2011 Global Payroll Metrics, Trends And Best Practices

2011 Payroll Performance Study Results| 1© 2011 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.

GLOBAL PAYROLL PERFORMANCE STUDY 2011

RESULTS PRESENTATION

Presented to: Study Participants

The Hackett Group

Felicia Cheek– Practice Leader, Global Time to Pay Advisory Program

Fall, 2011


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Copyright © 2011 The Hackett Group, World-Class Defined. All rights reserved.


Today’s Hackett Facilitator

Ms. Cheek is the leader of the Global Time-to-Pay Advisory

Program with primary responsibility for payroll and WFM advisory

services as well as setting the agenda for payroll research. Ms.

Cheek works closely with Finance, HR and Shared Services

professionals who own the payroll process to provide strategic

insight, metrics and best practices.

The current agenda for the program includes providing global

insight necessary to create a comprehensive payroll globalization

strategy and a Service Delivery Model that leverages best practices

in a global environment. A major part of the advisory program

framework focuses on facilitating peer interaction with top

performing payroll organizations.

She has passion for payroll and enjoys empowering payroll leaders

by providing strategic and tactical insight necessary to increase

the value and support of payroll organizations. She is a 2009

recipient of the APA’s Meritorious Award and a 2009 APA Hall of

Fame Inductee.


Contents

Key Observations From the 2011 Global Payroll Performance Study

Top Performer Overview and Trends

Global Observations & Metrics

Next Steps

Closing Statements


Four Major Findings From the 2011 Global Payroll Performance Study…

<1/2Of Payroll Organizations have

a Global Payroll Process

Owner

Only

34%Of Payroll Organizations have

a formal governance model

in place

More Than

30%of Top Performers are in a

leveraged (Shared Services)

environment

>1/2Of Multinational Companies

Outsource payroll in the EMEA

and Asia/Pacific Region


1. A global payroll process owner ensures the proper accountability and ownership of payroll around the globe…

Clear Payroll Accountability and Decision

Making

Globalized Business

Processes

Consistent Corporate Alignment Across the Enterprise

Global Data Standards


2a. Shared Services comes in different shapes and sizes for payroll, and affiliation continues to grow, regardless of corporate alignment…

Shared

Services


2b. Workforce Management continues to be an orphan process, that is highly decentralized and no clear corporate alignment…

Shared Services


3. Savvy payroll organizations realize the benefit of a formal governance model and the importance of using it to link payroll to the business…

Ensure the goals and objectives of the payroll organization are

In line with that of the broader business7% have no formal

governance model

in place


4. Payroll Leaders are becoming more comfortable leveraging outsourcing as a means of delivering services through the best service point…


Contents




Next Steps

Closing Statements


1. Top performing payroll organizations realize the importance of building internal relationships

and as such customer satisfaction surveys are used 85% of the time for employees and

62% of the time to business units.

2. The proper sourcing solution continues to be a big question for all companies. In our top

performer peer group, 40% of companies outsource the payroll process. Globally, this

number is even higher in the EMEA and Asia/Pacific regions.

3. Expertise in payroll and educational level is important to the top performer peer group with

75% of managers being certified in payroll and 64% possessing at least a 4 year college

degree.

4. Top performing payroll organizations only spend 36% of their time on transactional activities

5. Employee self service is being leveraged 65% of the time to reduce the focus on

transactional activities at top performing payroll organizations. Working with Human

Resources to ensure corporate policies and procedures are in place to encourage utilization

is key to success in this area.

6. Top performers process the payroll at a 42% lower cost per employee than the peer group

and use 45% less resources.

What Top Performers Are Doing To Increase Efficiency and Effectiveness…


$74.05

$127.02

Top Performer Global Peer Group

Top Performers process payroll at a 42% lower cost per employee

than the peer group

…Top Performers are leveraging scalability and using creative

sourcing solutions to lower the cost of paying employees in countries

with small employee populations.


$3.60

$5.75

Top Performer Global Peer Group

Top Performers process payroll at a 37% lower cost per payment

than the peer group…

…Top Performers are eliminating, simplifying, standardizing and

automating to increase productivity and reduce the cost of payroll

administration!


Top Performers Vision for Payroll in 2013…

Top Performing payroll organizations expect to decrease their focus

on transactional activities by 10% by 2013. They intend to shift

their focus to work on more analytical type activities (Root cause

analysis, building strategic internal relationships) and process

improvement initiatives aimed at increasing their payroll

performance.

As they spend time on more analytical and process improvement

activities, they don’t expect changes in the percent of management

resources but do expect to increase the number of professional

resources by 2% by 2013.

Regionally, the biggest changes will be in the EMEA region where

they expect an 18% decrease in their current 54% transactional

focus. The shift in focus will drastically reduce the number of

clerical resources and increase the number of professional

resources in the payroll organization.

Changes in the maturity of global payroll solutions will play a

significant role in helping companies in the EMEA region better

leverage technology and outsourcing to decrease their highly

transactional focus.

38%

25%

18%

19%

32%

35%

17%

16%

Analytical

Transactional

Technical

Process Improvement

Focus of Payroll

Today

2013

22%

27%

50%

22%

29%

49%

Managerial

Professional

Clerical

Type of Resources

Today

2013



Top performing payroll organizations work with Human Resources

to implement policies and procedures that encourage a culture of

employee self service. Effective utilization of employee self service

in the areas of time and attendance and employee data

maintenance help increase payroll productivity.

Although utilization of paper timesheets is almost non existent,

unfortunately there will still be a very small amount of paper

timesheets in 2013. Web based time entry will increase slightly by

2013, but most employees will continue to enter time through badge

swipes. Biometric web entry tools are not expected to increase

significantly over the next two years.

Employee self service for personal data maintenance usage will

continue to increase over the next two years. In fact, for top

performers usage will increase by 16%. When payroll resources

are not entering tax withholding data, direct deposit and other

employee personal data, they are free to work on other more value

added activities.

81%

10%

9%

0%

65%

25%

7%

3%

Employee Self Service

Payroll Resources

3rd Party Interface

Other

Employee Self Service for Data Maintenance

Today

2013

0.66%

57%

30%

0%

12%

1%

1.47%

52%

24%

12%

10%

0%

Paper Timesheets

Web Based Time Entry -Employee

Badge Swipe

Time Clocks

Web Based Time Entry -Superviosr

Biometric Tool

Time Entry Tools

Today

2013



Data integrity and protection are easier to ensure with system

integration. Top Performing payroll organizations have a100%

integration between the payroll and accounting system. With

globalization, some companies do not have 100% integration with

the Human Resources system. And, time reporting is usually

administered and managed locally and often not integrated with the

payroll system. Unfortunately, this can have a negative impact on

productivity and the overall quality of the payroll. Looking to 2013,

we don’t see much change in the integration of key systems and to

the payroll system.

Although globally many countries don’t require employee year end

statements, in those countries that do, there is a trend toward

electronic distribution to employees. Specifically, in the United

States, United Kingdom and Canada legislation has been approved

leading the way for employers to exercise this practice. Thus far,

adaptation has been slow, but it is expected to increase over the

next two years. In fact, Top Performers indicate that by the year

2013, they will distribute 66% of employee year end statements

electronically and paper only distribution will only account for 13%

of employee year end statements.

100%

94%

100%

95%

99%

92%

100%

94%

Human Resources

Benefits

Accounting

Time Reporting

Key System Integration

Today

2013

66%

13%

21%

30%

41%

29%

Electronic Only

Paper Only

Paper and Electronic

Employee Year End Statement Distribution

Today

2013


Contents




Next Steps

Closing Statements


The challenges of globalization have a noticeable impact on payroll performance…

1. The multitude of languages, currencies, cultures and countries in the EMEA Region

make it the most complex region to pay employees with the average cost per payslip

being almost 8 times higher than that in the Asia/Pacific Region and almost 5 times

higher than in the North American Region.

2. Multinational companies based in the United States almost always outsource the

payroll process in the EMEA and Asia/Pacific Regions. However, most times the

outsourcing solution is not scalable or cost effective for smaller employee populations

requiring a third solution or the need to continue to manage multiple small in country

solution providers.

3. Multinational companies frequently leverage payroll best practices in North America,

but are challenged to overcome local practices and cultural preferences in other

regions around the globe.

4. Globally, system integration is challenging, as such manual processes and duplicate

data entry are common negatively impacting productivity in payroll.

5. Globally, time reporting is almost always handled on the local country level, forcing

multinational companies to maintain and support a multitude of local time and

attendance systems.


Globalization has been particularly challenging for payroll organizations …

Asia/Pacific Region

EMEA Region

Regional

Complexity Level

Americas EMEA Asia/Pacific

High √

Medium √ √

Low

Americas Region

United States


The majority of the companies that participated in the

2011 Global Payroll Performance Study are multinational

companies headquartered in the United States.

Approximately 21 countries, 6 languages, and 10 currencies are

represented in this region. Corporate alignment is almost equally

split between Human Resources and Finance. While more

companies that participated in the study process payroll in-house,

the number of companies outsourcing continues to increase.

Overall, North America is the most mature country for payroll

processing solutions. Although we are continuing to increase

Participation in Latin and South America, our data shows a large

amount of In house processing and limited usage of global payroll

solutions, with most of the work being performed on the local level.

Overview of the America's Region High

Medium

Low


The EMEA (Europe, Middle East, and Africa) is the most complex

region for processing payroll. The multitude of countries, languages

and currencies coupled with local legislative requirements are add

to this complexity rating.

Most of the multinational companies in our performance study

have a large geographical footprint in this region but it consists

of small employee populations in each country. As a result, the

cost of payroll processing is much higher because the

ability to leverage scale is limited. In addition, overall payroll

performance is inhibited by a lack of one global payroll solution

and the inability to integrate the multitude of systems necessary

to perform the payroll administration process.

Data collected in this region is highly influenced by the activities

in continental Europe. As payroll solution providers continue

to tailor their service offerings to meet the needs of this region,

we expect to continue to see significant increases in payroll

performance.

Overview of the EMEA RegionHigh

Medium

Low


The Asia/Pacific Region is unique in many ways and the data in the

performance study reflects this uniqueness. Approximately 16

countries, 14 different currencies and 11 languages are included

in the profile of this region.

When looking at the cost of payroll processing in this region, labor

makes up the largest percent of total costs (i.e. labor, outsourcing,

technology and overhead); mostly because in some countries

labor costs are so low, they often replace money that would

be spent on technology elsewhere. This region also has several

countries that require a minimal effort to process payroll. On the

opposite end of the spectrum, some countries have legislative

requirements that require in country resources to maintain

compliance. Our data shows larger employee populations in

each country, which allows multinationals to better leverage scale

when negotiating pricing. Participation from companies in Australia

continues to grow and has a significant impact on performance

in this region.

Overview of the Asia/Pacific Region High

Medium

Low


Stage

3

Stage

2

Stage

1

Decentralization

Globalization

Consolidation

Global Payroll Standardization

Maturity

Strategic Business Enablement(Business Intelligence, Collaboration,

Capability, Flexibility/Agility)

Global Awareness(Compliance, Analytics and Reporting)

Local Focus(No global visibility or ownership)

•Local Payroll Ownership

•Local Payroll Processing System

•Local Time Reporting System

•Local Practices and Culture

•Regional Process Owner

•Gloco Business Process

•Key System Integration

•Local Solution for Smaller Employee Populations

•Shared Service Centers

•Global Service Delivery Model

•Standardization

•Consolidation

•A Fully Integrated Solution

•A Leveraged Environment

•End to End Business Processes

•Global Compliance

•Global Process Owner

•Cost Effective Solution for Smaller Employee Population

Local

Expertise

Market

Fluctuation

Localization

The progression from Stage 1 to Stage 2 is challenging and the experience is largely influenced by a company's global footprint…

A

B

C

D

Payroll Globalization Journey


Regional resource requirements are heavily influenced by local practices and the maturity of the payroll solution…

1.357

2.471

1.708

2.975

3.549

Top Performer Peer Group Americas Region EMEA Region APAC Region

Resources/1,000 Employees

Multiple languages, cultures

and legislative requirements

sometimes limit the ability to

leverage resources

Resources

often substituted

for technology due to

low labor rates


$60

$121

$44

$5

$185

$107

$47

$19 $36

$9 $46

$11

Americas Region EMEA Region APAC RegionLabor Outsourcing Technology Overhead

Total Payroll Cost/Employee on a Regional Basis…

$121 $371 $198

Selective

outsourcing

is more common

than

total outsourcing.

Data is heavily

influenced by

North America

Total outsourcing

Is much more

common for

multinational

companies. Data

is also heavily

reflective of

continental

Europe

Very common to

leverage

resources in

countries with low

wage rates


$2.23

$10.91 $5.83

$0.17

$15.90 $7.03

$1.70

$1.61

$1.84

$0.36 $3.81 $2.55

Americas Region EMEA Region APAC Region

Labor Outsourcing Technology Overhead

Total Payroll Cost/Payslip on a Regional Basis…

$4.45 $32.23 $17.25

Monthly pay

cycle is most

common in

these regions; not

common to have

multiple pay cycles

Biweekly pay

cycle is most

common in

the Americas

Region; common to

have

multiple pay cycles


Contents




Next Steps

Closing Statements


Our payroll research includes hot topics, case studies and monthly payroll metrics that can be used for decision support and business cases…


What can you do next?

Meet with a Hackett Senior Advisor to socialize these findings with a wider

audience in your organization

Find out more about building a Hackett Advisory relationship to further

explore topics of interest such as where your performance falls short of Top

Performance in payroll organizations through:

– the Advisory portal

– Advisory inquiries

– Participation in Webcast

– Peer interactions

– Participation in other performance studies such as our forthcoming

performance study, launching in January 2011

Find out more about how to develop a payroll strategy by setting up a

meeting with a Senior Consultant from our Payroll Transformation Practice

Find out how your costs compare to others with similar agreements by

setting up a meeting with a Senior Consultant from our Globalisation and

Outsourcing Practice.


Contents




Next Steps

Closing Statements


Questions, Comments and Closing Comments…

Felicia Cheek

Senior Advisor – Global Time to Pay Advisory Program

Phone: + 1.770.703.7470

Mobile: +1.404.218.8666

[email protected]

www.thehackettgroup.com

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2011 Global Payroll Metrics, Trends And Best Practices

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