Home' HR Monthly : HRM HRM06 DecJan 2015 Contents 16
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OF HR AT OPTUS.
A few years ago I conducted a cost-benefit analysis on retaining
payroll in-house or outsourcing. As a result of a restructure of our
accounts department, a required ex tra resource was identified. The
purpose of the exercise was to look at how the accounts department
could increase efficiency and productivity without increasing its
headcount. The current payroll system wasn’t integrated with the
accounting system and leave records were maintained manually.
Initially, there were set-up costs, but only in the low thousands.
Payroll processing costs per month were approximately $2000 for
100 employees, including in-house data input costs. For us, the
external company we selected significantly reduced ou r payroll cost.
From a risk management perspective, it was secure. Back-up
systems were in place and, if payroll data couldn’t be entered for a
specific pay period, then payroll would still be processed using data
(excluding allowances and expenses) from the previous pay period.
Reports, such as payroll by division, payroll tax reports,
superannuation reports, leave reports, etc, were available, which
were incredibly useful. In addition, the company was informed of
any changes in statutory or legislative requirements.
Overall, it depends on the effectiveness of the in-house payroll
system. Is it integrated with the accounting system? Does it generate
the reports required for statutory reporting purposes? It is worth
conducting a cost-benefit analysis and considering the pros and cons
of outsourcing, with clear objectives of what the real purpose of the
exercise is, i.e. cost efficiency, downsizing, etc.
I am a big advocate for internal payroll. For me, it’s just too
important to not manage in-house.
Outsourcing can be cost-effective, but the decision needs to
be more than a cost-based one. Getting payroll wrong just sends
the HR function back to focusing on the basics, which isn’t a
place where we want to be. Not to mention the considerable loss
of goodwill it would generate if something went wrong.
So it comes down to cost, quality, complexity and perceived
value in the business. It’s fair to say a small to mid-size business
with low complexity should find advantages in outsourcing
rather than employing internal payroll staff where internal
competence is low and economies of scale can’t be reached. A
larger business, where transaction volumes and complexity are
higher, could find internal payroll is more advantageous from a
cost and quality point of view.
Risk is also a factor. What are the strategies to manage risk in
either model? How would you pay your community if there’s a
system /staffing issue that means you miss a pay or get it wrong?
Risk is often overlooked, but as an HR D looking at payroll
effectiveness, your inability to get the basics right sets how big a
mandate you have over the business.
I see payroll as a key requirement to get right, which means
being flexible and responsive to our people. Payroll drives a
high percentage of questions when we look at HR queries and
sets the tone for internal satisfaction with the HR function.
FOR OR AGAINST?
TWO HR PROFESSIONALS TACKLE A TOPICAL DEBATE EACH MONTH.
Q SHOULD PAYROLL BE
KAY JOHNSON, HR
SAYS KERRYN FEWSTER CAHRI, CO-
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