Drafting agreements with in-country service providers and managing relationships with them and the rest of the company are key parts of any global payroll operation, even ones conducted in-house, two payroll professionals said July 14.
A well-written agreement “gives peace of mind to a client,” as the client can both refer back to the agreement and hold the service provider accountable, said Sharon Tayfield, MCIPP, director of global payroll at BDO LLP UK.
At a basic level, the contract should set start and end dates, scope of work, and what services are covered or measured, Tayfield said.
The contract should include boundaries and expectations, clear and measurable levels of performance, and priorities and responsibilities for each side, Tayfield said.
“A matrix of responsibilities is very common” as a way to list as many required tasks as possible, when they need to be delivered, and who is responsible, Tayfield said.
Country-specific considerations in contracts include the date service starts for a country, Tayfield said, noting that it is sometimes better to start at the beginning of a tax year or to not start in the middle of a quarter. It is rare for service for every country covered in an agreement to start at the same time, she said.
Similarly, situations where service ends in one country and not others should be addressed, such as when the only contracted employee working in a particular country leaves and is not replaced, Tayfield said.
If a provided service is not required to be available constantly, the most critical times it is needed should be clearly indicated, Tayfield said. Time zones should also be considered when setting response times to issues, she said.
Even a specified currency and specified exchange rates should be used for payments required by the contract, Tayfield said.
The contract should address various force majeure situations, including public health crises, instability such as coups or strikes, natural disasters, or infrastructure failures such as power outages, Tayfield said. These are especially relevant considerations after the Covid-19 pandemic, she said.
Further unexpected situations can include notices from tax authorities, audits, employee disputes, or calculation errors, and it is important to remember to work patiently to understand the problem and resolve it with the service provider’s help, said Kira Rubiano, a customer engagement director and U.S. lead at Immedis.
“Managing the unexpected should be expected,” Rubiano said.
Managing Provider Relationships
Key to the global payroll model is managing the relationships between company executives, the payroll department, and employees, who all have their own priorities when working with service providers, Rubiano said.
Errors in any area of payroll can result in compliance penalties or unhappy employees, and success requires all stakeholders to work together, Rubiano said.
Successful management includes holding to defined deadlines, ensuring that provided data is complete, practicing good communication, and solving problems, Rubiano said.
Schedules to contracts with service providers should include metrics and key performance indicators with penalties for failure to meet defined goals, Tayfield said.
Businesses can change service providers for many reasons, but should put together business cases to determine whether they have the resources to change, as many decide to start global expansion before they are ready, Rubiano said.
In these transition periods, documenting payroll processes is an important part of transferring knowledge to the new provider, Rubiano said.
Considering the timing of service changes, as well as resolving outstanding tax returns, transferring powers of attorney or login or bank credentials, and making remaining payments under the previous contract, should all be part of changing providers, Rubiano said.
With the number of different relationships and expectations that must be managed, global payroll is “truly an art and not a science,” Rubiano said.
Tayfield and Rubiano spoke at the American Payroll Association’s Virtual Congress, which was held July 14 and 15.
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