Are you paying over the odds to pay your employees?

14 October 2014

Most organizations don't really consider if they are paying too much to run their payroll especially when the function is run in-house. When it comes to paying your employees, organizations generally accept it is a vital function and one that must run smoothly; and hence leaving it to run the way it always has , is often seen as the safer bet. But if you stop for five minutes and REALLY CONSIDER - Is your organization paying over the odds to pay your employees?

Most organisations don't really consider if they are paying too much to run their payroll especially when the function is run in-house. When it comes to paying your employees, organisations generally accept it is a vital function and one that must run smoothly; and hence leaving it to run the way is always has , is often seen as the safer bet. But if you stop for five minutes and REALLY CONSIDER - Is your organisation paying over the odds to pay your employees? Running your payroll in- house may seem like the obvious and preferred choice- you have control over costs, flexibility to run your payroll when it suits and importantly that personal touch from your payroll department. But delving a little deeper , our analysis shows that the cost of completing the payroll process internally can range from between ?99.16 to ?131.08 per annum for each employee in an organisation*,- this may seem reasonable for a small to medium organization - however it doesn't stop here. In addition there are also a wide range of payroll variables that keep adding to the bottom line. For example payroll has become increasingly complex over the past 7 years, with numerous changes to payroll legislation. If your payroll is run in-house it not only means you need to invest in payroll training to ensure that your payroll is legislatively compliant, but also you need to ensure you invest in software upgrades and training to avoid costly hidden errors. And the list goes on: that are all adding up to be an expensive in-house service.

Process

People

Technology

Standardisation of data formats for input

Turnover of payroll staff / staff cover

Automation

Complexity of internal rules

Knowledge level of payroll staff

Disaster recovery

Authorisation / sign off

Keeping abreast of legislative changes

Utilisation of assets (e.g. printers, software)

Level of workflow

Cost of IT staff

Business continuity

Data accuracy / errors

Training costs

Security

Cost of error correction

 

Infrastructure

Level of enquiries

 

Interfaces

Cost of query resolution

 

Self Service

Cost of auditors

   

Payslip distribution

   

So perhaps it might seem clearer when you add all the above up as to whether or not you paying over the odds to pay your employees? In the UK organisations have been "outsourcing their payroll":http://www.ceridian.ie/irish-payroll-outsourcing for decades and more and more Irish organisations are moving in this direction. There are numerous outsourced payroll providers out there but finding the right one is key to success. Areas that should be considered when looking for a suitable provider include: * You need to ensure that you fully understand their price model - what is included as standard and what is additional. * You also need to understand that outsourcing your payroll doesn't mean you can wash your hands of it - there are deadlines and sign-offs that will need to be done to ensure timely payments to your employees. A good provider will clearly define roles of each party at contract stage. * It is also important to ask about your provider's compliance and risk policies in order to get a clear picture of what controls they operate for information security purposes. * Look for information on their Project Management Methodology, a detailed plan will ensure that timelines are met and that any element of the project will not get out of alignment and hence cost you time and money. * Finally knowing about the providers customer care model, customer retention rate and reference sites, will all give a clearer picture and help in the decision making process.

Actual costs of completing payroll process internally

Area

Minimum cost per employee per annum

Maximum cost per employee per annum

Data collection / storage

10.54

12.18

Data input

11.49

14.17

Data verification

8.02

9.89

Payroll processing

4.91

5.59

Employee payments

1.56

1.73

Statutory returns

2.70

3.24

Third Party returns

2.87

3.45

Management information

2.19

3.65

Employee queries to line managers

2.87

3.45

Employee queries to HR / payroll

2.87

6.38

Finance support of payroll

25.14

31.28

Tax year end

0.61

0.68

Audit

0.65

0.87

IT support and maintenance

22.74

31.59

Total

?99.16

?131.08