The Payroll function is one of the most common process areas in which companies leverage the benefits offered by third-party providers. However, in some cases companies decide that they would like to bring this critical function back in-house after having this type of outsourcing arrangement. This can be a very challenging initiative to carry out, with issues including access to historical Payroll data, proper staffing, developing or rebuilding in-house processes and expertise, and providing appropriate levels of employee access to Payroll support all needing to be properly addressed.
On a recent Peeriosity PeercastTM, a Fortune 100 retail company shared their experiences in migrating Payroll, along with the majority of other HR-related processes, back in-house after having the processes outsourced for over ten years to a major third-party provider. While the service provided during those ten years had been adequate and had helped the company to focus resources on other more pressing priorities, the company was now working on a company-wide IT initiative to consolidate, standardize, and streamline their technology infrastructure, including HR and Payroll, where, in order to achieve a maximum benefit, it made sense to transition Payroll and many other HR-related process to be performed directly by company personnel.
As a result of this company-wide initiative, Payroll was part of the migration to a new directional system to support HR-related processes called Workday. Implementation began in 2015, with April as the cut-over month. While a go-live date of January 1st would have been simpler for a number of reasons, more pre-implementation work was needed and so they went with the beginning of a quarter instead. While the overall transition went smoothly, a number of issues did arise which the presenter went into greater detail regarding during the PeercastTM:
- Get comfortable with the test plan
- SOX controls
- Random processes
- Prior quarter/year adjustments
- Know your system configuration
Having utilized the new process design and system for almost a year, the company now has complete ownership of Payroll, communications have been streamlined, there is more control over costs, they now have instant data access, and the employees have a more consistent experience which better aligns with their overall company culture. Bottom line – the company is very happy with the results of migrating this process back in-house.
Reviewing some iPollingTM results related to this PeercastTM, the first question looked at the current status of outsourcing the Payroll process. While the most popular response was that all Payroll processes are performed in-house (36%), that was closely followed by 32% of the companies that outsource a limited portion of the Payroll process, which is typically payroll taxes or garnishments. Another 23% of the companies have outsourced a significant portion of their Payroll process, and just 9% have outsourced the process in its entirety.
The second poll question then focused on what is the primary reason that companies retain the Payroll process in-house. Interestingly, all four of the response options received an equal share of the votes, suggesting a wide range of reasons can be cited for why keeping Payroll in-house is important to the 68% of companies that continue to carry out a majority of this process internally.
Some of the member comments related to this poll included the following:
Manufacturing Member: The time and attendance piece for our hourly locations is being completed in India.
Computers & Electronics Member: We outsource our international sites, except Canada, which we process in house with our domestic payroll.
Software & Internet Member: We use our in-house payroll team performing payroll using ADP with feeds from Workday and timekeeping with Kronos. We haven’t outsourced further due to the confidentiality of the data and concerns over privacy in India.
Transportation & Storage Member: Currently undergoing an RFT process to look at potential outsourcing.
Consumer Products & Services Member: Payroll outside the US/Canada is outsourced.
Manufacturing Member: It is a combination of cost control, available internal technical resources with HR specific knowledge and the quality of the outsourcing relationship and services.
Computers & Electronics Member: When outsourcing was originally chosen, we were seeking a global partner.
Non-Profit Member: We handle all of the data entry and manual entries for payroll processing. ADP generates the physical checks and direct deposits, and mails the live ones out to staff.
Computers & Electronics Member: US payroll processing has been outsourced, but other countries still manage internally. This is primarily due to the perception that a centralized team cannot manage the different laws and regulations for each country.
What role does outsourcing play in your company’s Payroll process? Is your company headed towards more or less Payroll outsourcing in the future?
Who are your peers and how are you collaborating with them?
“PeercastsTM” are private, professionally facilitated webcasts that feature leading member company experiences on specific topics as a catalyst for broader discussion. Access is available exclusively to Peeriosity member company employees, with consultants or vendors prohibited from attending or accessing discussion content. Members can see who is registered to attend in advance, with discussion recordings, supporting polls, and presentation materials online and available whenever convenient for the member. Using Peeriosity’s integrated email system, Peer MailTM, attendees can easily communicate at any time with other attending peers by selecting them from the list of registered attendees.
“iPollingTM” is available exclusively to Peeriosity member company employees, with consultants or vendors prohibited from participating or accessing content. Members have full visibility to all respondents and their comments. Using Peeriosity’s integrated email system, Peer MailTM, members can easily communicate at any time with others who participated in iPolling.
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