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SuccessFactors Employee Central Payroll vs. MCPO: Which wins?

Learn how combining Employee Central Payroll with multi-country payroll outsourcing may be the best way to cover smaller workforces across the globe.

Typically, a positive ROI on SuccessFactors Employee Central Payroll is only really achievable when the employee...

count in each country exceeds 1,000. If you have multiple countries with populations under 1,000, the business case for using Employee Central Payroll for these countries -- or at all -- can be challenging, even if it is the right option for larger countries. And although at the time of writing Employee Central Payroll covers 41 countries, many users have employees in countries not in the list of 41. In other words, it won't make sense to use Employee Central Payroll for the countries where employee count does not exceed 1,000. So what's the best way to create a multi-country payroll system?

A look at MCPO vs. Employee Central Payroll

Multi-country payroll outsourcing (MCPO) is a way to cover the countries that can’t be covered on SuccessFactors Employee Central Payroll. MCPO is an end-to-end managed payroll option whereby the payroll vendor provides coverage for multiple countries on its own aggregation platform, often for employee populations of 1,000 employees or less (often referred to as the tail or long tail). These vendors are often referred to as aggregators. There are a number of MCPO vendors in the marketplace, such as Celergo and CloudPay.

The figure below depicts the relative positions of the long tail and Employee Central Payroll in the payroll landscape.

Interface from Employee Central Payroll to MCPO vendor

The other advantage of using an MCPO provider is that only one interface is needed from Employee Central to the MCPO vendor's system to replicate employee data, and only one interface is needed back to your finance system to post the results of the payroll. You only need one contract with the MCPO vendor to cover all countries, thus consolidating payroll costs and the administrative burden of paying multiple vendors. Support is also handled through a single channel, again avoiding the burden of dealing with multiple payroll vendors. Additionally, you can often perform consolidated reporting in the MCPO vendor's system and have the vendor handle statutory filings and audits in each country.

For consolidated reporting of payroll results from both Employee Central Payroll and the MCPO vendor, you can use the standard Payroll Results Export object and build an integration to populate the object with the MCPO vendor's payroll results. (Functionality already exists to populate it with payroll results from Employee Central Payroll.) You can then use the online report designer and a standard report to view the payroll results from across your payroll landscape.

Let's examine a quick example to see how this looks. The table shows a customer that has 13,500 employees across 12 countries.

Example of global coverage from SuccessFactors Employee Central Payroll and MCPO providers
ROI of Employee Central Payroll depends on the number of employees in a given country.

As you can see, Employee Central Payroll can clearly accommodate the United States, Germany and Mexico. However, the remaining countries fall below the threshold and will be managed only by an MCPO vendor. Even countries with as few as 13 employees can usually be handled by an MCPO vendor.

SuccessFactors Employee Central Payroll long-tail diagram
An example of global coverage using both SuccessFactors Employee Central Payroll and MCPO providers.

Where does MCPO sit in SAP's payroll strategy?

The good news is that SAP is fully aware of the MCPO concept and partners with a number of MCPO vendors. In recent presentations at the SAPPHIRE NOW and SuccessConnect London conferences -- as well as at SuccessConnect Vienna last year -- SAP promoted MCPO as a complementary option for Employee Central Payroll and as one of its four pillars of payroll alongside Employee Central Payroll, SAP ERP Payroll and Managed Payroll. While not all sales executives across SAP are aware of the option, customers can request information and support from SAP if they require an MCPO option.

Getting payroll right matters

Payroll is a critical aspect of every organization. I like to call it the ultimate system of engagement, since no other level of engagement equals that of being paid. For global organizations that operate across multiple countries, managing payroll can be a difficult and unwieldy task. With varying sizes of populations in each country and a multitude of payroll vendors, it can take a significant amount of effort to maintain all of the integrations and ensure data consistency throughout your payroll landscape.

For global organizations with a varying number of employees in each country in which they operate, being able to simplify and effectively manage payroll is important for their ongoing digital and HR transformation initiatives, while also reducing costs and complexity.

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