Is it Practical to Outsource Your Payroll?

Make a decision by conducting a feasibility study.

Article by Diana Geldenhuys | M.Com HR  I  Managing Director, Outsourced Payroll Solutions

For many businesses, there are advantages to outsourcing their payroll, such as cost efficiencies, consistency, labour law compliance etc. OPS encourages you to dig deeper, and thoroughly analyse whether outsourcing your payroll would make sense for your organisation.

Here in Dubai, we came across an HR Manager in a company who is conducting a ‘feasibility study’ on outsourcing their payroll.

The situation is very interesting. Currently, the finance department is processing their payroll and the HR Manager is wanting to improve areas like analytics capability etc. The finance department is unwilling to hand over the payroll reins to HR. She is doing research before addressing management, persuading them why change should happen. (Payroll responsibility HR vs Finance is a contentious debate that we will be covering soon.)

Here are some points you could look at when doing an in-house vs outsourced payroll feasibility study:

  • What are your operational requirements and what level of outsourcing do you require? E.g. fully managed with no requirement for payroll expertise in-house, vs very little outsourcing, perhaps just the disbursement, the WPS file or even just the C-Suite salaries.

  • What internal resources would you still need with the new model and what is the capability of your team?

  • What is your current payroll costing you to process?

  • Compare current payroll costing in the same way the proposed payroll provider cost is structured, i.e. the total payroll cost per year divided by the total number of payslips per annum.

  • Where does your payroll team get support and compliance information from?

  • How will team/stakeholder communication work?

  • How much support is needed for the employees on your payroll?

  • Does your organisation and line management have a need for bespoke reporting?

  • How clear are those requirements?

  • Determine how the new process will maximise efficiency, have zero human errors and provide a solid governance base.

  • Determine your own visibility on payroll data, processes, and reporting (Cloud computing makes this all possible).

  • Data security – who has access to this confidential information and how secure is your server?

  • Brainstorm a few questions that are unique to your company payroll.

Cleverism says this of a feasibility study: “The study is typically used in situations where an important strategic decision needs to be taken. Since the study aims to discover whether an action is viable, it can help organisations to avoid costly or operationally exhausting ventures.”

Contact us for help to conduct a feasibility study on outsourcing your payroll

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