Myths of Payroll Outsourcing
In the discourse surrounding the myths of outsourcing, a consideration arises: Is your bureau working for you or are you working for your bureau? And why do companies choose to outsource payroll?
When considering cost savings and contingency planning, opting for outsourced payroll is a smart financial move. Payroll costs are a fixed expense, whether you handle payroll internally or entrust it to a specialised provider.
The fundamental advantages of outsourcing manifests in its capacity to generate substantial cost savings. By choosing to outsource, companies can avoid the need to maintain an in-house payroll expert or even a team of experts, thereby effectively optimising their operational expenditures. Beyond the realm of financial benefits, outsourcing your payroll offers additional layers of reassurance. Companies that engage in payroll outsourcing don’t need to be concerned about the unexpected absence of their payroll administrators, whether such leaves are planned or unplanned, and how these absences might impact the smooth processing of payroll.
The significance of time efficiency cannot be overlooked, particularly within industries with high employee turnover rates, such as hospitality, retail, or manufacturing. These sectors regularly deal with fluctuating data due to frequent new hires and departures on a monthly, weekly, or fortnightly basis. These complexities make in-house payroll work very labour-intensive and prone to errors due to the extensive manual data entry involved. Nowadays, larger companies often assign payroll management to their HR departments as part of their overall employee management duties. This extended role requires a thorough grasp of payroll intricacies and a continuous focus on keeping up with ever-changing payroll regulations. This additional responsibility adds to the already demanding task of staying informed about essential HR legislation.
What do companies want to achieve through outsourcing?
- Replacing the need to employ a skilled payroller in-house.
- Save time by not having to key data themselves.
- Have full support and assurance of compliance with all payroll related matters.
Payroll outsourcing in 2023
Payroll outsourcing in 2023 has witnessed significant transformations. In the past two decades, the landscape has evolved considerably. Initially, outsourced payroll involved a straightforward process: you faxed your payroll data to your chosen payroll bureau, and they managed all aspects of payroll, offering support for calculations and legislation queries while delivering paper-based payroll reports and payslips. This was a truly outsourced solution with all aspects of payroll being managed by the bureau.
However, with the introduction of front-end payroll software and integrated HR & Payroll systems, the lines of outsourcing have become less distinct. Nowadays, companies considering outsourcing are often guided towards inputting their payroll data into the bureau's payroll software, under the guise of streamlining their processes. Bureaus offering integrated HR and payroll software adhere to a similar trend, streamlining processes and avoiding duplication of data entry saving time and reducing costs.
The Reality of Software-fronted Outsourcing
Cost savings and Contingency – Front-end software doesn't always save time. You'll spend more time inputting data into an unfamiliar system, which can lead to extra training costs and the need to adjust your internal processes to fit the one-size-fits-all nature of the software. Additionally, contingency planning isn't assured. If the person responsible for data input is unexpectedly absent, there's no guarantee that someone else in the department can operate the software, potentially resulting in costly errors or the need for additional training, incurring further expenses.
Time Savings – Adapting to new software may slow down data entry, making it more time-consuming for you. This means the bureau saves time since you're handling the changes. Additionally, you might face more queries about data input, leading to extra time spent emailing or calling your bureau for support. Waiting for their response can also be time-consuming, as they are likely handling similar requests from other clients.
No payroll knowledge – When using front-end software, employees need some payroll knowledge to input data correctly. If they make a mistake and question the bureau about it, they often get the response, "We processed what you entered." This can result in uncomfortable conversations with affected employees, erode confidence in payroll accuracy, and lead to extra costs for error correction.
Integrated HR and Payroll solution – This option brings its own unforeseen challenges. HR can be locked out of keying additional information whilst the payroll is in the processing cycle leading to HR data being delayed until the software is unlocked.
Compromised solutions – In all-in-one integrated solutions designed for universal use, you'll often notice that either the HR or payroll aspect is less robust. Like the saying "A camel is a horse designed by a committee." When HR and finance collaborate to list their needs, their agendas and requirements can be completely different.
The Solution
Prioritise service over software when considering outsourcing your payroll. Seek companies that take full responsibility for all payroll transactions. In the post-GDPR and COVID era, compliant bureaus should offer a secure upload system for client data using XLS templates or HR exports, eliminating the need for clients to directly input data into the bureau's software while maintaining data security and GDPR compliance.
Electronic alternatives are readily available for standard reports and payslips, negating the necessity for paper output. Service-focused bureaus leverage robust and flexible software for customised payroll reporting, as well as efficient data import, export, and API functionality.
Opting for service-centric providers ensures flexibility as your business requirements evolve, eliminating the need for frequent front-end software reconfiguration. Contingency planning becomes assured, as specialised software navigation skills within your organisation are not required. Fully managed payroll bureaus can offer valuable insights for streamlining processes drawing from their extensive client base experience. Choosing a service-oriented bureau means quicker responses to queries, as the payroll team's sole focus is on providing payroll support rather than software assistance, leading to reduced call volumes. By selecting a bureau that prioritises service, you'll benefit from a team of payroll experts who will be meticulous with data validation before entry, resulting in enhanced accuracy rates. This approach ensures that clients feel well-supported and compliant across all payroll matters.
Avoid integrated solutions and instead view HR and Payroll as distinct projects. Allow HR to select software that suits their needs and collaborate with top-tier payroll service providers capable of seamless integration through file export, import, or API, granting HR the freedom to input data without disrupting payroll processing.
In conclusion, when it comes to payroll outsourcing, it's crucial to question whether your bureau works for you or the other way around. While outsourcing offers benefits like potential cost-savings, contingency planning, and time efficiency, it is essential to navigate this landscape wisely. The rise of technology and integrated solutions has made outsourcing less straightforward, introducing unexpected challenges. The key takeaway is to prioritise service over software when selecting a payroll bureau. Seek a payroll provider that takes full responsibility for payroll transactions, ensures secure data handling, and offers flexible, custom reporting. This approach guarantees higher accuracy, compliance, and the confidence that your bureau genuinely serves your needs. Furthermore, it's wise to treat HR and payroll as separate projects, allowing each department to choose the software that best suits them while ensuring smooth integration for seamless data management. By doing so, you can achieve the true benefits of outsourcing without compromising on quality or efficiency.
Written by
Mark Sapsford
Pay Check
paycheck@paycheck.co.uk
+44 (0) 20 7866 4600