Earlier this year, the Australian Payroll Association surveyed over 400 payroll professionals nationwide across a range of industries, focussing on the process and end user experience of payroll outsourcing. For payroll outsourcing providers, the results weren’t flattering. In this blog, I’ll share the key findings and discuss the case both for and against payroll outsourcing.
In-House or Outsourced?
Survey Finding: 71% of Australian businesses run payroll in-house.
The survey revealed that most Australian businesses process payroll in-house. In doing so, they assume full accountability and responsibility for the payroll operation including governance and controls, as well as additionally managing the payroll function in accordance with State and Territory legislation.
The Driving Factors Behind Outsourcing?
Survey Finding: 55% of businesses stated they choose to outsource because they wanted to lower the cost of payroll processing.
The research illustrates that for those who do outsource, on the whole, it’s about saving money. I find this both a little strange and concerning. The last time I swapped my internet provider for an advertised cheaper option, guess what happened? The service level was of course of far poorer quality and the service less reliable. Other leading factors behind organisations choosing to outsource that emerged in the survey were to try and ensure a high level of payroll compliance, and testing whether there was a requirement to retain payroll expertise in-house.
Would You Still Outsource?
Survey Finding: 58% of businesses surveyed who had outsourced their payroll would not make the same decision to do so again based on their current experience.
This question is always pivotal as a barometer into the experience of clients who outsource their payroll. That is, given what you know now, and the experiences you have had, would you still outsource your payroll function if given the opportunity to choose again? The outcome of this question is quite alarming, especially if you are a payroll outsourcing provider. Based on current experience, the majority of businesses that had outsourced their payroll function would not choose to do so again.
Survey Finding: 62% of businesses surveyed indicated they were spending too much time on payroll.
It would appear that payroll outsourcing is not really payroll outsourcing. And what do I mean by that? Well, the biggest issue faced by businesses who outsourced their payroll function was that they still felt they were spending far too much time and money on payroll related matters. Furthermore, the quality of the outsourcing service was also rated as poor – with payroll outsource providers making too many mistakes, coupled with poor customer service.
…So, what’s next?
The key results from the survey indicate that payroll outsourcing providers in Australia have work to do – especially when it comes to providing an acceptable level of quality service to their customers.
Unfortunately, many executives view payroll as a “non-core” business function and would love to see their payroll outsourced, subsequently allowing them to focus and invest more time in their core business. However, they are scared to do so because of findings such as these. One of the things I’ve noticed about payroll outsourcing services is that providers of these services are not currently delivering clarity to potential customers as to exactly what it is that they will be responsible for in the outsourced payroll function. In digesting the survey results, as well as through the anecdotal evidence and feedback I get when I speak with those who have or are considering outsourcing their payroll, I feel that payroll outsourcing providers are in a cycle of over-promising and under delivering. Much like my internet provider!
From an evaluation perspective, I would ask buyers – especially procurement officers – to forget putting saving money as their number one goal when they look to outsource payroll. Australian payroll is complex, making compliance difficult to achieve year on year, especially without fully trained and qualified payroll professionals managing your payroll.
Therefore, when considering outsourcing payroll, buyers should ensure the providers they review employ fully trained payroll consultants – qualified to at least Certificate IV in Payroll Administration. Additionally, any potential outsourcing provider should be offering your business payroll advice and guidance relating to the impact that legislative changes will potentially create as they happen.
Considering notions of quality and expertise, it’s critical for buyers to see past the “price per payslip.” Don’t let procurement take you there. The price per payslip does not tell the whole story – so buyers should make sure they are very clear what the price includes and excludes, and what responsibility, if any, they will retain in-house.
If your business is looking to outsource the full end-to-end management of payroll and have no payroll expertise in-house, then this is exactly what you should request. I’ve seen too many organisations who assume that they’re outsourcing the entire payroll function, including direct employee support when it hasn’t been specified, and ultimately, therefore, not been delivered.
Finally, be informed about who you are buying the service from. Are they a technology company who develop brilliant HR & Payroll technology with outsourcing shoehorned as a sideline offering? Or are they are they experts in delivering high-quality payroll outsourcing services? This will have a significant impact on the quality of service you will enjoy or endure.
Don’t forget to download our free eBook on how to make outsourcing work for you. Co-written by Andre Atton, General Manager of Payroll HQ, and Tracy Angwin, CEO of the Australian Payroll Association, this book acts as a blueprint for how to best make payroll outsourcing work for you and your business, and ensure you implement a quality managed payroll service.Download your free e-book