Insider Business Club: International HR and payroll

Just how tricky are payroll and HR issues when you are trying to expand
abroad?

Rupert Merson, partner at BDO Stoy Hayward

A common mistake is to assume that international expansion is the same as
national expansion and to pay insufficient attention to the cultural values and
HR differences from one country to another. Some of the mechanical issues can be
sorted out with time and attention, some of the softer issues in particular are
very difficult to address.

So many acquisitions don’t yield the value that their business plan suggests
because of the failure of post acquisition integration activity. It’s easy to
forget the softer, cultural issues.

Clients need advice, help and support because there will be issues overseas
that they have no experience of. Conducting an acquisition puts you under
enormous pressure on the capacity of the management team. For that reason, a
well-managed acquisition depends on adding capacity to manage and integrate the
acquisition properly. That can come from outside consultancies and agencies from
people who have been there before.

At a time when firms are committing significant resources to the acquisition
to start off with and they will understandably be nervous about adding still
further costs after the event. The question is not really whether you can afford
to incur the costs, it’s whether you can afford not to.

Corporate governance can be reduced to ticking forms. Managing people is a
lot more complicated than that. The answer to these problems is not easy, but it
lies very much in creating a culture a values-based system within an
organisation. That is where real control and sense of responsibility lie, not
simply ticking a box to say that you have done something when you probably
haven’t because it’s 5:30 and you are dashing home to catch the train.

The days of the accountant who doesn’t understand people are long gone, just
are the days of the HR professional who wears a badge of pride because he can’t
tell the difference between a two and a five. We need HR people who are
seriously interested in measuring the value that they bring and a FD who is not
interested in capturing the complexity of the people problem. They are people of
the past.

New people in different countries doing business together can be facilitated
enormously by technology. You don’t need to jump on a plane and start burning up
the planet to achieve many of the things that you need to achieve at post
integration to make it work.

One of the real problems is the extent to which organisations are too
inclined to outsource things that really matter. If you outsource everything,
you are so far removed from the core of the business that you are working on
that you don’t have a sense of responsibility to it.

Why do FDs need to take HR issues seriously?

Allan Brennan, managing director, ADP UK

Managing HR on a domestic basis is difficult enough but taking this task
internationally does create significant challenges. International companies need
to be very conscious of costs and the issues of how they get people, how they
manage people’s overtime, how they manage their absence, how they manage their
holiday entitlements.

A lot of companies see payroll as very much a back office function. It is
often only when these so-called back office tasks hit them head on that they see
the pain. A lot of FDs see no value in many of the HR and payroll-related tasks.
The value for them is the focus in the areas that will help their business grow
and be more successful.

For staff, the most basic need is to see that their pay is in their account,
that it is accurate and meets all of their legislative needs. As an FD, you
can’t play around with that stuff.

Problems often boil down to just not understanding the legislation. But there
are cultural differences between countries, in terms of the way in which they
work, holiday entitlements, the way you hire people, etc.

Ideally companies would not have an imbalance between their concerns for
people and for corporate compliance but FDs need to be making sure that they are
moving both of those agendas forward.

There’s a growing trend towards areas such as employee self service and
manager self service, where through online access employees, HR managers and
line managers have options to manage their projects and their staff using
technology.

How many FDs really know the true cost of their employees? Recording the
pensions, the benefits, the expense accounts, the P11D related information cards
– recording that information on a global basis and being able to report on it is
very powerful.

FDs have been carrying the burden of a lot of their people management
challenges themselves. Because the data hasn’t been there, HR hasn’t been able
to provide it. In many cases they haven’t even seen it as a priority. Now FDs
have ways of pushing some of that responsibility into the organisation. They can
see their HR groups contributing more to growing the business.

With HR, you don’t want to go down the box ticking route. But to do it right
every time is a solid skill and you would have to be a jack of many trades. You
should take advice and seek out service providers who can help and who can give
you service level agreements and corporate governance reports that satisfy you.
Outsource the stuff that is not in the value, and take good advice while you are
doing it.

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