3 Key Considerations when Outsourcing Payroll
Business Process Outsourcing is something which is growing worldwide, Gartner predicts that worldwide IT outsourcing will grow a further 2.8% in 2013. Many organizations have found this is an area they cannot ignore and have outsourced all, or elements, of specific functions within their business. When considering whether to outsource your payroll function or if you are looking to change providers there are a number of key questions that you need to ask yourself as a business. These can be divided into three main areas:
1. Current internal situation (business case, people, process and technology);
2. Company readiness for outsourcing;
3. Selection of the right partner and right solution.
It is vital that you consider all three areas fully, outsourcing is a long term solution and you need to ensure that the partnership with your provider is strong enough to make this work for your business.
1. Current internal situation
In order to get buy-in and approval for any initiative, a business case is of course key. What are the current costs of your payroll process, and what would it cost in a proposed new scenario? Make sure you compare as much as possible apples with apples: in case of comprehensive outsourcing you might need to calculate not only the costs of your current payroll staff, but for all people working on HR data entry related to payroll, or having involvement in the payroll process. Since most providers calculate a price per payslip it is best to calculate the current internal cost per payslip, and decide what the return on investment would be.
Is your current payroll process under control, and following compliance rules? Increasing focus on compliance can make it difficult to ensure your payroll is compliant on local and global levels. With outsourcing this responsibility is moved to the provider you select, provided that a solid contract and service level agreements (SLA's) are established. Are you using internal SLA's currently? How would you like your SLA's to be in a future situation?
The payroll process requires people with extensive knowledge of local legislation. This experience cannot be built up over night, so it is important to look at:
- What skills are currently present in your company?
- What is the strategy of your company: do you want to have this kind of knowledge in your organization? Outsourcing administrative processes can free up time for more strategic HR initiatives.
- It is also important to consider what the impact of outsourcing would be on staff currently employed. Would they need to be trained in other areas or moved to different positions?
What current software do you use for your HR and payroll system? If you have made any recent investments in the implementation of new software, you want to make sure any new solution will not take yet another big investment. Connecting your current HR solution to an outsourced payroll via standard integration could also be an option.
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