Any business leader would know the biggest cost of running an organisation is labour cost. According to an article by Paycor, labour costs can account for up to 70% of total business costs. This includes employees’ salaries, benefits, taxes, and other payroll-related elements.
Given the huge financial impact that labour costs have on an organisation, it is imperative that organisations engage a payroll provider that can support all aspects of payroll – be it payroll analytics or compliance with labour laws. While an efficient payroll provider is the first step in ensuring accurate and accessible payroll data, business applications today simply cannot run in silos. HR, finance, marketing, and other departments may rely on specific information to function, but often fall back on collections of overlapping yet inconsistent data due to data silos. This potentially results in duplicate and inconsistent records, as well as a drag on operational efficiency.
Cross functional utilisation of data from a central data repository allows for enhanced analytics and facilitates strategic business decision-making. In a report published by Deloitte, Global Business Driven HR Transformation The Journey Continues, it suggests a proportional correlation between progressing from a transactional data approach to predictive analytics and increased business value. Organisations who draw data from multiple applications i.e HR and finance, are often able to adopt a more proactive business model such as predicting the risk of employees leaving based on a certain criteria.
Driving business success by integrating HR and finance
In order for global organisations to succeed in their global payroll management strategy, there needs to be increased cooperation between HR and finance. After all, both functions are critical in the entire employee lifecycle – the former prioritises people while latter focuses on the bottom line i.e. paying employees.
Organisations that reallocate traditional departmental responsibilities within HR and finance often report greater returns on their human capital management (HCM) investment and leverage these integrated platforms with streamlined processes, improved efficiencies and increased ROI. According to Ernst & Young, close to half of organisations (43%) where the CFO and CHRO are strong collaborators experience higher workplace productivity and saw a significant improvement in employee engagement (44%). On the other hand, those that retain traditional roles, often suffer from data silos, redundant data entry, poor data integrity and pay for services they do not use.
Here are some key considerations when combining HCM and finance on a unified platform:
1. Source for a global payroll provider
Look for a payroll provider that can provide the organisation with global payroll solutions. This minimises the cost of having to engage and implement varying payroll providers that may not be consistent across countries where the organisation has operations in. Consider engaging payroll vendors that also have existing technical integration partnerships with other vendors such as Workday. These partnerships allow organisations access to additional HCM features on top of payroll, such as leave management and performance appraisals and tracking.
The global payroll provider should also have in-built features that allow organisations to set up different payroll parameters in each of the various geographical locations. This allows organisations to comply with ever-changing employment legislations while maintaining a unified payroll platform to receive and store updated and accurate records. Accurate payroll data also offers better data insights and facilitates effective decision-making.
2. Ensure seamless integration between HCM, Finance and other supporting systems
Engaging a global payroll provider and requesting for an integration with the organisation’s finance application is not as straightforward as it sounds. The first step is to conduct a system health check to identify gaps and security lapses in existing HR and finance applications. Take this opportunity to fine-tune and increase the quality and efficacy of these core applications.
Thereafter, do a consolidation of both key systems roadmaps into one overarching application roadmap. Think about which of the features across both applications should be integrated and merged together to facilitate future operational workflows.
Ensure that the global payroll provider is able to support the integration with the organisation’s existing finance applications, particularly on data security and accessibility. Consider reviewing the capabilities of the payroll provider in providing unlimited scalability to account for future business expansion plans as well.
3. Enforce standardisation while localising to respective markets
Once the integration roadmap is in place, work closely with the payroll provider to implement the integration with both finance and other supporting applications. Ensure that the applications integrate seamlessly as this forms the foundation of a unified business applications platform. With a strong foundation, organisations can then draw on the centralised platform to expand across other geographies and localise certain aspects to account for country nuances.
The gap between HCM and finance have narrowed in recent years. The high cost and scarcity of talent, coupled with maturity in leveraging data for strategic decision-making has driven the need for a closer relationship. By integrating HCM and finance systems today, it will no doubt allow for strong human capital metrics and improved productivity – all of which are key drivers for global organisations to remain competitive in today’s business climate.