Payroll service will almost certainly always require experts to interpret local regulations and interpret how those regulations can and should be applied to a client, based on the unique situation.

What do you see as the hallmarks of a true global payroll leader?

A global payroll leader first recognises that no one element of payroll delivery can fulfil client needs. A great provider has both a sophisticated, reliable global platform and a network of global teams to support the many aspects of payroll delivery. Its compliance experts, local teams, SSCs and other stakeholders effectively communicate among themselves and with local regulatory authorities, and of course with clients. All of these elements are critical to on-time, compliant and efficient payroll delivery.

I’ll add that a leader can’t be complacent, especially in our volatile global economy. A provider needs to be a rottweiler, questioning every aspect of the payroll process, including how service is delivered. The answers, and the questions themselves, will change based on evolving compliance trends, employee expectations, client demands and other factors.

Are there any other important global payroll trends or important considerations you think we should address but haven’t?

It’s important to emphasise an earlier point, which is that payroll is not easy. When looking into providers, a company will be bombarded by promises of “payroll made easy” and similar claims. Those who are in the industry know better. Challenges are inevitable and often require payroll staff to work late and on weekends, especially during the peak processing periods.

For these and other reasons, it’s not easy to assemble and retain a dedicated payroll staff. The challenges of global payroll delivery also help account for the number of payroll providers that don’t last, which I mentioned. It’s a difficult, often thankless industry. This is why it’s essential to work with a provider that devotes significant resources to supporting its payroll teams and platform and recognises that world-class global payroll delivery is a key differentiator in today’s competitive corporate services industry.