by Attractor
Reflections on Payroll Outsourcing
10:00 am in Latest News by Attractor
Photo: kevindooley, Flickr
Over a period of years supporting public sector organisations’ support improvement action in corporate teams, especially with HR, Finance and Payroll, one of the most common topics of discussion with Directors and senior managers has been the proper place for payroll functions.
Some years ago, during a conversation with one (American) Chief Executive working in an NHS Trust that was experiencing problems with payroll services, this experienced leader expressed amazement that NHS organisations used outsourced payroll suppliers when ensuring staff were accurately and properly paid was “the most important responsibility of every employer.
Clearly he did not share the view of payroll as a low-value service, an assumption which might underpin the fact that, in UK public services, outsourcing payroll to a specialist provider is relatively commonplace.
Outsourced Solutions
Historically, payroll services have been the most likely corporate service for public bodies to buy-in from another organisation. Seen as non-core function, any in-house service would be viewed as wasting valuable time and money.
In the past, the challenge of legislative compliance combined with high volumes of relatively simple data driving most payroll processes (e.g. absence records, overtime worked, shift payments due) has made outsourcing the payroll function an attractive option.
This approach sees payroll as a”commoditized service” – a simple function which can and should be organised and delivered in the cheapest manner possible with the essential outcomes being payment accuracy and legal compliance.
During a time of austerity and cuts in public services, it seems more fashionable than ever before to outsource such services, having them delivered by a specialist payroll or multi-faceted corporate shared services provider. From 2007 onwards, public services have been seeking cost reductions in support functions by moving these services out to shared services organisations. The expectation for these projects is a combination of simplification, standardisation, automation and economies of scale will reduce costs while maintaining or improving standards. There should be no surprise there are both strong proponents and opponents of these projects, but everyone agrees delivering the benefits is pretty challenging.
For a shared services project to succeed in delivering savings while protecting quality, some fundamental changes are required, with significant review and redesign of functional roles and the business processes they are responsible for. With the trend for considering outsourcing a wider range of administrative functions, the potential to buy in a combination of “HR and Payroll” or “Accounts and Payroll” is becoming increasingly common. In such cases the perspective of the client organisation about these support functions can be an important driver for the suitability of a particular solution. Read the rest of this entry →
Working with NHS organisations, Attractor is often asked where the payroll function should reside … with Finance or Human Resources.
The NHS Electronic Staff Record forced organisations to review working methods in HR, Payroll and Finance – a significant challenge for all teams.
The Electronic Staff Record, an Oracle-based integrated HR and Payroll solution, was implemented across the NHS as an enabling “service solution” for transactional processes and business intelligence for corporate teams.
