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Global Payroll – Old vs. New Model

Running global payroll for a multinational company has always been challenging. Payroll is extremely country-specific and is strictly regulated by local laws and policies. Unlike in HR or Accounting where global solutions like Workday, SAP, Oracle, Ultimate, etc. exist, in Payroll, no single global solution exists that can be deployed around the world to process payroll in compliance with local laws and regulations across many different countries.

 

Over the past 15+ years, companies like ADP, NGA, Ceridian, CloudPay, Safeguard, and other traditional payroll vendors have developed global payroll solutions based on the so-called aggregator model. It integrates a variety of local payroll solutions under the umbrella of one global vendors. While that model promises to simplify and harmonize the payroll environment for multinational companies, it comes with significant downsides and compromises for the customers (which we will explore below). In response to the shortcomings of the traditional global payroll model, a new global payroll model has emerged over the past couple years, pioneered by companies like Payzaar, striving to bring the transparency and flexibility of open marketplace models like Amazon, TripAdvisor, Booking.com, Airbnb etc. to the world of payroll. This new model is therefore often called the open marketplace model.

 

For anyone considering a new payroll solution, here is a quick side-by-side comparison of these different models:

 

 Traditional Aggregator ModelOpen Marketplace Model
ChoiceZero choice of local payroll solution; the local solution/service provider is dictated by the global vendor100% choice of local payroll solution; use your existing solution or choose any new solution
Implementation requirementsNeed to rip all the existing local solutions and replace with the solutions mandated by the global vendorKeep the local solutions as long as you’re happy, no re-implementation required
Implementation timeMonths and years (for 20+ countries typically > 2 years)Days (because no reimplementation required)
Support of delivery modelsInflexible – Only supports complete outsourcingFlexible – You can run your payroll outsourced or in-house or in a mix
Ongoing vendor relationshipsComplete lock-in – can’t simply replace a local vendor when not satisfiedComplete flexibility – simply swap in a different local vendor without skipping a beat
Power BalancePower sits with the vendor because of lock-inPower sits with customer given choice
TransparencyLimited – self-protective of the closed network partners100% – gives you stats how different vendors compare
Underlying EconomicsOutsourcing mentality – still highly manual, trying to maximize revenues by upselling more servicesSaaS mentality – relying on modern technology and providing self-service without incremental fees
CostHigh, typically 3-5 times (or more) higher than local payslip priceVery competitive, small additional fee on top of local payslip price

 

The Payroll industry is at an inflection point that will drive similar transformations as we have seen in other industries. Old closed, proprietary business models (i.e. global hotel chains, regional retail chains, etc.) got surpassed by new more flexible, open, transparent models like TripAdvisor, Booking.com, Airbnb and Amazon. If you like to discuss or learn more about the new way of running global payroll, contact us at info@payzaar.com.

 

 

Marc-Oliver Fiedler
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