Why more CFOs are turning to outsourcing post-covid

The impact of the global coronavirus pandemic has forced finance leaders to do the impossible; maintain stability in a chaotic environment.

Forward-thinking CFOs are considering every area of the business, from eliminating the yearly budget in favour of something more agile, to driving growth through new technology and economising departments in a bid to create financial resilience.

Savvy CFOs and finance leaders have spotted an opportunity to maximise ROI by taking a new look at Payroll operations. The Payroll department is often ignored, believed to be purely administrative and not an asset to the business. Yet Payroll, including employee salaries, benefits, compensation and related taxes, is one of the largest overheads in business.

In light of recent events, it’s understandable that finance leaders are looking for ways to make the finance function more efficient and reduce their labour costs. Outsourcing, either part or fully, payroll and HR functions has increased in popularity over the last few years to help manage costs, reduce risk and increase accuracy, all the while contributing to digital transformation. By outsourcing to a trusted provider, finance leaders can maintain tight financial control while reducing costs and streamlining processes across departments.

How outsourcing can drive efficiency for finance functions

Outsourcing your payroll operations allows your business to concentrate on core functions and help to control costs. There are many benefits, but here are some of the most attractive for finance leaders.

Turn fixed costs into variables

Payroll outsourcing can reduce your total cost to serve when you partner with a credible supplier, leaving you with more budget to reinvest where it’s needed. Consider your direct costs that are absorbed by the supplier such as IT infrastructure, maintenance and data security, plus the indirect costs including compliance and payroll expertise.
In addition, you won’t need to invest in updating infrastructure or new technology to future proof the function and maintain security because the supplier will take care of that.

Reduced risk & liability

New legislation is introduced in the UK all the time, just think of the introduction of furlough legislation and changes to statutory sick pay over the last few months. Ensuring that your payroll is up to date and compliant can be a battlefield and making errors in payroll can lead to costly fines and penalties. Outsourcing to payroll specialists can help you to remain in control of ever-changing employment law, schemes and taxation without the expense of HR/legal consultants and avoid risk of non-compliance through lack of knowledge from your team.

Increased control & security

By outsourcing payroll to a reliable provider, you can guarantee that your payroll will be processed in a secure environment. Look for ISO27001 certification that proves compliance with internationally recognised standards of information security and risk and compliance process controls against ISAE3402 and GDPR.

Measurable KPIs

A good outsourced provider will take the time to understand your business processes and map these against KPIs. This allows you to measure their performance against pre-discussed metrics. Typical KPIs you could and should be monitoring include cost-per-employee, payroll performance/accuracy and the cost of absenteeism. By handing most of the payroll function over to the experts, you’ll give payroll teams more time for strategic initiatives, improving productivity and time-to-value.

Business continuity

As we’ve seen in the last few months, operations can be disrupted easily when business continuity plans aren’t set in place. By outsourcing to a reliable partner, you don’t have to reply on one or two individuals in your payroll team. A good supplier will have a robust business continuity plan, so they are never caught out by the unexpected and your payroll will always be processed accurately and on time.

Questions to ask your outsourced provider

Make sure you’ve covered all grounds before handing over your payroll operations to your outsourced provider by asking these five critical questions.

1. How will my data be stored and protected? Where is the location of the datacentre?
2. What kind of prevention technology do you use to protect my data?
3. What qualifications and training do the outsourced team have?
4. Do you have a recent security accreditation and how often is this updated?
5. Do you have a robust business continuity process in place?