Compliance is defined by Merriam-Webster as “the act or process of doing what you have been asked or ordered to do.” Unfortunately for HR and payroll professionals, that’s … well … a lot. And when operating across national and continental boundaries, navigating the maze becomes a monumental and stressful task.
Generally speaking, what we are “asked or ordered to do” can be broken into three categories:
- Company Policy—Complying with policies and processes that are unique to a company and are there to help us do business in a certain way. It could relate to industry standards or drive things like efficiency, environmental and social responsibility, and cost savings.
- Negotiated Agreements—Complying with collective bargaining agreements, supplier contracts, client contracts, or social/community contracts. These are negotiated rules but legally binding.
- Laws and Regulations—Complying with government (local, state, provincial, federal/national) rules and regulations that were enacted through legislation. The most obvious examples are labor laws, tax laws, privacy laws, and accounting rules.
These three categories are underlined by two variables. One, they’re not the same in each country. Two, they’ll never be constant. For example, in the United States, under the Internal Revenue Code, employer penalties for failure to deposit, payroll taxes range from 2%-15% of the amount due depending on how and how late deposits are made. Wage and hour settlements can be even more expensive.
Research published by NERA Economic Consulting “identified total wage and hour settlement payments of $445 million in 2013, $400 million in 2014, and $39 million through the first three months of 2015, bringing the aggregate amount paid for cases settled since January 2007 to over $3.6 billion. In total, our database contains 613 settlements from January 2007 through March 2015, for an average rate of approximately 75 settlements per year.”
These settlements resulted from lawsuits bought by current and/or former employees alleging unpaid work (such as overtime), failure to provide meal and/or rest breaks, and work done off the clock. This is just one category from one country. For global organizations, these challenges are further magnified when doing business in multiple countries.
Ceridian’s CEO Aaron Hurst laid out a great roadmap in his article 3 Keys to Maintaining Compliance With a Global Workforce that should be considered when rolling out a compliant global workforce management strategy. (Hurst was also featured in the April 2016 Global Payroll issue speaking about the different emerging trends.) The three keys are 1) effective data management, 2) employee- and manager-friendly self-service, and, 3) a strong partner (solution provider).
In this article, we will focus on the first piece—managing global data—and understanding each category.
The different elements of HR and payroll data fall into four categories:
- General employee data—Information such as age, address, employee ID, pay grade, compensation history, tax status, benefits elections, reporting structure, and certifications is recorded. Think of it as the employee file, which tends to be more static.
- Workforce management data—More applicable for the hourly employee (including consultants where time is billed as revenue) and contains time worked, hourly rate, shift data (e.g., holiday hours), earned time, schedule preferences, and absences. This data continuously changes and is updated in real time daily or weekly.
- Documents—Include files and attachments of things such as written warnings, scan of licenses, work contracts, non-compete and non-disclosure agreements.
- Extraordinary or elective elements—These include off-cycle bonuses, commissions (for sales), stock options and vesting schedules, housing, car, and other allowances.
Typically, rules govern the storage of each of these types of data. These could differ based on country. Permission to access this data also differs based on individual roles. But some data is integral to running the business and impacts agility and decision-making. When it comes to global workforce management, the three most critical questions to answer are:
- Is our workforce data stored compliantly?
- Is it accurate and dependable?
- Are we providing data to the right people when they need it?
After completing an inventory of the different categories, it is important to ensure that the rules governing storage are understood. Questions include:
- What kind of data is acceptable to maintain?
- How long do I need to keep data?
- Is the data secure?
In a spreadsheet-driven environment and with a dispersed workforce, this is a major challenge. Increasingly, we see global organizations seeking solutions from partners who truly understand the local rules and regulations of each country and can provide a solution that accommodates them. There are important questions to consider, especially when it comes to security. Does the system automatically purge data after the company’s time to store it expires? Are the permissions easily configurable based on role and responsibility? When changing the data, is there a documented audit trail that shows who did what? The answers to these questions changed based on the rules and regulations in the corresponding country.
Accuracy and Dependability
Data drives the business, and managers are held accountable for results. Enabled by advances in technology, a trend is developing as to how companies view time and pay processes.
A few years ago, it was difficult to imagine a holistic and accurate view of workforce data across different countries. Time and attendance solutions didn’t have real-time integration into payroll systems. The result was often old or stale data when it came to labor cost reporting. That hinders a manager’s ability to stay within labor budget plans. In addition, these systems might have been so customized in the way they were built that it was extremely cumbersome and expensive to create or expand reports to different parts of the workforce or the world.
Along with the aforementioned compliance risk, trust in workforce data—especially global—is the biggest challenge facing organizations today when it comes to data management.
Access to the Right Data
Along with accuracy, timeliness is necessary to ensure that managers are using the data for business impact. In most companies, labor costs are the largest expense item. Ensuring that managers have access to the data is key. Unfortunately, spreadsheets remain the most widely popular reporting tool for these managers. In addition to limits around the type of data, spreadsheets can cause staleness in the type of reporting. Most of us have been on the receiving end of a weekly or monthly spreadsheet report. Assuming the data is accurate and trustworthy, how often have we been able to add different components to it? Usually, only one person actually builds these reports and provides only so many formulas, pivot tables, and macros. That makes it virtually impossible to dig deeper, wider, or gain insight that helps us proactively anticipate issues (such as budget overages) before they happen.
Solving the Matrix
An effective data management strategy starts with an understanding of the type of data needed and how it should be treated. It all starts with an honest evaluation of where the data lives and who needs it. This means involving cross-functional stakeholders from finance, operations, and strategy. It’s hard to imagine an approach without taking advantage of a strong technology platform and an expert partnership. In seeking a partner, local expertise directly or through a broader global partner is critical. Because payroll is often the trusted source of truth in reporting to local legal and tax authorities, a local partner can help define the type of data needed and the rules surrounding its storage and dissemination.
Increasingly, companies are looking for a comprehensive strategy to address HR, workforce management, and pay processes in one technology solution. Cloud technology now affords companies new capabilities that legacy solutions didn’t. A comprehensive strategy is best enabled by a single application and one database. Breaking the silos between the different data categories will simplify access and reporting. It also enables companies to configure and manipulate data while maintaining a wider view of the global workforce and maintaining an audit trail of changes and updates.
By housing information in a system that is constantly and continuously monitored by a cloud provider using the latest security tools and mechanisms allows HR and payroll professionals to focus less on the tactical aspects and logistics of maintaining compliance and more on how to start using the data to be better strategic business partners. Lastly, scalability of cloud technology allows companies to easily add employees as they grow organically or through mergers and acquisitions with little to no incremental investment in IT and HR/payroll headcount.
A successful global workforce data management strategy should be developed for compliance, trust, and business agility. Understanding the type of data we need and having a broad, comprehensive strategy to store and disseminate it is best accomplished by seeking a global partner with local expertise and a technology built for the future.