Outsourcing your payroll operations should herald the beginning of significant company-wide productivity gains, a reduction in costs, and an increase in compliance. There are several arrangements that exist under the banner of ‘payroll services’, however a fully managed service often provides the most value.
Most organisations outsource their payroll services to:
- Reduce costs.
- Remove single points of failure.
- Automate or digitise processes.
- Improve data quality.
- Improve systems and reporting.
Switching from an in-house to an outsourced payroll operating model has its challenges, however most failures occur when there is a lack of clearly defined objectives or purpose.
Before outsourcing your payroll operations, ask these six questions.
Who will provide payroll support?
Most payroll service providers claim to fully manage payroll, but few actually do. A critical element — employee query management — is missed. If query management remains internal, payroll support staff will still be needed.
When an employee has a complex payroll query, they go to their managers to resolve it. Managers are not payroll experts and often cannot help. The issue is then referred to the HR or Finance department who may spend days or even weeks trying to solve it.
Multiply this by many employees and managers, and HR and Finance staff soon start to question the effort required to support employees. This may result in the organisation rehiring internal payroll staff, resulting in projected benefits of outsourcing being lost to the organisation.
Payroll providers that offer ‘end-to-end services’ have full query management support for both employees and managers. It’s important to investigate the payroll provider’s helpdesk offering and whether they directly manage employee queries without intervention from your organisation.
What are the payroll provider’s standard operating procedures?
Many payroll providers will allocate a single payroll person to manage all service delivery tasks and outputs. In this model, payroll accuracy relies on the knowledge and competency of one person.
This arrangement can work if that individual is highly skilled and dedicated solely to your account. But what happens when they resign or get transferred to another account? The resulting disruption in service may lead to errors that cause rework and rectification.
When choosing a payroll provider, find out how many people will be assigned to your account and what functions they will perform. The best service models have a team of people performing end-to-end operations, backed by systems and robust processes to manage and monitor payroll production.
How will manual payroll processes be automated?
One of the primary goals of outsourcing your payroll operations should be to support the removal of manual back-end processes. Manual administration attracts errors resulting in rework, disgruntled employees, inaccurate data, and business-wide inefficiencies.
While many payroll providers focus on removing core payroll processing functions in the backend, they may not have a solution for front-end data capture. Managers and employees may still need to manually create timesheets and leave records, missing an opportunity to remove labour-intensive processes and data entry issues by digitising these functions.
Make sure you choose a payroll provider that offers the ability to electronically capture data and payroll transactions through self-service dashboards, eliminating the need for manual input. Ask your prospective provider how they will help your organisation embrace automation and remove manual administration.
Will the payroll system support real-time reporting?
A common pitfall of payroll outsourcing is that providers cannot produce the reports that organisations need to make employee-related decisions. Often reports can’t be delivered until a pay period has closed, providing little to no time to make critical business decisions.
Outsourcing your payroll function should alleviate manual manipulation of data to obtain valid information. Most companies resort to Excel to merge data from various systems which compromises data validity and timeliness.
Check that your payroll provider’s systems and integrations store all employee information, and that data is accessible in real time. There should be no limits to the amount of employee information — or the level of detail — that can be stored and accessed.
Reports should always be available and delivered to the right people in your business at the right time. Have a list of reports you need up front and check they can be delivered.
What’s included in Service Level Agreements (SLAs)?
You can’t manage what you can’t measure. Make sure your payroll provider is accountable and you have agreements in place. Service Level Agreements (SLA) detail the complete services, time and format in which they are to be provided, along with the responsibilities of each party.
A payroll provider’s SLAs should include a schedule of service items and exclusions, detailing who performs each task. If a task does not form part of their standard services, then the SLA should detail the associated costs. It should also include escalation paths and frequency of performance reviews.
Where is the payroll support team located?
To ensure timely service delivery, it’s vital to have payroll managed in your time zone, and without language or cultural barriers.
Remotely located or global payroll service providers have challenges sourcing knowledge and expertise in country-specific statutory and regulatory requirements, meaning you need to spend more time supporting and updating them.
Choose a provider with a payroll service team located in the same country or region as your payroll regulators. This will mean you have access to local expertise, as and when you need it.
Reliable payroll providers do exist
When considering managed payroll services, a little knowledge is a powerful thing. By fully understanding your needs, you can ensure that your provider meets all of them. A reliable payroll provider will offer accurate, timely and trustworthy information along with:
- A defined set of best practice procedures.
- Query management response services for employers, managers and employees.
- A team of local experts to guide you through regional legislative changes.
- Systems and processes that are highly automated and feature-rich.
Most importantly, your chosen payroll provider should offer solutions that match your current business needs and can scale with you as your organisation grows.
For over thirty years, Affinity has been a trusted partner for mid-market and enterprise businesses in Australia and New Zealand, empowering them to transform their payroll operations. With a focus on turning payroll from a cost into an asset, we have established ourselves as industry leaders in delivering innovative cloud-based payroll software and exceptional payroll services.
