A couple of years ago when I was chatting with the senior management team at a small multi-country payroll aggregator, I asked how they went about sourcing the different partners they use to process payroll. “Everyone talks about how difficult this is,” a senior exec told me, “but it’s really easy. You just do a Google search.”
Partner selection and ongoing management are central to the aggregator model, which is one of the most widely used service delivery techniques in multi-country payroll. Developed as a practical means of meeting different country-specific legislative requirements around the world, an aggregator builds a network of national or regional partners who calculate payroll on its behalf. Models vary, but commonly the aggregator will take in data from the customer, distribute it to its in-country partners for calculation, and manage the full end-to-end processing and reporting cycle.
I’ve lost count of the number of international payroll managers who’ve declared to me that one aggregator is pretty much the same as another, but the reality is very different – and the way aggregators choose and manage their partners is one differentiator. Few global payroll managers want to hear that the integrity of their payroll processing depends on how well a national provider understands the dark arts of search engine optimization. Sure, finding partners online has its upsides – search on the right websites and your monthly payslips might even come with free Viagra and a windfall Nigerian inheritance – but it doesn’t exactly inspire confidence.
In fact, everything from the quality of the aggregator’s middleware – the ‘glue’ that underpins data exchange and reporting – to their geographical coverage and preferred vertical markets can be a factor in helping companies determine which provider is the best fit for them. As the multi-country payroll market matures, some key capabilities are now standard, but other distinctions are becoming sharper as vendors look for ways to differentiate themselves. That’s why Webster Buchanan Research believes that the vendor landscape in multi-country payroll is moving into a more nuanced era, one that should be reflected in the way companies go about their vendor selection programs.
We’ve long urged caution in assessing the claims made by aggregators about their geographical coverage: aggregators still often define their country capability on the size of their network (in other words, how many countries they have partners in) as opposed to the smaller number of countries where they have live customers. The latter is more meaningful because it implies firstly that the technical integration with the partner is proven, and secondly that the partner’s performance has been monitored over time.
Going forward, we believe that in addition to geographical spread, more focus should fall on the nature of the aggregator network, its capability, and how robustly the aggregator manages it. The first point reflects the fact that while some aggregators rely exclusively on partners, many networks are actually hybrid set-ups where the aggregator will do the calculation itself in certain countries. This has a number of implications, not least in the way it impacts the cost equation for service delivery.
Robustness of management, meanwhile, is all about the aggregator’s partner strategy, selection procedures and governance. While there’s nothing wrong in doing online research as part of your partner selection process, there’s obviously much more to finding the right provider – and reputable outsourcers will go through an exhaustive process of due diligence and performance management contracting that can take many months. And that’s only the start of the cycle: once onboard, customers should be looking for evidence of a robust, structured partner governance framework that matches the partner’s performance to the performance that you, the customer, have been guaranteed.
This column was adapted from an article that first appeared in Payroll World