How to avoid problems when implementing payroll for new market entries and acquisitions
As is often the case with new market entry and acquisitions, the commercial side of the business tends to dictate the timelines for new country implementations with little if any engagement with the functions responsible for onboarding new employees, running payroll, setting up bank accounts and disbursing cash. Perhaps understandable given the need to capitalise on a gap in the market or move on a new opportunity but from a payroll perspective problematic as aggressive or unrealistic timelines can present a number of additional and often unnecessary challenges.
However compelling your argument regarding the ideal lead time for a payroll implementation, it’s unlikely to delay a go-live date if supported by a strong, commercial led business case. Given the inevitable headaches presents, the purpose of this piece is to share a few tips which will help maximize the time available, mitigate potential challenges and ultimately enable you to successfully implement payroll to support a new venture.
The project team
• As soon as a new country is mooted, arrange some time with the commercial team to discuss the proposed schedule and engage other departments to support e.g. HR, Treasury, Finance, Legal and Talent Acquisition.
• If new market entry or acquisition activity is a fairly regular occurrence, it’s worth forming a stakeholder group with these teams so you can convene relatively quickly when a new country is announced. A joined up approach will help to ensure the timelines for each work stream are aligned and all functions are in a position to go-live at the same time.
• Making an effort to build a relationship with the commercial teams to keep abreast of new business activity will pay dividends and is likely to result in earlier involvement and maybe even an opportunity to reiterate requirements and timelines.
Planning & timelines
• A key output from the stakeholder group should be a comprehensive road map for onboarding new countries including timelines and dependencies.
• A detailed plan will provide a good estimate of the lead time to go-live, enable you to plan ahead and understand which tasks can run concurrently or take priority over others.
• If required, this approach can support a proposal to review timelines, manage expectations from the business and forewarn of potential challenges.
• Good communication is vital, particularly if timelines are tight, so make sure you have regular meetings with key stakeholders, using the project plan and an issues log to drive the agenda.
• Where possible, try to keep impacted individuals or teams who are not directly involved up to speed too and provide advance warning regarding important milestones, particularly if you require their input.
• If your organisation is already operating globally, speak to your existing payroll provider to ascertain whether they can support in the new country. If they can, find out if they’ll be providing the service directly or subcontracting, how long they’ve been operational in that country and how many clients they have.
• If you have a multi-vendor footprint, try to work with the local office of an existing provider to maintain some consistency and reducing the number of different vendors in play.
• Once you’ve made a decision, engage with the preferred provider as soon as possible to start the process and ensure you’re clear on the timelines for any country specific requirements. This can include appointing an official representative to act on behalf of the company, registering a new entity or pre-registering an employee before they start work. Having a set of standard questions or an implementation checklist to run through at the initial meeting will ensure you cover everything and help minimise the risk of missing a crucial task or misunderstanding a key requirement.
Getting up to speed with local legislation
• When setting up payroll for a new country, carrying out as much research as possible beforehand will be time well spent. Apart from the obvious advantage of expanding your global payroll knowledge, a good understanding of legislation and local practice provides a degree of independence and, if necessary, the ability to challenge your payroll provider.
• The internet is the obvious default for research but more often than not your payroll provider will be happy to offer advice and guidance. Some global payroll and professional service organisations offer similar, country specific guidance which can range from high level fact cards to very detailed, comprehensive documents. Whilst undoubtedly useful, availability is often subject to membership conditions or an existing client relationship so may not be suitable for everyone.
• Ask your payroll provider to pull together a schedule detailing monthly and annual payroll obligations including year-end filings. You don’t know what you don’t know so having a clear picture for the year ahead can be really useful, particularly once the new payroll has stabilised and is part of wider, business as usual operations.
Bank accounts & payment disbursements
• However thorough your discovery, build and testing, the project will rightly be considered a failure if you can’t physically pay your employees so the cash disbursement piece is crucial.
• Make sure your treasury team has the bank accounts and procedures to support and there are no market restrictions impacting currency in the new country.
• Opening a new bank account can be a lengthy process, particularly if a new entity is being set up at the same time, as the two activities are often inter-dependent. Even when a new account is fully operational, the cash disbursement process is fraught with fail points so testing and a clear understanding of the timelines are crucial.
• Carrying out a ‘penny test’ i.e. loading a test bank file to pay a small number of employees a nominal sum on a set date, is highly recommended, will provide comfort the process works and could save you time and effort further down the line.
Onboarding new employees
• Employee registration requirements vary from country to country so it’s important to clarify what your obligations are. For example, where pre-employment registration is required, failing to act accordingly could mean your new employee is unable to start work on the agreed date and, at the very least, is likely to attract unwelcome attention from the authorities.
• There may also be a legal requirement for new employees to provide additional documentation to support their educational or professional achievements and, on occasion, health records so clarifying what’s needed should be a priority. It’s often easier to collect additional documentation during the new hire on-boarding process so communicating these requirements to your Talent Acquisition team in advance will help to streamline the process.
Going-live & stabilisation
• For a completely new payroll, parallel running isn’t an option but, it goes without saying, additional care should be taken to ensure the first payroll is accurate.
• Where possible, try to get ahead of schedule so you have extra time to carry out additional checking and some contingency if things don't go according to plan.
• Ask your payroll provider to walk you through the gross to net calculation for a sample of employees and apply the logic to others until you’re satisfied. As with any implementation project, go-live is only the start so make sure focus is maintained until the payroll is stable and any teething problems have been resolved. - Build additional time into the processing schedule for the first couple of months to allow for unexpected challenges and regularly check in with your payroll provider to make sure everything is on track.