A History of Global Payroll Models, Part 2

In the wake of Y2K, the newly interconnected world began seeking ways to reconcile a reality that was increasingly, permanently, dependent on data with growing fears of that data being compromised. An amazing cycle had begun, in which the use of data resulted in the creation of more data, which contained ever more valuable and personal insights into individual lives.

The payroll function is unique in business in that it holds nearly equal importance for employer and employee. One won’t succeed without the other, and payroll is the trade. As discussed in the first part of this blog series, payroll is poised to become even more valuable for businesses the world over—and the companies ready to benefit are the ones adopting the latest technology.

The Data Dilemma

In 2000 an extensive research project at the University of California Berkeley resulted in a website called How Much Information?, which measured the volume of data produced worldwide each year. At the time, the world produced as much as 2 exabytes of unique information annually, or roughly 250 megabytes of data for every person on Earth, and experts predicted that data volume would double every year. Today’s estimates predict that by 2020, we’ll produce approximately 44 zettabytes of data every year—that’s 22,000 times more data than we created just 17 years ago.

The incredible boom of data creation was the ultimate modern double-edged sword. Greater access to more information and increased connection on a global scale meant individuals could learn about things, work with people, and even virtually visit places they never would have been exposed to otherwise. The price was their own data, whether uploaded wittingly, collected while browsing, or stored in private exchanges, such as while banking or at work.

Global payroll was an excellent example. Payroll creates new data with every run, compiling ever more records of information to be securely stored, accessed, and shared by multiple people for multiple reasons over time. While no employee would object to their information being accessed and processed to ensure they get paid, very few would ever consider that each paycheck came with yet another record of their personal, financial, and employment data.

However, that fact wasn’t missed by companies or regulatory bodies, and protecting the storage and transfer of the growing mass of data suddenly became a primary concern in the 2000s. The Digital Age gave rise to the new industry of data security, complete with products, services, lore, and in-demand specialists. Whether protecting customer credit card details during an online purchase or managing international finance records, companies had to take responsibility for the wealth of information they held. New solutions were needed, particularly for cases in which the data was both proprietary to the company and personal to the individual, as in payroll.

Turning to Technology

By the time the “cloud” became mainstream around 2009, the average US company with 1,000 employees was storing more than 200 terabytes of data, and the world’s servers were processing more than 12 gigabytes of information per person per day. For reasons ranging from compliance requirements to company ethics, organizations needed better ways of processing, storing, and, critically, deleting sensitive information.

Countries and localities around the world had amended, replaced, or implemented data protection regulations with a focus on securing citizens’ right to privacy, and companies across sectors scrambled to comply. Multinational organizations faced unique challenges in their attempts to meet disparate and sometimes conflicting requirements across locations, and they relied more and more on global service providers who could manage critical data.

Although the concept of “Software as a Service” had existed since the start of the millennium, the cloud enabled innovators to realize its potential. The cloud made network computing fast and easy, while advancements in data protection technology helped companies comply with laws while processing information as needed. Colleagues could collaborate across any distance, and data could be shared in real time. For multinationals hoping to maintain agility while achieving compliance, the wave of cloud-based providers was a welcome development.

After the Aggregator

While essential business functions including Human Resources and Finance implemented streamlined, cloud-based, integrated solutions for managing their important information, Payroll seemed to be left behind. The aggregator model that previously enabled global growth by providing payroll and payments in various locations under one contract fell short of managing payroll data on a single platform.

More data meant greater risk, and as payroll regulations changed and changed again, standardization of both process and outcome became an increasingly important goal. Although different locations’ payroll data looked the same in the aggregator dashboard, it wasn’t, and the limited visibility into each location’s process ultimately limited a company’s ability to explain and rely on their payroll and workforce reports.

As companies realized the benefits of unified human capital management solutions, integrated financial data, and more, payroll teams began looking for their better way. In the early 2010s, payroll professionals and industry publications devoted a lot of discussion to moving toward a hybrid model, in which the global payroll providers would process payroll themselves in more locations, such as the larger markets, and continue to use local providers for less common or smaller locations.

The intended benefits of this evolved model included process standardization, reduced errors, faster processing times, and lower costs, and their discussion led many in the industry to wonder if truly global payroll was possible. By 2014, the idea of a unified global solution was gaining popularity—although countering opinions labeled global payroll a myth, an ideal that couldn’t be achieved.

But the problem with the opinion that global payroll can’t be done is that it’s a limiting, self-serving idea. Saying it can’t be done took the pressure off the payroll companies to provide a better solution, but adopting a customer-serving approach to offering a better service would ensure that forward-thinking organizations could benefit from the advantages of unified global payroll and its data.

A Unified Solution

Today, global payroll on a single platform is becoming a reality, providing multinational organizations with the visibility required to maintain compliance with data and payroll regulations across their locations. With a unified system, every payroll is processed on one platform, meaning the data and results are in a consistent format, and the process is the same for every run, everywhere.

Beyond consistency, speed, and accuracy, the greater value of a unified global payroll model lies in the heart of the innovation: the data. With payroll information stored in one format, on one platform, and accessible anywhere, the idea of real-time global reporting becomes possible, offering multinational organizations greater visibility and understanding of their largest cost center.

Using comprehensive global data and details, analytics exercises can be applied to an entire organization. Business leaders could gain a better, more nuanced understanding of costs and use those insights in everything from planning process improvements to managing their workforce to considering expansion options. Suddenly payroll moves from being an essential function to an essential resource, helping to inform decision-making and even drive strategic planning.

While payroll may be one of the oldest of business operations, the industry is only now tapping into its potential. Advancements in robotics and process automation, analytics, and more are helping forward-thinking multinationals prepare for the coming data regulation changes like GDPR and eSocial, and make better informed business decisions across their organizations. With the promise of truly global payroll now coming to fulfillment, payroll teams are facing their chance to impact and influence the future of global business.

Read Part 1 of this blog series here.

The blog was written for CloudPay, a global SaaS technology provider. View the original here