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Attitudes to outsourcing have changed over the past year, in the wake of Covid-19. As remote working became a necessity, the idea that a business function, like payroll, can operate outside the four walls of an organisation has become more readily accepted.
Deloitte’s Global Outsourcing 2020 survey shows that cost saving remains the primary driving factor for those now considering outsourcing as an option. This is perhaps understandable, given the economic impact of the pandemic. When it comes to payroll – and the investment needed to cover technology, as well as the hiring and training of staff – the economies of scale achieved with a dedicated provider is estimated to deliver savings of around 20% on average.
But, while cost reduction is the one thing everyone will take into consideration, there are other supplementary reasons why organisations believe it’s best to switch to a managed payroll service.
Here’s seven compelling benefits that help companies reach this conclusion.
Employee pay is a highly emotive subject for any organisation. It’s not an area where companies want to see mistakes. It’s essential, therefore, that this function runs smoothly and that the team responsible is always fully up to speed with the latest legislation and tech solutions.
Organisations need to trust that whoever is responsible will get it right, every time. Whenever an experienced team leader moves on, however – taking with them vast amounts of knowledge and expertise – companies are left trying to find another individual who they can put their faith in. It’s often at this point that they will consider whether an outsourced payroll partner, that has the expertise, experience and resources to ensure accuracy, poses less of a risk.
As remote working has become the norm in the wake of Covid-19, every organisation has been forced to rethink security protocols. This has required new tools, technologies and processes to be rolled out – especially where sensitive data is involved.
Few organisations were better positioned to manage this situation than outsourced providers that already perform these functions remotely. As we continue down the road of digital transformation - with the greater systems integration that requires - information security will be an ongoing imperative. With most payroll service providers also being technology providers, there is a growing recognition that they may be better placed to manage these concerns.
Perhaps one of the biggest challenges payroll teams face is the need to keep pace with changing legislation – whether that involves taxation, employee benefits, pensions, data privacy, etc. Following the national lockdowns that happened in the wake of the Coronavirus pandemic, the major challenge payroll teams were confronted with was the furlough scheme.
Given that this type of legislation is not always black and white, and can require an element of interpretation, the advice that is available on tap from a service provider can be invaluable. Payroll outsourcing partners tend to be at the forefront here, and may even be working with government to advise on draft legislation.
The global economy has been experiencing digital transformation for some time, and Covid-19 has only accelerated the pace of change. Investment in technology has soared and will continue to as business leaders seek greater access to real time data and insights
We can expect demands for greater integration between systems, which will have ongoing implications for the payroll department. Rather than continuously investing in new solutions, working with an outsourced payroll provider is often seen as a safer long-term bet. As dedicated specialists are continuously investing large sums to upgrade their technology and information security, in effect, customers get a future-proof payroll system.
Keeping staff up to speed on changing regulations and technology requires a significant investment in staff training. When team members leave, organisations also need to spend time and money hiring and onboarding – which, as highlighted, becomes significantly more of a challenge if the person leaving is a long-standing, CIPP qualified, department leader.
This constant need to hire, train and upskill staff is a headache that will never go away – unless an organisation outsources. The option to tap into a larger talent pool is a big reason why many choose to work with a payroll partner.
The ability to scale the level of service up and down is another key factor in why companies choose to outsource. This is especially important with payroll. As the make-up of organisations changes over time so will the requirements placed on the payroll department.
When you have a fixed payroll team in place, however, it’s not that easy to recalibrate the personnel within a team. An outsourcing partner offers more flexibility in terms of the level of service required, giving organisations more control over the capacity of the function and the costs involved.
Depending on the organisation, responsibility for managing payroll will either fall under the remit of the HR or the Finance team. Given the importance of this function, it’s a responsibility that neither can ignore. Yet, it isn’t always an area where the leadership in either department wants to be focusing its attention.
The prospect of outsourcing this responsibility, and the stress that comes with it, can be highly appealing. This is especially true when the chosen partner – one that has the expertise, experience and resources required - can provide the reassurance that everything will be handled smoothly.