Is a centralized payroll process right for your business?

September 16, 2021

centralized payroll process

It's cliché to say payroll is important (duh). 

But the wrong payroll process can literally ruin your employee experience and sink your business.

When you have to pay employees across different countries, with different currencies, and different statutory withholdings, the waters get murky. Fast.

A centralized payroll process offers standardization and control amid the chaos. Here’s what you need to know.

What is centralized payroll?

Centralized payroll puts all your payroll activities under one umbrella. No more different processes, platforms or providers in different countries.

This approach to payroll management places control in a central location with top-down decisions coming from upper management. With all payroll data and processes in a single system, it's also easier for everyone who needs it to access it. Data-driven decision making for the win.

A centralized payroll process is common in larger corporations that favor control over cost savings. 

Is centralized payroll better than decentralized systems?

If there were a clear-cut answer to this question, there wouldn’t be so many blog posts discussing decentralized vs. centralized payroll. But for large multinational corporations dealing with payroll on a global scale, a centralized payroll process seems to be the favorite. Here's why.

Control

The No. 1 reason large companies opt for a centralized payroll process is control over costs, expenses and data. Centralized payroll standardizes payroll across all subsidiaries of the company so one system is used for everyone. From Germany to Guatemala, France to the Philippines.

Standardizing processes can go a long way toward making sure everything is accounted for. It’s the way to go if you love crunching numbers and making data-driven business decisions. Plus, standardized processes improve accountability, which inherently reduces error-based risks. 

Data security

Payroll systems are chock full of sensitive data. Names, addresses, banking details, social security numbers, race, ethnic background, affiliations, you name it. And much of this data is contained in payroll outputs and inputs. 

A single, centralized payroll system means there are fewer opportunities to compromise sensitive data. 

Enhanced productivity

A well-designed centralized payroll system benefits the entire company. With key payroll data accessible in a single location, information flows through the company easily. This increases efficiency and allows departments to more easily reach operational goals.

When to consider centralized payroll for your business

Many smaller businesses start out with decentralized payroll systems simply due to convenience and cost savings. But each stage of growth presents greater complexities in the existing systems. At what point do you call it and invest in a centralized payroll system?

Local expertise can be invaluable to a growing multinational company entering new global markets. However, too many independent decision-makers can also undermine the goals of the larger corporation. 

Are you struggling to collate data across the organization

Or have you reached a point where your incompatible systems are making it difficult to share the information people need? 

Then it's time to make a change. 

Management should never be left in the dark when it comes to details about how the company operates in different countries. But that's exactly what happens when your global company outgrows your decentralized payroll processes.

A centralized payroll solution can help you tighten up the reins on company finances. It can also help you stop wasting money on inefficient systems that are limiting productivity. Every year, U.S. businesses suffer $47 million in lost productivity. A big chunk of that is from using poorly designed or antiquated systems that cannot keep up with current business growth.

The bottom line on centralized payroll systems

When you're a smaller business, a decentralized system can work just fine. But as you grow into a global enterprise, a centralized payroll process will make put you in a better position to ensure compliance and meet strategic objectives.

Centralized payroll provides standardization that limits errors, mitigates risks and allows for clear oversight in terms that executive management can understand. And though centralized payroll can be a significant organizational investment, companies often see immediate ROI, with better access to data, enhanced productivity and better control over finances.

Learn more about how a centralized payroll process like Global Managed Payroll can position your company to achieve key goals and initiatives.

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