#44 - How to pick the right payroll solution

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How to pick the right payroll solution 

With Anita Lettink, international keynote speaker, advisor and author

Sandra Redlich  01:30

Thank you for taking the time and chatting with us today Anita. I see your lovely book in the background. And we will include a link to that in our show notes as well. But where are you exactly joining us from today?

Anita Lettink  01:42

Good morning, or good evening I think. I'm joining from the Netherlands, I live close to Amsterdam. Yeah,

Sandra Redlich  01:49

Lovely, I love the Netherlands, especially Rotterdam has a special place in my heart. A very big remote and expat community living there. So perfect place for you, I imagine, to be and to work with companies, and to talk about what we want to talk about today, which is the big topic of payroll. So as I understand, you work very closely with a lot of different companies from all over the world, and you advise them on payroll solutions. So can you take us a little bit into that process and describe what it is exactly that you do?

Anita Lettink  02:25

Yeah, so for the, I would say, for the past 19 years or so, I worked at NGA HR, which is a global company that does HR and Payroll consulting and outsourcing. And shortly before the pandemic it was acquired. And I decided to become an independent and do something completely different. But as the pandemic started, companies started to reach out and ask me questions around, we now have people in remote locations, how are we going to pay them? And then I thought, well, I have all this knowledge, I better do something with it. And it can be very useful right now. So I started advising companies to help them pay their people timely and accurately in all these jurisdictions around the world.

Sandra Redlich  03:21

Perfect timing then - that's something we don't hear very often when it comes to COVID. But you know, when there's losers, there's always winners at the same time. Can you say that, in your experience, from your experience, it has increased with the demand for those services and the focus on payroll as well, because that might have not been something that companies were always very aware of before the pandemic?

Anita Lettink  03:47

Yeah, so the basic principle around payroll is you have to pay people well, and you have to pay them on time. And it has to be flawless, right? If you don't pay them on time, or you don't pay them flawless, you will end up on the newspaper or on the front page of the newspaper and no one wants that. And during the pandemic, people also started to think differently around what they want from life and what they want from their employer. And having access to well paying jobs, to jobs that guarantee a good life instead of just getting by is now one of the most, I would say, coveted perks for employees. It's not really a perk but it's really high on their wish list. Companies are really starting to rethink what you can do with salaries. They understood that many of their employees, or more of their employees, have mental health issues and research has now established a firm link between financial health and mental health issues, meaning that very often mental health issues come from financial issues. So it starts there, not in all cases, but in a considerable amount of cases, it starts with financial problems. And look, it's logical, right? If you are sitting behind your desk thinking all day long about how you are going to pay the bills this week or this month, then you are not focused on work. And you are probably not as productive as you could be. So that is one side. And the other side is that now new technologies like Cloud, allow all kinds of new payroll solutions to come to the market. And that means that companies are also running inventories of OK, what is out there? And how can I modernize the way that I pay people using some of these solutions that were not available before?

Sandra Redlich  06:04

Yeah, and perfect segue into my next question, how can you choose between these solutions? Because I would envision there's a lot on the market now, people have caught up to the need. What's the first step when a company comes to you and says, Look, I want to work on my Payroll solution. But I don't know where to start?

Anita Lettink  06:24

Yeah. So my first question to them is then 'what is the problem that you are trying to solve'? Because if you are just coming to me and ask me, How can we run a Global Payroll, I'm going to say, Well, don't go there. Because it's a massive undertaking. And if you internally are not convinced that you want to do this, then it is doomed to fail. So first, you need to identify the problem that you have. And sometimes the problem is very simple in the sense that we're currently running on this payroll, and the vendor has alerted us to the fact that they are going to stop the maintenance. So the contract is ending. And that means that the company needs to find another platform to move to. In other cases, it could be something like we are expanding into a certain geography. We don't have any HR and Payroll people there. What is the best way for us to pay people? Because, you know, it doesn't matter what you are going to do, you always have to pay people. And you have to do well. So there are a number of different reasons I could easily, you know, think of 10 different reasons that companies decide to change payrolls. Sometimes it's also as easy as we're very unhappy with our current vendor, this happens a lot, actually. And the contract is going to expire, and we do not want to renew it. So that happens too.

Sandra Redlich  08:06

Is there something that you would focus on specifically for global Payroll, because you just mentioned that there's people that want to hire employees from a certain region in the world where they might not have processes in place yet? And I would imagine global Payroll is a whole different board game, a whole different level of payroll. So is that something that you see more and more, and how do you advise on global Payroll?

Anita Lettink  08:34

Yeah, so what I do see more and more is that there is a desire in the headquarter country to understand what is going on with payroll and have at least some level of control over who's getting paid what and some insights, because this is usually the largest expense at salaries, it's paying people. And you want to make sure that it is financially covered. Knowing what goes on, looking at the numbers, being able to derive data from all these different vendors, or from all these different countries, is important. And it also helps you establish credibility with the board, when you can just come up with accurate estimate of what the outflow of cash is over the next couple of months. So I would say the insights from data and having a measure of control over money are probably two of the most important reasons that companies are starting to think about moving to a global Payroll. And then the third is they don't have any people and someone needs to run these services for them. So they are, in those cases, they are trying to do an inventory of global vendors that are available for these countries.

Sandra Redlich  10:12

You were speaking about data and data insights and data transparency as well, I would assume, is something that is really important to companies, when looking at payroll. What are the most important data sets that you should be focusing on when it comes to payroll?

Anita Lettink  10:29

Well, first of all, it's the personal data, it needs to come from somewhere. And you always need to know that the people that are on your payroll really exist. Otherwise, you are paying ghost employees, and that is not good. So that's your first set of data. Your second set, obviously, is everything that has to do with the gross to net payments. So what is the gross salary? What other types of benefits for instance, or allowances, are you paying that employee? So that is your second set. And your third set is the country specific information, and then I'm talking about taxes and social security. Because even though you do not per se need to know the percentages, you do need to know as a company, you want to know, what kind of amounts are you paying to the government, right, because that adds up to the gross salary. And that means that if you know all these different parts, you can run it up to total cost per employee. And that gives you a good insight into where you should hire people, because a company obviously does not want to pay twice as much for the same type of work simply because they're in another country. So you have to have some understanding of the total cost per employee.

Sandra Redlich  12:09

Speaking about different countries, if you are working with a company that has employees in a variety of different geographies, and with that comes the challenge of different tax, different social security, you know, the different payments that come with payroll, not just salaries, but you know, everything that goes with it. Is there ways, are there solutions out there for companies to consolidate all of these different data points into one solution?

Anita Lettink  12:37

Yes, I think that when you look at many of, I would say the more younger solutions that came to market shortly before the pandemic or during the pandemic, they mostly use an approach where they roll up all that information from the local payrolls into some sort of global data layer, some sort of global dashboard. And that makes it very easy for their customers to take a look at, for instance, how much do I pay in this country, but also run analysis on gender equality. Do I pay men more than women? Or things like in what country do I pay overtime a lot? And why does that happen? So there's all kinds of, I would say, questions that you can ask, in that data layer from the analytics dashboards, that provides you insight into what is actually going on with people in that particular country. And that was very difficult in the past, there were some companies that would offer you this overlay. But then of course, it's always the data fields in these different engines don't match up completely. So there was a lot of matching and calculation, what does an FTE mean in this country? What does it mean in that country? And now, these providers take that away from you. They short that all out and what you see in the dashboards is actually apples to apples instead of apples to pears for the different countries.

Sandra Redlich  14:26

Do you also advise your clients on different strategies? Not just what route to take or what solution to use, but also what strategy to use to approach payroll when we're talking about global solutions? For example, should I pay everyone equally or should I pay depending on the individual market? You know, there's different approaches to how we handle benefits. Do I roll out all the benefits across the company for everyone or do I match them to the specific location where employees are. Different approaches. So is that something you include in your advisory position as well?

Anita Lettink  15:04

I do talk about that, but only when the client asks me for it. And typically, it's part of compensation. And they will ask a compensation analyst for that type of information. But yeah, you're absolutely right. There's a lot of movement. And also thinking around how do we pay people in a world where some people work in country, but others work remotely? And so do we pay them according to their location? Or do we pay them according to their skill set? And do we reward them the same no matter where they live? I see both of these approaches. But I also see that some companies are clustering countries together into a region, and then say, okay, these are the salaries for this position in that region. So it doesn't matter in which country you live. It's a very difficult topic. And I also know some countries that have a blanket salary for the same position across the world. Doesn't matter where you live, this is your salary, which means that some people can live handsomely from that salary and other people struggle to make ends meet simply because they live in a more expensive location. So it's a difficult topic.

Anita Lettink  15:11

And I could imagine that it's also becoming a difficult topic to ignore, if you start having all that data available to you. And it's presented to you right in your face. And, you know, you can look at the data and say, Oh, we actually, across the globe, we don't have gender equality in our payments, according to our global Payroll solution. So it's a very important factor to actually become aware of issues that you might not even have thought of before. So that's an interesting factor as well.

Anita Lettink  17:16

Yeah. And there's something else that's playing into this, and that is that you see more and more legislation around salary transparency, which means that when companies take out an ad for a vacancy, they will have to present the salary range in that vacancy. So you can sort of derive from that what you will earn. And of course, people are following that very closely, because it gives them an indication of what a competitor would pay for the position that they currently hold. And, of course, they take that ad and bring it inside their companies and say, Hey, this is apparently the acceptable range for my role. Are you going to match it? So there's a lot going on in the area of pay equality and salary transparency at the moment.

Sandra Redlich  18:12

Yeah, super important topics. And it's good to see that these global or general payroll solutions can help actually the people behind who are benefiting from it and not just, you know, make the life of the HR and finance departments a little bit easier. Something that's probably also a big topic for your clients is when they move to either a new solution or just, you know, start setting up the process from the ground up, is how do you integrate a Payroll solution into other potential HR software that you're using? I can imagine there's a bunch of other different software and, you know, logins and accounts that people have, and you don't want to use five different ones. Best case scenario, you want to use one and just integrate all of these other applications into it. What is the process when it comes to that?

Anita Lettink  19:08

Well, first of all, you start to establish, is there a defined integration between the current HR solution that the client has and the payroll solutions that they are considering? And especially when you are looking at one of the newer solutions, they have built in integration, right. When these parties started to build the solutions, they knew that an integration with the core HR system was probably the first thing that clients would would ask for. So from that sense, moving data back and forth has become somewhat easier, because the integrations are now standardized. Instead of that you have to create a bespoke integration per solution per country. And when I started in global Payroll, that was still the case, we build these bespoke integrations all the time. Good thing about the standardized integrations is also that you are able to move more data back and forth. And so you would still use the core HR as your base layer, that is where you register your employees. So that is the master for that. The most core HR systems do not hold all that local information that you need for payroll. And so what you have as you have a subset of data that travels, and then the payroll administrator needs to augment the data in the payroll system so that people get paid appropriately. And typically, what you do is you move back the outcomes, and you absorb that in the system. And you also make the payslips available, and many companies opt to move the pay slips back into the core HR system. Because that means that only payroll administrators log into the payroll system, and everyone else can find everything in the core HR system. That is not always possible. So I know that some of these global Payroll vendors also offer the opportunity to employees to log into this overlay, into this data layer, and download their payslips there. And if you get really fancy, there's also some opportunity to look at some sort of dashboard for yourself and play around a little bit with the payroll data so that you can see what would happen if you, for instance, pay a little bit more into your pension or asked for a little bit more cash. So you have some sort of total compensation statement that you can download from there.

Sandra Redlich  22:04

Yeah, it sounds like you've seen a lot of changes already happening to these solutions?

Anita Lettink  22:11

Yeah, and all very exciting, because in the past, payroll solutions would be very much optimized for the payroll administrator. And now you see that companies are also really thinking from an employee perspective, what does an employee need? And how can we help them better understand their financial situation and give them some options to adjust that? To optimize what they receive and pay and benefits?

Sandra Redlich  22:46

Yeah, it seems like it's become less of a one way street, and it's opening up a little bit more to cater to both sides, to both needs. Is there anything else when it comes to developments and trends that you could imagine seeing or something that you've heard people asking for that is not there yet?

Anita Lettink  23:08

Not too much ask for what isn't there yet. I see that a lot of companies are experimenting with earned wage access, right, paying people or where employees can request a certain portion of their pay once they have worked, instead of having to wait until the end of the pay period where they receive the whole amount. Something that is more focused on the payroll administrator is the ability to automate more off the process. So having less manual interventions usually means having less mistakes. And payroll vendors have been trying really hard to understand which steps can we automate. And so that payroll runs without any person doing certain steps, also producing the reports, sending files automatically to be approved. I see a lot of that makes the life of everyone a lot easier, both of the vendor and of the payroll administrators. And then they are starting to build intelligence into payroll engines as well. And that very often comes in the form of anomaly detection. Meaning that it scans, for instance, you have 10 employees, nine receive benefits, one doesn't. And so it flags that one employee to the payroll administrator and says why doesn't this person have benefits because these nine others have it? And that's a way for a payroll administrator then to correct that mistake. And over time, the program really learns how to correct mistakes. So in the first phase, it only flags mistakes but then it learns what a payroll administrator does to correct them and so in a later stage, people flag the mistake and the most appropriate action that is taken and then the payroll administrator can just say, ‘Oh yes that is the correct perk correction, and then it goes through. So, payroll engines are also starting to become more intelligent. 

Sandra Redlich  25:24

That’s some very exciting developments there. I’m sure there is more to come and a lot more to learn from working with them. I know that you have a newsletter that you write and that you send out and we will include a link to that, because it is a really valuable research, as well, in our show notes. For now I want to thank you for your time. Thank you for talking through payroll. I know it's one of those topics that keeps popping up. And there's always something new to talk about. And it's super, super important. And I hope that we shed some light on some of these exciting developments and steps you can take. If you want to get in contact with Anita, we have her contact details and links on our landing page as well.

And yeah, thank you for your time and I'm sure we will be back to discuss some more payroll at some other point.

Anita Lettink  26:25

Thank you, Sandra. It was lovely to be here.