Global payroll – your most undervalued asset - EY

Global payroll – your most undervalued asset Leading practices, trends and impact

Disclaimer

► EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young LLP is a client-serving member firm of Ernst & Young Global Limited operating in the US.

► This presentation is © 2015 EYGM Limited. All Rights Reserved. No part of this document may be reproduced, transmitted or otherwise distributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying or using any information storage and retrieval system, without written permission from Ernst & Young LLP. Any reproduction, transmission or distribution of this form or any of the material herein is prohibited and is in violation of US and international law. Ernst & Young LLP expressly disclaims any liability in connection with use of this presentation or its contents by any third party.

► Views expressed in this presentation are those of the speakers and do not necessarily represent the views of Ernst & Young LLP.

► This presentation is provided solely for the purpose of enhancing knowledge on tax matters. It does not provide tax advice to any taxpayer because it does not take into account any specific taxpayer’s facts and circumstances.

► These slides are for educational purposes only and are not intended, and should not be relied upon, as accounting advice.

Agenda

► Introductions ► The Global Payroll Value Stream

► Strategic alignment ► Global expansion ► Gaining operational control

► The Wells Fargo Global Payroll Journey ► Background ► Challenges ► Today

► Addressing the payroll challenges ► The global payroll dilemma ► Gross-to-net operational excellence ► Payroll analytics and talent management

► Closing remarks

Introductions

Dimitris Papageorgiou

Dimitris is a human resources and payroll professional with lengthy background in managerial positions within large organizations (20,000+ employees) in the US and abroad. He has been involved with offering knowledge in global payroll, HR transformation, shared services strategy and HR systems implementation. As a founder of EY’s Global Payroll Advisory offering, he is committed to improving global payroll service compliance and simplifying delivery.

Norbert Braun

Norbert has over 20 years of Global HR/Payroll support and outsourcing experience across multiple clients and sectors. He has held various management, project management and consulting roles and has driven positive client experience. Norbert has led large HR/Payroll operational teams with IBM, Lockheed Martin, Fidelity Investments and currently with Wells Fargo. .

Maria Delmoro-Hultman

Maria currently serves as Vice President for Wells Fargo in its corporate human resources organization. She leads the Global Payroll Services: Center of Excellence for Solution Design and Readiness. Maria recently returned from a short term assignment in Manila as HR Service and Delivery Leader to collaborate with the local team to concentrate intellectual power toward defining the right solutions, the prerequisites to those solutions, and the plan forward for optimum, scalable HR Service Delivery for the rapidly growing operation.

Top CEO challenges

For the third consecutive year, respondents to The Conference Board CEO Challenge placed human capital as their top-ranked global long-term challenge to drive business growth.

Global N–1,020 Challenges 2014

Asia N–479

Europe N–105

United States N–233

Latin America N–114

China N–179

India N–47

1 Human capital 1 1 2 2 2 1

2 Customer relationships 4 3 1 3 5 5

T3 Innovation 2 2 4 4 1 4

T3 Operational excellence 3 4 3 2 3 2

5 Corporate brand and reputation 5 7 T5 8 6 T8

6 Global political/economic risk T6 6 7 6 7 3

7 Government regulation 8 9 T5 5 9 6

8 Sustainability T6 8 8 10 4 T8

9 Global/international expansion T9 5 9 7 10 7

10 Trust in business T9 10 10 9 8 10

Note: in addition to other countries, the Asia category includes China, India and Australia.

Source: The Conference Board CEO Challenge 2014: People and Performance, Reconnecting With Customers and Reshaping the Culture of Work, The Conference Board, Research Report 1537, 2014, 16.

Agenda





► Closing remarks

Payroll is a universally accepted necessity and the single recurring touch-point every employee has

with their employer. A truly globally integrated service delivery model must have access to and be able to quickly mobilize local and

global resources to support all aspects of payroll and workforce management initiatives, spanning the entire payroll value stream and

all the payroll vendors and systems.

Global Payroll Value

Stream

Mobility

Talent and rewards

Employment tax

Contingent workforce

HR performance improvement

Workforce management

Global Payroll Value Stream

Payroll’s contribution to strategies that meet senior leadership challenges

► Strategic contribution: Payroll professionals control your biggest controllable cost and wages, and protect your reputation by ensuring compliance with a wide range of legislation.

► New offerings are typically accompanied by local or global expansion, which puts emphasis on the effectiveness of payroll’s service delivery and vendor relationships.

► Gaining greater control of processes increases management accountability and alignment and reduces compliance risk.

Key challenge #1 – Growth and globalization Successfully navigating and benefiting from expansion

Planning to expand business

Primary issue with global payroll delivery

Source: EY Global Payroll Survey, 2014.

► Successfully delivering an accurate payroll across a variety of legal frameworks, labor contracts, government reporting and compliance requirements, without the benefit of a single technology solution can be difficult to navigate.

► Service placement and outsourcing are critical areas impacting payroll delivery costs and service levels.

► Most organizations that choose to outsource payroll operations don’t reap the full benefits: ► Fail to take advantage of transforming

processes prior to shifting services ► Overstaff remaining in-house services ► Don’t possess appropriate vendor

management skills

Key challenge #2 – Compliance Payroll compliance considerations

No market segment can escape the risks of wage and hour litigation. More than 15,000 Fair Labor Standards Act filings in Federal court have occurred in the last two years with a likely increase given the current national debates on wages and “white-collar” exemption.

Source: Seyfarth Shaw 2105 Workplace Class Action Litigation Report, 2015, Seyfarth Shaw.

Settlement Issue 1. $56.5 million – Food and

dining General wage and hour violations

2. $26 million – City government Meals and breaks

3. $23 million – Retail Unpaid wage

4. $21 million – Retail General wage and hour violations

5. $16.5 million – Health care Unpaid wages

6. $16 million – Bank Compensable time/OT pay

7. $15 million – Telecommunications Inaccurate wage statements

8. $15 million – Bank Unpaid wages/OT pay

9. $14.3 million – Services OT pay/minimum wage

10. $12 million – Bank Compensable time/OT pay

► Global – Rapid increase in labor disputes (e.g., Philippines, South Africa, UAE, China, Brazil)

► US – Wage and hour litigation has led to unprecedented costs for employers in all industries; according to the Department of Labor Wage and Hour Division (DOL) 70% of employers are not fully complying with federal and/or state wage and hour laws

► US – Affordable Care Act (ACA) is fully effective in three months ► And if the all the above were not

challenging enough, the below are arriving soon: ► Minimum wage ► White-collar overtime (OT)

exemptions

Key challenge #3 – Operational control Global payroll and mobility challenges

Payroll operations impact 46% consider processes to be the first or second most pressing area in need of improvement. 68% of companies do not have a formal payroll tax and social security compliance risk control framework. 65% do not have a formal tracking process for cross-border business traveler.

Source: Global Mobility Effectiveness Survey 2012, EY.

► Data availability and compatibility ► Tax compliance ► Immigration ► Compensation and benefits ► Policy management ► Funding ► As complexity, speed-to-market and

global growth converge, international assignments will increase, putting further pressures on payroll

Agenda





► Closing remarks

Wells Fargo Team member presence

Total 285,707 team members in 36 countries • USA – 273,630 (includes 59 Ex-Pats) • Outside the USA 12,475

Canada = 178 TM (0.06%)

USA = 273,630 TM (95.77%)

Malaysia 8 Australia 5 Bangladesh 11 China 107 Hong Kong 882 Indonesia 12 India 7,205 Japan 58

Korea 26 APAC = 10,896 TM (3.81%); 14 Countries

Philippines 2,312 Singapore 104 Thailand 11 Taiwan 145 Vietnam 10

Total APAC 10,896

LatAm = 70 TM (0.02%); 8 Countries Argentina 8 Bahamas 3 Brazil 11 Chile 9 Colombia 7 Dominican Rep 20 Ecuador 5 Mexico 7

Total Lat Am 70

EMEA = 933 TM (0.33%); 12 Countries

UAE 27

France 11 Germany 22 Great Britain 740 Ireland 96 Italy 7

Russia 5 South Africa 4 Spain 6 Turkey 12

Total EMEA 933

*TM headcount as of report date 9/1/2015

Israel 2

Netherlands 1

Slide courtesy of Wells Fargo

► Domestic and International Payroll had separate and unique operating models after Wachovia merger

► 2012 – External Vendor provided consultation on International Payroll Service Delivery Model Design and Payroll Consolidation Playbook

► 2013 – Deep dive on current state of the projects and production activities; further evolution of model and refocus of priorities, including stabilization of current implementations, risk mitigation, global expansion and acquisition support

► Implemented current GPS model intended to better support payroll policies, business requirements, and regulatory demands while we establish a strong infrastructure and strengthen controls

Domestic Payroll

Common Governance and SOPs

Central Support

International Payroll

Disparate Governance and SOPs

Decentralized Support

Wells Fargo Background



GPS vision statement ► A dynamic and forward-thinking Global Payroll team which provides cutting-edge

products and services that are accurate, timely, compliant, and delivered in mediums to suit the diverse nature of our global team members, lines of business, and the enterprise

GPS Centers of Excellence ► Solution Design and Readiness – provide strategic direction and execution on

projects and initiatives to support GPS through tools, technologies, and vendor relationships; and through ongoing core system support

► Data and Record Management – maintain and provide timely and accurate workforce information

► Payroll Processing – provide an efficient, timely, and accurate payroll production for all cycle activities including variable compensation, funding, reporting, and delivery of payroll products and services

► Regulatory Specialties – administration and support for Tax, Compliance, Reporting ► Effectiveness – manage data and information, align strategy to goals and benchmarks



Primary goal has been to move International Payroll toward One Wells Fargo strategy, establishing a common global model and consistent processes for payroll activities, such as: ► Global oversight of payroll risk and compliance, business continuity, and

vendor management ► Consistent, scalable, and streamlined payroll processing, payroll accounting,

and operational support ► Consistency in team member experience ► Increased security of confidential, restricted data, and confidentially The International Payroll Consolidation (IPC) project complimented this transformation as it evolved



Future Model ► Compliance oversight and audit

support for all WF payroll ► Regional payroll support ► Preferred vendor relationship ► WF treasury solution partnership, as

possible

Systems ► Select payroll processing system/s

with managed access ► Single sign-on payslip access through

Teamworks ► Payroll GL posting interface with

common currency conversion ► Secure transmission of data

Service Level ► Wells Fargo team members paid on

time and accurately ► Pay calendar consistency (monthly,

semi-monthly, bi-weekly) ► Published paydates ► Standard payslip and tax statements

Future Business Process ► Established workflow; configurable

based on local regulatory need ► Regional Payroll 1st tier support contact ► Compliance controls

► Separate payroll funds ( not comingled) ► Segregation of duties

Building an ideal regional model Guiding principles and standards clearly defined up front (70/30 rule)


Wells Fargo International payroll consolidation

► The value proposition included : ► Risk mitigation and efficiencies through select vendor relationship with

compliant contractual agreements ► Alignment with Wells Fargo data privacy and confidentiality requirements ► Streamlined payroll processing ► Bringing consistency to the team member experience ► Minimizing compliance and reputational risk through additional audit

controls and centralized payroll administration ► Regional Tier 1 escalation support ► Technology support – BCP ► Creating scalability to support the business as Wells Fargo continues to

expand



Payroll consolidations will be completed for

countries in progress:

Taiwan (January)

South Africa

(March)

Japan (May)

2015

Payroll consolidation

implementations completed:

Australia Bangladesh

Canada France

Germany Malaysia

Philippines Rep Office

Shanghai Singapore

South Korea Spain

Thailand Vietnam

2014 Continued support

of business expansion and

acquisitions in all regions

Paused to refine

methodology, set playbook, and

establish repeatable processes

Project focus

directed to APAC

2013 Payroll

consolidation completed for most

entities in EMEA and Canada

Supported

business growth, expansion, and

acquisition activity

2012 Wells Fargo

selects CloudPay as our Global

Payroll Partner

2011

► International Payroll Consolidation - Historical context


International payroll consolidation Historical context – multi-year and dynamic scope

Pilot • Inclusions: Canada, HK, UK • Entities: 9 • Not project funded

2011 • Inclusions: EMEA • Entities: 11 • Forecast: $176k • Actual: $66k

2012 • Inclusions: Canada, EMEA, New Entities • Entities: 20* (+10, -1) • Forecast: $68k • Actual: $118k

2013 • Inclusions: APAC, Canada, EMEA,

LatAm • Entities: 56 • Forecast: $1.39M • Actual: $1.47M

2014 • Inclusions: APAC, Canada, EMEA • Entities: 48: IPC 8:LatAm • Forecast: $813k IPC, $261k LatAm • Actual: $812

*includes existing, new, and closed entities


Questions to ask? Why? What? How? Who?

These questions need to be addressed in the context of overall Business and HR/Payroll/Finance strategy

Single Payroll/HR platform

Identify: Common, standardized, repeatable processes

Determine: Selected processes in Regional/ Global Shared Service Center

Optimize: Sourcing Model (In-house/Outsource processes)

Global Oversight, Audits, Control and Scorecards

Transformation journey

Take a hard look at where you are today:

Open your mind to where you want to be:

Identify the tools to create your new reality:

Organization design Process design Technology

infrastructure

Business strategy alignment New role of HR/Payroll Redesign of processes

Information/education Data Global Community

Global Transformation Global payroll transition


Corporate

EMEA Americas

(Canada, US, LATAM) HR Insourced/Near-shored Payroll Outsourced/Near-

shored

APAC India / Philippines

Local Practice

Regional Delivery

Controls

BCP

Location Agnostic

Policy

Oversight

Local Delivery

Interactions with Regulators

Compliance

Governance

Wells Fargo Today


Agenda





► Closing remarks

Payroll was among the first functions to be outsourced, but vendor frustrations prevail

Source: Payroll Complexity Guide, 2014, NGA Human Resources.

Global payroll complexity means: ► Only 20% of companies have processes that do not

require manual intervention. ► Only 34% of companies have a formal payroll governance

model in place. ► More than 60% lack enterprise-wide reporting capabilities. ► Less than 40% of multinational companies have a global

payroll process owner. ► Sixty percent are considering changes to their payroll

systems. ► Only 25% express a high level of satisfaction with their

current payroll technology solution. ► The average multinational had 10 payroll systems plus 10

additional HR systems across their business. ► The movement to cloud technology is increasing with 45%

of companies planning to move to the cloud in the next two to three years.

► Payroll is not just about putting cash in the employee’s pockets. In many countries around the world payroll is the mechanism for imputing wages for mobile employees (aka shadow payrolls). In some countries this is the mechanism for paying income tax withholding, eliminating the need to file tax returns.

► Sixty-five percent do not have a formal tracking process for cross-border business travelers.

Country Complexity index (scale 1–10) Italy 9.16

Germany 8.85

France 8.44

Belgium 7.21

Australia 6.87

Spain 6.76

Japan 6.65

Netherlands 6.65

United States 6.44

New Zealand 6.35

Sweden 6.31

Brazil 6.27

Austria 6.17

South Korea 6.06

Denmark 5.87

Canada 5.60

Switzerland 5.60

India 5.56

Luxembourg 5.55

Portugal 5.51

Global enablement across a single solution is more a myth than a reality Is there a single vendor that can handle all of your payroll needs globally? (2014 vs. 2013)

15%

55%

30%

33%

44%

23%

0% 10% 20% 30% 40% 50% 60%

Unsure

No

Yes

20142013

Source: Global Payroll Survey, 2014, EY.

Global payroll challenges

Source: Managing Global Compensation, 2014, EY.

► In 2014, the focus on compliance had intensified.

► Payroll reporting and tax withholding ranked as the number one global compensation challenge faced by our survey respondents.

► Thirty-six percent responded they experienced queries and findings related to payroll omissions as a result of local tax authority audits.

Key performance metrics

Type Key performance indicator (KPI) Americas

peer group EMEIA

peer group Asia-Pacific peer group

Process cost

Process cost per employee $58.56 $275.75 $161.62

Process cost per payment $2.10 $24.62 $9.09

Total cost Total cost per employee $109.29 $357.95 $223.70

Total cost per payment $3.78 $31.96 $12.38

Quality Payroll processing accuracy rate 99.88% 99.80% 99.88%

Productivity

% employee self-service for personal data 43% 6% 21%

Full-time employees (FTE) per 1,000 employees 0.792 2.028 1.771

Timeliness

Inquiries resolved within 24 hours 65% 23% 54%

Days between payroll closeout and interfacing of payroll entries to general ledger

2 3 3

Source: Global Payroll Performance Study, The Hackett Group, 2013.

Global payroll landscape

Top three payroll issues organizations are facing

Process consistency

1 Global compliance

Source: Global payroll: Myth or reality, April 2013, EY.

Right payroll talent

Main drivers of existing payroll operating models

2

3

Organization’s historical practice

Cost

Lack of confidence in

alternative models

Control/risk management

54%

14%

7%

6%

35% of companies anticipate entering new global markets

11% of companies are actively pursuing a global payroll solution

Selective sourcing is a common approach to improving efficiency and effectiveness

31%

43%

46%

47%

50%

52%

59%

64%

91%

93%

69%

57%

54%

53%

50%

48%

41%

36%

9%

7%

Tax Filing & Payment

W-2/T-4

Check Printing

Verification of Employment

Garnishment Payments

Pay Statement Distribution

Garnishment Administration

Gross to Net

Payroll Inquiries

Employee Data Maintenance

Source: 2014 Payroll Sourcing Optimization Study Results, The Hackett Group.

In-house

Outsource

Payroll remains the most outsourced transactional HR/finance activity globally Which of the following best describes how your payroll operation is currently serviced?

57%

60%

65%

54%

EMEIA Asia-Pacific

In-house

Outsource

47%

28% 25%

Both outsourcedand in-house

Outsourced In-house

Source: EY Global Payroll Survey, 2014. Source: 2013 Global Payroll Technology, APA.

Driving the trend for tighter payroll management

Source: Managing Global Compensation, EY, 2014.

► Training for payroll teams to understand the nuances of international compensation, payroll and workforce management (WFM) issues

► Greater collaboration between the home and host payrolls as to the application, tracking and sharing of data

► Assigning a global payroll leader who enforces the payroll process globally, and for all local payrolls to have a subject matter resource for assignees and local employees

How do payroll leaders prepare for the upcoming changes? ► Regardless of process

governance, improving efficiency and effectiveness is the foundation of all transformation efforts.

► The payroll maturity framework provides a structured approach for assessing operational performance.

► Most leading performers assess their operations every two years.

When did you last baseline your performance?

Payroll maturity framework, EY.

63%

26%

7% 4%

Where does the payroll department report?

Accounting/finance

HR

Shared servicecenter

Other

Source: Bloomberg BNA’s Payroll Benchmark and Analysis 2011.

0.01.02.03.04.05.0Process

Organization

People

PerformanceManagement

Data andTechnology

Governance

As-is

To-Be

LeadingPractice

► Payroll analytics are not just benchmarks, metrics or reports

► It is not just a data warehouse

► Analytics are business driven and technology enabled ► Payroll analytics utilize business intelligence to provide the organization with an

improved view of the workforce and highlight insights that can drive workforce and payroll-related decisions and actions

Payroll analytics: an overview

Payroll analytics are …

the use of forensic data, statistical and quantitative analysis, explanatory and predictive models, and fact-based management to drive payroll strategy, planning and decisions to create business value.

Employee DNA

5 2 3 1 7 4

Benefits: ► Employees’ costumer training – targeted skills ► Feedback targeting – better feedback process and data ► Employee at risk – performance driving actions ► Attrition and retention – Who do we want to keep? Are we loosing the right people? ► Promotion indicators – Who are the individuals we should look at first? ► Area of improvement – Targeted development based on past data ► Management pipeline – Do we have the right people at the best location?

Responsiveness

► Identify the characteristic that constitutes a productive response

Performance under pressure

► Performance near engagement deadlines

► Total initiatives that employee is involved in

Loyalty and long- term dedication

► Years of service to the firm

► Promotion rate

Problem solving

► Feedback text analysis to gauge ability

► Engagement-specific metrics

Leadership capabilities

► Benchmark analysis against peer group

► Past feedback on individuals' capabilities

► Performance metrics over time

Networking and teaming

► Network analysis for influence assessment

► Peer feedback

How predictive retention analytics comes to life

► Apply

algorithm to relevant employee population to identify intention to depart

► Identify repeatable patterns/trends in the types of queries, sequence of events, payroll behaviors prior to departure and create an algorithm that reflects all the mined parameters

► Collect last 12 months prior to departure of benefit, pension, payroll queries and voluntary HR and payroll transactional activities for a group of departed employees that were classified as undesired attrition

Agenda





► Closing remarks

Final thoughts

► Many factors are contributing to the changes affecting payroll operations in 2015: ► Push to the cloud ► Regulatory changes or increases in audits ► Growth and globalization

► There are opportunities for payroll leaders to drive true business value: ► Reassess the payroll operating model ► Take ownership of the Payroll Value Stream components

► Questions and answers

Global payroll – your most undervalued asset - EY

Documents

Transcript of Global payroll – your most undervalued asset - EY