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Outsource magazine: thought-leadership and outsourcing strategy | July 21, 2017

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Global payroll outsourcing: the myth behind the market

Global payroll outsourcing: the myth behind the market
Outsource Magazine

Why does the global payroll outsourcing market continually fail to match up to expectations? Lifting the lid on this seemingly ‘easy’ opportunity, would-be buyers of global or multi-country payroll outsourcing solutions continue to be disappointed. Why, and what can you as a buyer, do about it?

Many readers will be all too familiar with a scenario which goes something like this: a key stakeholder decides, and rightly so, that Payroll is a good candidate process for either first-generation outsourcing or indeed consolidation of a problematic fragmented in-and-outsourced landscape featuring multiple contracts with diverse suppliers. This decision is usually driven by a desire to increase compliance and manage risk, and/or drive cost savings. So far so good. A quick flip through the latest market research reports will then reveal that there is a healthy raft of suppliers with whom one can contract for delivery of global Payroll outsourced services. Even better. You can select a single supplier with whom to contract for provision of this critical service which touches each and every employee across your business, yet brings with it an environment steeped in statutory, regulatory and language-driven complexities and variations.

If this is your first time to tackle global payroll you’re probably pretty excited too at this stage, as the person tasked with tapping into this excellent opportunity. So you get a pretty good RFI together, start to engage with the healthy raft of suppliers, and fairly rapidly start to realise that all may not be as it seems.

For underneath this seemingly straightforward and well populated marketplace lies the reality that there is no such thing as a global payroll supplier – at least not in the sense that your stakeholders will have automatically assumed. Beneath the veneer of the single global supplier of services there in fact lies, without exception, a plethora of subcontracted ‘partner’ organisations delivering varying amounts of scope in those countries where the principle supplier does not have feet on the ground.

Whilst your goal of having a single supplier accountable for global delivery remains attainable, you now have the complexities of sub-contractor management, layered over the existing statutory, regulatory and language-driven complexities and variations, to deal with. In a nutshell, under the bonnet of what your stakeholders think of as a straightforward, no-brainer outsourcing transaction which can be tendered, contracted and delivered on pretty optimistic timescales lurks a significantly more challenging transaction.

The principal suppliers will assure you that this is unimportant; that they will have back-to-back agreements with their sub-contracted partners, and the overall model will be seamless from a client perspective.

Rather than majoring on how good they are at partnering, and focusing on how they manage a partner network effectively from an account and actual service delivery model perspective as a selling point, almost all of the main suppliers make efforts during the sales process to downplay the fact that they do use partners, choosing to pass it off as a mere technicality. This is probably driven by the fact that buy-side organisations continue to perceive use of partner networks as weakness and lack of capability, so suppliers react to this by playing it down. Unfortunately this rather typical glossing-over at the sales stage can have pretty disastrous downstream implications, which tend to wait until transition work starts in earnest to reveal themselves.

What then are the secrets to successfully tendering a global payroll outsourcing project? They are many, but a few key early on tactics can smooth the way:

1. Address and manage internal expectations
By now it is probably obvious that proactive education regarding the shape of the market and the realities underlying the somewhat misleading top level view is critical. However, many messages around implications on timescales and service often fall on deaf ears until proof starts to appear in the form of supplier tender submissions. Don’t be disappointed and think that all is lost. Instead be prepared to use the RFP process itself as a tool to land key messages with stakeholders. Educate them bit by bit as the process unfolds and you are equipped with the sit up and listen evidence.

2. Think about and articulate what it is you really need
Again, sounds obvious. But think again. What is really most important? Seeking the holy grail of having a single supplier of services no matter what or getting the payroll service you need? It might feel counter-intuitive to pursue a multi-supplier strategy. However given that partnering to achieve full geographic scope coverage is unavoidable for suppliers, have a think about whether you might actually achieve your goals by yourself partnering directly with multiple suppliers to get the right coverage – accepting that some form of incremental internal vendor/contract management resource is required to coordinate.

3. Major on RFP content around use of partners
Counteract the natural supplier tendency to play down use of partners with some really robust RFP content designed to probe and assess this side of their offering in-depth.

4. Think about the service delivery model you need and ask the right questions upfront
There are challenges associated with what many think of as very routine aspects of service delivery, such as managing employee queries, where sub-contractors are used. Especially where global process standardisation is sought – ensuring that your principle supplier can delivery service in the same way in countries where they do and do not rely on sub-contractors is difficult. Getting what may seem like an unusual level of detail during the RFP process will save cost creep and pain during the contracting phases and beyond. Making too many assumptions based on loose assurances or seamless service delivery will have tangible negative consequences.


About the Author

Jill StablerJill Stabler is a Principal Consultant with award-winning firm Aecus and has over 10 years of HR & Payroll strategy and advisory experience, both captive and outsourced. She is an expert in HR and payroll outsourcing and specialises in sourcing strategy, operating model design and implementation. For a briefing on the themes raised in this article please contact enquiries@aecus.com.

Comments

  1. Tim Janisch

    Really good post, thanks. The issue of the use of “partners” arises in a number of other services and is easily downplayed by service providers and overlooked by buyers. Legal services comes to mind, it would be interesting to hear where else this is a risk.

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