What are you seeing in the international payroll space in 2017?
You’re really looking at a change in market practice. Payroll has always been a fairly decentralized process for multinationals. Companies have always had multiple contracts and vendors across various countries. And now modern technology is allowing companies to harmonize that. This process really began around ten years ago. SafeGuard looked out from being a UK payroll provider to being a global one, and this year we had $56 million in revenue and 540 employees globally after starting from zero revenue and eleven employees.
What did the rollout of SafeGuard look like?
Generally, I think there are a number of streams you need for any new product rollout. You need early adopters to accept your product, and we were lucky that many expanding technology companies were willing to adopt new technology. You’re seeing a whole vendor and model replacement cycle taking place over ten years in payroll. The model we deploy now has the acceptance of the analytics community which is hugely important. It’s also crucial to be able to show that your model is profitable.
What should you watch for when expanding into a new market or country with payroll technology?
It is important to truly understand the country you’re entering. Harmonizing your corporate culture with both the corporate and overall culture of the country you’re working in is very important. You must ensure you’re harmonizing all the rules and regulations of each country you enter with your human resources and human capital elements. Talent acquisition is most important of all. The people you bring on for the first stages of growth are crucial to the success of your brand in that country, as well as your ability to attract more talent.
What’s an example of somewhere SafeGuard had difficulty expanding internationally?
Placing our office in Mexico City was the most difficult. We were growing quickly, and needed a footprint in Latin America, but it took more of our time and focus than anticipated. Our most recent acquisition was in Budapest, Hungary, and by then we had a pretty good template in place, so it was less challenging.
“The people you bring on for the first stages of growth are crucial to the success of your brand”
I think people often underestimate Mexico in terms of both opportunity and difficulty. If you can’t master Mexico, you’ve got no business expanding to places like India or Africa.
That’s correct. In India, landlords include desks and other finishes as part of the rental agreement, so capital requirements are lower. This is not the case in Mexico. I advise companies to examine the overall budget needed to move into a country and decide whether that country is a sustainable long-term market.
I’m sure that’s why clients come to you for your professional services. What role can you play in helping your clients expand their businesses?
SafeGuard helps our clients to better articulate their goals and objectives by highlighting their risks, as well as providing solutions through our own entities to accelerate their deployment of staff with less risk. I consider SafeGuard a real partner for any company trying to go global, helping them to understand the true cost around human capital in a given country.
There have been some interesting trends in the global labor market, with automation and technology gnawing away at traditional jobs. This has placed pressure on politicians to ensure labor gets what it needs. What kind of risks does this present to companies, and how can you help?
We provide services in 114 countries, and each of those governments has an agenda, so it’s a tough world to navigate. There is a lot of information out there, and it can become confusing, so we try to demystify some of that information around human capital, employment rights, and employment law. We strive to keep clients abreast of new developments with pay and employment practices so they stay compliant.
Acknowledging these pressures are increasing, what has SafeGuard World International identified as key trends to watch moving forward for Global HR?
We’ve seen an unparalleled year in terms of global change, and I don’t think that pace will change. Data protection is changing massively, new requirements coming out in 2018 will push multinationals to think about how to protect data. Furthermore, individual countries like Russia and others are changing their data protection policies as well. Rather than harmonizing globalization practices, you’re seeing some opposing views, which is interesting.
Also, with the gig economy taking off, you’re seeing companies trying to figure out how to preserve tax revenues amid changing employment models. This is likely to continue in the coming years, so compliance risk is a real focus of ours. Obviously, the EU post-Brexit will merit a lot of attention as well.
“I consider SafeGuard a real partner for any company trying to go global”
What are some of the key signals you’re looking at when it comes to Brexit?
At the moment the biggest theme will be the movement of people. What will happen to clients headquartered in the UK? Will employees need a new visa? Will they be given a waiver? Then there will be a plethora of other issues around incorporation, value-added tax or sales tax treaties. It’s nearly impossible to predict whether we’ll see more of a hard Brexit or a soft Brexit.
These are issues that have been keeping people up at night. From Russia and data localization, to TPP, to issues with Brexit and the EU. What countries stand out to you as leaders in thinking through these shifts in the global landscape?
From a business continuity perspective, our clients in the Asia-Pacific are growing significantly. While there’s always political turbulence in the region, there is also high growth for our clients in the region. Europe is obviously going through drastic change at the moment. We work with the EU data protection council, and they’re encountering challenges stemming from the move from static data centers to cloud data centers. In the US, the Trump Administration has an appetite for deregulation, which will impact across the world because a majority of multinationals are headquartered in the US. I would expect regulation fluctuation, and once it comes through, we can better inform clients on their strategic decision-making.
We talked earlier about how hard finding the right talent can be. Why is this so challenging, particularly in hazier labor markets?
If you don’t have connections entering a new country, the challenges can be huge. We’ve found having a global recruiting partner is tremendously beneficial. And this is true across every country we’ve entered. China can be especially difficult because of cultural and language differences.
Do you find companies generally understand this challenge early on?
No. And it depends where you are as an organization. Large ones tend to understand, but we often work with companies that have done well domestically, but have never experienced the challenges a new market can pose. This is where having a playbook of potential challenges is invaluable.
Is digital banking an issue for payroll?
This could be a whole separate interview, but it is definitely very challenging for people. Having the right banking partner is challenging since they all operate so autonomously from country to country because of regulatory schemes. There are some great partners, we work with organizations that have partner banks all over the world, and are able to send funds without having to put a footprint down in a country.
Is there any other subject area you’d like to touch on?
Just that I love what GetGlobal is doing. It’s a great community that we’re pleased to be a part of.