Article

5 things to think about before outsourcing your payroll

By November 10, 2017

Is payroll outsourcing right for your business? Each company needs to strategically assess the benefits and impact before committing.

Payroll outsourcing is certainly not a new concept, but it’s also not for every organisation.

The decision should come from a strategic level analysing what the benefits and impacts will be to your business.

Each business needs to take into consideration their individual scenarios to access which is the most viable decision for them.

From our experience, here are the top five aspects you need to consider before making your final decision.

1. Accuracy & Accountability

Having reliable and accurate information that your business can rely on is essential for managing costs, forecasting and planning.

Indeed, the consequences of payroll inaccuracy within a business can be far reaching – disgruntled employees, invalid reporting, and the risk of breaching government regulations, just to name a few.

In general, outsourcing payroll services leads to a greater level of trusted information and less errors due to the use of tried and tested processes and technology.

2. Data Safety

Now of course the control of all your employee’s personal data – bank details, salary information, contact details etc. – is an important security consideration.

In the decision making process you need to consider your comfort levels – of both management and employees –  with where this sensitive information is being stored.

With in-house payroll services, you will need to assess the technology you are using, IT’s ability to safeguard the information and where your data is being stored.

By outsourcing to a payroll company, you can benefit from state of art modern infrastructure, security and disaster recovery systems, which are usually beyond the capabilities of most businesses.

However, be sure to investigate vendor’s capabilities and procedures towards data security before signing on the dotted line.  Ask your vendors:

  • Where they store data (offshore or onshore?)
  • What security checks do they have in place?
  • Who has access to this information?
  • Have they had any security breaches in the past? If so, how did they manage this?
  • How often and by whom is their data centres audited?

Key question:  Who is better equipped and resourced to handle the data security of information?

3. Available Staff & Resources

The levels of control over your payroll data may also be dictated by the level of internal resources you have available to you.

The number of payroll people and resources needed in-house will of course depend on the size of your business, how technology-enabled you are, number of employees and the intricacies of your payroll system.

You need to consider the level of knowledge and experience available to you in-house, and whether it is sufficient to operate compliantly. Remember best practice transaction management means you need to be web-enabled for automated transaction management.

The benefits of outsourcing is that it is easily scalable, especially since good vendors should be able to provide the relevant level of staffing and resources at the level of expertise demanded.

As their core business, it is in the best interest of the payroll company to hire the best people and to be driven by efficiency.  This means they will also have highly automated functional modern systems to remove manual processes and intervention.

Your company may also benefit from gaining a ‘team of experts’ for less than the cost of one full time employee.

Overall, outsourcing enables your team to concentrate more on your core business rather than the repetitive necessity of payroll transaction management

Key question:   Can you afford to assemble an in-house team with the same calibre of expertise and efficiency of an outsourced provider?

4. Payroll Requirements

The level of knowledge and commitment you require from your payroll staff will also depend on the complexity of your payroll requirements.

Investigate:

  • How frequently do your employees get paid?
  • Do you have different pay cycles for different staff?
  • Do you have all full time employees or a mix of casual, freelance, full time and part time employees?
  • What awards, benefits, deductions, allowances, need to be managed at each pay cycle?
  • How many hours is actually required in a week to manage the payroll process?

Key question:   Do you have the capable internal resources, knowledge and technology to deliver your payroll requirements compliantly?

5. Payroll Processes

So now it is time to take an honest assessment of how your payroll is currently being managed in-house.

Ask yourself:

  • Are the processes and systems we are using for collecting payroll information automated?
  • Are employees still filling out timesheets/employee forms etc. manually?
  • Are we using a number of disparate technology systems to manage the payroll process?
  • Do we have best practice process in place to remove risk and increase accuracy?
  • Does our technology support our people in making clever decisions?
  • Do our people systems identify waste?
  • When did we last change or make our process to reduce effort?

Old fashioned payroll strategies that are inefficient can impact your business by adversely affecting your budget and output.

The benefits of outsourcing is the integration of industry best payroll practices with systems that enable informed decision making, thereby driving a solid return on investment for your business.

Key question:   Is your in-house team and processes being managed at industry benchmarked levels and help drive business decision making?