Organisations cite cost savings and the need to focus on core competencies as key factors that have influenced their decision to outsource HR and payroll. However, finding the right outsourcing partner can be a complicated process so how do you get the perfect match?
Last month, Boots Group Plc made a splash by outsourcing its HR and payroll to Northgate HR, addressing the needs of its 65,000 employees and joining a host of other large scale payroll outsourcing contracts to hit the headlines in recent months.
Leading UK retailer, Matalan, has had a payroll outsourcing relationship with its provider for 20 years. As one of the fastest growing retailers in the UK, Matalan selected a fully scalable solution that has allowed the organisation to continue to grow and expand, currently processing payroll for 15,500 UK employees.
Matalan chose Moorepay, provider of bureau payroll services, as its payroll outsourcing partner. Jimmy Wilde, senior payroll manager at the retailer, explains, “Matalan Retail Limited has grown at an amazing rate, with new stores opening on a regular basis. However, the payroll team employs fewer staff than ten years ago. This speaks volumes about the role Moorepay plays in the payroll department.”
So how do you ensure that your payroll outsourcing relationship is a long-lasting one? Chris Williams, sales manager at Moorepay, gives some top tips for payroll outsourcing.
1. Recognising the need for payroll outsourcing
The first step in the process is to assess whether the organisation needs to outsource its payroll. This is often triggered by an identified problem in the payroll process. An organisation may find its payroll is not accurate; or the in-house professional responsible for payroll struggles to deliver on time.
2. Researching and choosing a payroll partner
To find the payroll outsourcer most suited to the needs of the business, there are a variety of sources available such as HR and finance publications, trade exhibitions, local Chambers of Commerce, Business Link, local bank or accountant and the internet, for example, the Institute of Payroll and Pensions website. Smaller organisations would be advised to talk to other partners and contacts, for example a small business advisor to see whether they can recommend a provider.
When assessing the best outsourcer, there are five areas to investigate:
Experience: Consider how long the outsourcing provider has been in business, this will give an indication of its stability, and the degree to which it is a dedicated payroll specialist, as opposed to a provider which offers a payroll service as an optional extra to their main activity. Check its employees hold recognised qualifications from the Institute for Payroll and Pensions.
Culture: Ensure the provider has experience of your industry sector so it can appreciate the challenges that may arise. The advantage of choosing a partner that works across a broad range of industries is that it can introduce learning from one sector to another, constantly improving its service offering.
Service: Check the provider uses software that is capable of delivering the service required. Will it produce the appropriate management reports? Can it be tailored to reflect any special circumstances that may affect the company? Choose a provider that is able to provide support every working day, not just the two or three days when the payroll is due to be processed, some needs will arise throughout the month, such as new starters and leavers.
Flexibility: A good provider will offer a choice when presenting payroll information, for example, reports can be printed, posted to the web or sent in a data file. It should be flexible enough to grow with the organisation, negating the need to change providers if employee numbers increase or decrease.
Price: Although direct price comparison is important, remember that the cheapest option is not always going to be the most effective. What may look like a great deal at first may end up costing more if it does not deliver what is needed. The payroll provider can help to assess the cost of the existing in-house solution, enabling organisations to benchmark their process.
3. Drawing up a contract
It is vital that there is a contract and service level agreement in place. The organisation should be aware of the service it can expect and how the relationship will work, for example, timescales for processing the payroll.
There is also a tactical aspect of moving responsibility for managing payroll from the original in-house professional to the payroll partner. The payroll provider should conduct an analysis of existing payroll practices so it can provide advice regarding any processes that can be improved to make the payroll more efficient. This may include checking that the organisation is adhering to all relevant employment and tax legislation, or advising on any cost savings.
Organisations need to supply the relevant employee data to the payroll providers and should also check the accuracy of the data, prior to forwarding it to the payroll partner. However, the test payroll run will highlight any issues.
There should be minimal disruption to routine during this process, and the organisation and payroll outsourcer should agree a project plan with clearly defined timescales so that there is no risk to the payroll running late during the transition period.
4. Maintaining an outsourcing relationship
It is important that you have an ongoing relationship with the provider. A helpdesk is essential, as is the ability to contact an account manager for possible problems or a general contract review. Remember the provider will become your payroll department, and you must be able to confidently rely on them.
Chris Williams is a sales manager at payroll specialist Moorepay www.moorepay.co.uk
