Global Payroll RFP: The 10 Essential Elements
Alex Margolin| Aug 31, 2020
Composing an RFP starts with a clear set of goals. What is the company trying to achieve and how does it go about achieving it? What are the pain points it needs to address? What role does global payroll play in its larger strategy?
It is essential to remember – an RFP is not about finding the top-ranked payroll vendor, the vendor with the most features, or the vendor with the most advanced technology, though it could be any or all of those things. The RFP process is designed to help you identify and procure the payroll vendor best suited to the specific needs of your company.
The more clarity you have on what you are looking for, the more likely you are to find it through the RFP. Take a broad view of payroll, beyond simply paying your employees. The global payroll solution you choose will impact your HR, Finance, and Legal departments. It will touch on core business issues, including:
- Security and privacy
- Legal compliance
- Employee engagement and retention
- Workflow management and data consolidation
- Control over workforce spending
Timing is also an important consideration. Once you are planning your payroll implementation, you need to understand how long does the vendor need to go live with your entire workforce? Can it meet your specific time-frame? Can it provide a measurable ROI that will allow you to evaluate your decision?
An effective RFP can lead to finding the best payroll provider for your company’s current needs and help you meet your global expansion goals in the future.
The following are 10 essential areas to consider when putting together your global payroll RFP:
1. Scope of Payroll Service
The solution you pick should cover your current employment needs as well as your future needs as you continue to expand globally.
In the future, you may want to hire thousands of employees and contractors in 20 different countries, including countries where you don’t have an entity set up. The quickest way to get people started without an entity is through an Employer of Record (EoR) model. In an EoR, a payroll provider’s in-country partner serves as the legal employer for your employees while you direct them in daily tasks.
Your payroll solution should give you the agility to take on any type of worker (payroll, EoR, and contractors). It should provide an end-to-end service – from hiring to managing your workforce to making cross-border payments.
Another important element to look for is automation of the payroll process. Automation saves time in data collection, standardizes reports in different languages and currencies in one format, and eliminates processing errors. Any forward-looking payroll system should provide payroll automation.
- What differentiates your solution from other global payroll solutions?
- Which types of automation technology (such as RPA) are employed in the platform, and how are they used?
- Can the system standardize reports from different countries, in different styles, and different languages be consolidated into one report in a single language and currency?
2. Vendor Qualifications
When it comes to choosing a payroll vendor, you want a partner who will be with you as long as you need. That requires probing the vendor’s financial strength and customer base. Look for key performance indicators such as Total Payroll Under Management (TRUP).
Of course, the vendor’s leadership team is also crucially important. The team in charge should inspire confidence, have a proven track record in the field, and demonstrate that their company is flexible enough to handle new challenges as they arise.
Sample questions to determine vendor qualifications:
- What is the background and experience of the members of senior management
- What is the profile of your clients, particularly new clients from the past year?
- What is the company’s revenue from most recent year? What is the TPUM?
- What is the company’s growth plan for the next three years?
3. Compliance Assurance and Data Accuracy
Legal compliance is an ongoing challenge for any global company. Tax and labor laws are different in each country and subject to change at any time – as the UK demonstrated in April 2020 by changing the standards for worker classifications, increasing the number of workers classified as employees and subject to employer taxes. Without a system to monitor law changes in each country as they happen, staying in compliance is virtually impossible.
To maintain compliance, you need a payroll system with an in-country partner staying abreast of any changes that happen and letting you know when you need to make changes.
The ICP plays a key role in ensuring data accuracy as well. The ICP processes the data and the payroll provider handles the audit. This method establishes a two-layer system for ensuring data accuracy on behalf of the client.
- How do you monitor compliance for each location?
- What method does your company use to keep up with changes in labor laws and tax codes in the countries you serve? What process is used to update software after a change in labor law is enacted?
- What structure does your company have in place to ensure accuracy? Is it done primarily through automation, through people, or a combination of both?
- Are the people who process your payroll located in that country or is it handled from abroad?
4. Consolidated Reports and Real-Time Insights
With countless employees spread across dozens of countries, it is virtually impossible to keep track of overall payroll spending through spreadsheets and multiple data streams. When you have all the information across all locations in one dashboard, you can make quick and smart decisions and save money at the same time.
Payroll spending has far-reaching effects, impacting human resources, finance, and global strategic planning. Consolidating all the data for every location into a single report, language and currency is the only way to stay in control of your payroll. Having access to accurate and precise workforce spending reports can help you spot areas of your business that need improvements, such as excessive overtime pay in one department when an additional worker would ultimately cost less, or a budget shortfall in another department.
With an effective reporting suite, you don’t have to compare spreadsheets and Excel files from different countries to find out the costs of workers. The information is already in one place.
- Will I be able to see all my workforce data in a single view? What mechanism do you use to consolidate the information?
- Do you supply the accounting codes for all my payroll data?
- Can you provide business intelligence reports to compare time periods, projects, and locations, and to identify the biggest expenses?
- Can I customize my reports?
5. Geographic Locations Covered
While no payroll vendor has operations in every country on earth, the vendor must be able to operate in your key countries and be able to expand to those countries in the planning stages of your expansion.
It is important to know how the global payroll vendor establishes a presence in a new country and how long it will take. You want to know the ICP will be vetted effectively and the criteria used to choose among potential ICPs.
- What areas do you cover?
- What is your expansion plan for the next two years?
- How long would it take you to set up operations in a new location if my company wanted to hire employees there? What is your methodology for choosing an ICP in a new country?
- Can you produce payslips in different languages and make payments in the local currency?
6. Local Knowledge
One of the biggest barriers to entering a new market is the information gap. Companies don’t know the local culture, tax and legal requirements, the way business is done, salary expectations, or benefit benchmarks.
A global payroll supplier that can provide expertise to overcome the information gap offers tremendous value, both in the short-term and as an on-going partner.
Ideally, the vendor would offer more than access to local experts through its ICPs. The vendor should also have in-house experts who can answer questions about compensation, benefits, and the costs of hiring in a new country.
- Does the solution include any human support on the ground in the local markets?
- What is the process for answering questions my employees might have about their rights and benefits?
- Do you have experts in-house on employment laws across the world?
7. 3rd Party Integrations
In enterprise, HRIS and other digital systems are common and hold key information for payroll, such as the people who join or leave the company. Many companies have implemented employee self-service models for reporting expenses. You want to be sure you can leverage the data you have already collected and avoid the error-prone process of manually re-entering it into your payroll platform.
Your payroll system must integrate with the systems you are already using. If there is no way to integrate the systems, then you will have different streams of data for many of the same functions.
- Is your platform capable of integrating with our HRIS, Expense reporting, CRM, ERP, VMS, T&A? (If the answer is no to any of the systems you are already using, consider it an elimination question.)
- What’s the cost and complexity for integration? Will I need to bring an integrator?
- Will the vendor take responsibility for implementing the integrations? If not, how much effort will it take to install the necessary components?
- How flexible are the integration workflows? How much adaptation will it require from my company?
8. Security and Data Privacy
Payroll will always be an attractive target for cyber-criminals. A payroll vendor must always be at the cutting-edge of data security. Today, that means SOC 1 compliance and ISO/27001 certification.
Security, however, is no longer just protection against attacks. In the wake of GDPR regulations in the EU, it is also a matter of data privacy. Email is not a safe way to transfer sensitive data. An international payroll company today has to be able to provide a safe method for transferring payroll data that protects the privacy of the employees.
A company that provides less than top-of-the-line security and privacy protection will only fall behind further in the future, leaving you at great risk. Consider security an elimination question.
- What level of data security protects your system?
- What methods do you use to transfer data that does not involve email?
9. Pricing Model
Virtually all global payroll providers offer one of two models: a flat fee per payroll, or a percentage of each payroll. In the first model, the fees remain constant regardless of how much an employee receives as compensation. The second model may go up or down depending on how much payroll is under management, and the more high-end talent you hire, the more your payroll costs.
The pricing model you choose is important for today and perhaps even more important in the future. Your ability to plan your budgets accurately in the years to come will depend on how well you can predict your payroll fees.
That’s why the flat fee model is preferable to the percentage model. It’s simply a matter of knowing how many payrolls are being processed multiplied by the cost per payroll.
- What is your pricing model for each of your services?
- Is the pricing model a per employee or a percentage of payroll under management?
- Under what circumstances would you charge additional fees for service?
10. Payroll Continuity Plan
One lesson to learn from the COVID-19 crisis is the need for a payroll contingency plan. No one should be surprised in the next disruption, whenever it arrives. Companies need to plan now to be sure they are covered under all circumstances.
A payroll vendor must be able to present a contingency plan for all the elements of payroll that could be challenged in a crisis or disaster. How will the company deal with a loss of data, a situation where the local partner is unable to work, when the key people in each location are unreachable?
A vendor that cannot answer those questions has not fully absorbed the lesson of the COVID crisis.
- How would your company handle a major disruption in communications to ensure that payroll is delivered to every location on time and accurately?
- How can you ensure that you collect the payroll data you need even if the people responsible for sending it are unavailable?