How to outsource your payroll in 2020?
By Christophe Faucher, Associate Partner HR Path
Payroll Outsourcing – More than just a cost-cutting measure, a true business project
Payroll outsourcing is becoming more and more attractive to companies, but are they embarking on this project for the right reasons? Are they aware of the real benefits of this type of project? Since payroll is a vital human resources mission, it is important to identify the impact that outsourcing can have on the company and to define a suitable methodology. However, this impact is far from being limited to financial gains.
Financial reasons but not only
Reducing costs is one of the main reasons why many companies outsource their payroll management. In a context where they are often asked to do more with less, delegating support functions is a logical choice. In fact, most of the time payroll outsourcing has a positive ROI. However, the reasons that drive companies to make this choice are varied, and financial reasons do not always prevail. The difficulty in recruiting qualified and experienced payroll specialists is another determining factor. The HR industry is in a crucial race for talent, and high turnover or simple retirements can pose significant challenges to the HR function.
Reducing costs is one of the main reasons why many companies outsource their payroll management. In a context where they are often asked to do more with less, delegating support functions is a logical choice. In fact, most of the time, payroll outsourcing has a positive ROI. However, the reasons that drive companies to make this choice are varied, and financial goals do not always prevail. The difficulty in recruiting qualified and experienced payroll specialists is another determining factor. The HR industry is in a tight race for talent, and high turnover or simple retirements can pose significant challenges to the HR function.
Preventing regulatory risk
Payroll outsourcing is, therefore, outsourcing of HR talent management, but it is also and above all, a delegation of responsibility. It is a sensitive subject within the company: a stable and correct payroll preserves.
By entrusting this task to specialists from outside the company, the managers thus prevent the possible tensions that could arise from this type of error. At the same time, they also protect the company from the regulatory risk that is increasingly weighing on HR departments. The payroll business is subject to a high level of legislative activity, and therefore it requires constant efforts in terms of regulatory monitoring, failing which the company could be severely sanctioned. Payroll outsourcing is thus motivated as much by a need for serenity and regulatory security as by the need to reduce costs.
Be well accompanied
Because of these advantages, payroll outsourcing is becoming increasingly popular. But before embarking, it is important to be aware of the risks and to know that some projects end up in deep customer dissatisfaction. Most of the time, this is due to insufficient communication between the service provider and the client.
Outsourcing payroll should not be limited to delegating a task to an external service provider. It must lead to a complete takeover of internal collaboration processes: who will the employees go to? How will data be processed and exchanged with other departments? To answer all these questions, a company that outsources its payroll must provide its service provider with comprehensive information about its internal processes. Otherwise, the tools and methods put in place will be inadequate.
Measuring the ROI of outsourcing
The return on investment of payroll outsourcing is not limited to the economic aspects. It is essential to measure it in qualitative aspects. When a company outsources its payroll to a specialist, it has the right to expect higher quality than what was previously done in-house. This is why performance measurement systems can be used in outsourcing, where we used to rely intuitively on the level of employee satisfaction. The added value of outsourcing is thus multi-factorial: it includes serenity in the face of regulatory risk, focuses on the core business and a qualitative improvement in payroll processes. In this logic, outsourcing must, therefore, be treated as a valid business project.
