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Payroll Lab Global Payroll Understanding the European Payroll Partnership

Dave Foxall Understanding the European Payroll Partnership

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 By Dave Foxall

Do Pan-European Payroll Services Have a New Model?

Much like payroll service providers in the Asia Pacific region, for organizations operating across a number of European countries, the business case for outsourcing to a single, coordinated payroll service provider is clear. The organization can focus on its core business while also reaping the benefits that a third party provider can offer: consistency of service, standardization, unified business information with deeper reporting insights and – importantly – on average a 15% cost savings (according to outsourcing advisory firm, Alsbridge). However, while the potential benefits may be compelling, they can only be realized by a genuinely unified payroll operation and finding a provider who can navigate Europe’s complicated legislative landscape and deliver those benefits can be a challenge (which is why a new model for European multi-country payroll management is of interest). The Payroll Services Alliance (PSA) is a group of five leading regional payroll providers covering almost 30 countries across Europe. The combined client base makes them the number two European payroll provider (after ADP) by volume of payslips. The question is, are they really offering a new, ‘third stream’ option of just a hybrid of existing approaches?

The Two Basic Approaches to Cross-Border Payroll

Multi-country payroll specialists Webster Buchanan described the two most common technical solutions to unified management of payroll across different countries:

  • The integrated model – the truly centralized approach in which a single software ‘engine’ is used to manage the core processing across multiple countries, with individual business rules and country requirements layered on top.
  • The aggregator model – also called the broker model, the client is presented with a single point of contact and access to data; while the actual processing is done ‘locally’ by a network of expert in-country partners (ICPs) who feed back to the service provider via ‘middleware’ technologies.

How is the Approach of the Payroll Services Alliance Different?

PSA’s set up is certainly not an integrated approach; there is no single system or database in use and PSA is five separate autonomous organizations working together and not a sole provider. However, neither is the PSA an aggregator. Webster Buchanan’s David Longworth, writing for the International Payroll Center website, highlights two key differences in PSA’s service offering. Although, the client’s employees in different countries may technically be serviced by differing firms within the Alliance, there is not middleware to pull the data together. Instead, the consolidated reporting is provided through what Longworth refers to as, “a set of data “cubes”, or analytical services that can pull data from the providers’ systems.” Secondly, unlike the aggregator model, individual country payroll is not sub-contracted to a network of independent providers. Again, as Longworth puts it, “rather than dealing with one aggregator and through them multiple ICPs, in this model you would be contracting direct with the providers, albeit with a single point of contact.” This is an altogether more collaborative, self-organizing style of working than the usual aggregator structure and the member organizations have agreed common service level agreements based on the service levels they already work to.

The aim is to offer clients the benefits of a single point of contact for all payroll issues while leveraging the Alliance’s broad geographical coverage. The common service level agreement is backed up with various other unified services – including a single method of invoicing and shared sales and marketing resources – which can be applied differently depending on each client’s needs.

The Payroll Services Alliance so far…

Belgium-based SD Worx is one of the two founding members and in the past adopted the more ‘traditional’ aggregator approach, partnering with smaller firms in countries outside of its usual territory of Belgium, Netherlands and Luxembourg. In search of a more harmonized approach, SD Worx initially partnered with Nordic provider Aditro in 2010 and the Alliance became fully pan-European in 2011 when the membership expanded to the current five partners: SD Worx (Belgium, France, Netherlands, Germany, Luxembourg); Aditro (Sweden, Finland, Norway, Denmark, Estonia); Elanor (Central and Eastern Europe); Seresco (Spain and Portugal); and Trianon (Switzerland). The scale of the combined service includes:

  • Operations in 27 European countries
  • Over 450 M EUR in combined revenues
  • 4,200 employees
  • over 51,000 customers
  • over 5.5 million payslips each month

Final Thoughts on A New Pan-European Payroll Model?

The Payroll Services Alliance does seem to have applied an approach new to the payroll services outsourcing market. It is a genuinely European venture with – hopefully – the expertise that that implies rather than being the ‘Euro arm’ of a larger operation and therefore at risk of being subject to more global corporate priorities. What’s more, their position as Europe’s second biggest service provider suggests an instant benefit of the partnership model. However, as David Longworth observes, “It’s still early days for the Alliance; with its latest expansion taking place only in December, the first joint customers that will provide proof points of the approach are still being implemented. We’ll be watching with interest.” End

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The aim is to offer clients the benefits of a single point of contact for all payroll issues while leveraging the Alliance’s broad geographical coverage.”

 

 

 

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