Payroll is a fundamental element of any business, and while it may seem like a simple (ok, not that simple) mechanical or mathematical action, it plays a role in company culture. When employees feel like they have to double-check their paystubs and verify all of their income and taxes – it erodes trust in their employers.
All relationships are built on trust, and perhaps nowhere is this more true than in human resources.
To this end, outsourcing payroll can prove to be a vital decision in building (sometimes rebuilding) trust with employees. To understand the true scope of the advantage this brings, the issue that it addresses must first be examined:
Challenges Presented to In-House Payroll
No legitimate employer wants to erode trust with their employees. It obviously doesn’t serve their interests, but it still seems to happen with many organizations. This could be due to unclear procedures or perhaps communication issues between departments, or for a host of other reasons as outlined below:
Legacy and Manual Processes
Some businesses are almost like a time capsule. They are set up, begin operating, and are subsequently buried in work – and the processes within remain untouched, unchanged, and almost perfectly preserved. Except that they in fact don’t, as the reality is that businesses must constantly adapt to a world that is changing ever more quickly.
Payroll can be bogged down in archaic legacy tech or even manual processes – which leaves a lot of room for human error, data security breaches, and unnecessary issues.
As it happens, payroll can eat away at the trust between not only employee and employer, but the business and its regulating bodies. A perfect example of this comes from record-keeping – which must be accurate not just to function for the business, but for the big C – compliance.
The Canada Revenue Agency requires that payroll records be kept for 6 years, while the Ministry of Finance requires the retention and destruction of books to last and occur somewhere between 7 – 10 years.
As this is per the Employment Standards Act, businesses can face penalties for failing to comply with these record-keeping requirements.
While it might go without saying to some, payroll accuracy is vital. The thing is, a lack of accuracy is generally symptomatic of another root problem within the organization. This could look like delays in receiving hours/time cards due to offset shifts, problematic time tracking technology, forgetful employees or supervisors – the list goes on but the result is the same:
First at the trust, and then at culture. When payroll is having issues, it is deeply concerning for employees and should be for management as well. When a new hire walks on the job and is given their first pay stub, only to be told by a coworker that they need to double-check it, it isn’t a good look.
The elephant in the room is the feeling that the employer doesn’t care enough to uphold their main responsibility to the agreement they have made with their employees. So, the culture becomes reflective of this, and it costs the business as a whole, every time.
So how is this tumourous issue remedied? Well, outsourcing the payroll provides an excellent solution for a number of reasons.
Turning Down Costs and Turning Up Company Culture
Now, other elements have to exist to make a positive company culture – and in most cases, they already do. These are situations where outsourcing payroll can prove to be a key factor in improving company culture. It’s not a company culture cure-all, but it certainly is a big piece of the pie. Below the benefits of outsourcing payroll are defined and how that supports a positive working environment is illustrated.
In many (though not all) cases, outsourcing payroll can actually be a more resource-efficient method than having it performed in-house. Considering the number of manhours that staff burn through in calculating pay, and checking up on compliance regulations (not to mention penalties for failing to comply), it adds up quickly. Further: it accumulates.
Outsourcing payroll to a 3rd party partner is often less expensive than running all of these hours internally. Not to mention, the investment in software, training and other technology, outsourcing this expense calculates to a gain for the business.
Allowing a specialized team to manage a business’s payroll also avails another major benefit; Expertise. Regulations are in constant flux and keeping all of an organization’s records, rates, forms, etc. up to date is a time-consuming affair. Allowing a 3rd party partner to manage the payroll allows businesses to get rid of that whole issue altogether and have confidence that they are enjoying up do date processes, and compliance – a benefit deserving of its own noting.
When a business is found to be non-compliant with regulations set out by the Employment Standards Act or the Canada Revenue Agency, they are penalized and it costs everyone. Outsourcing a company’s payroll ensures that compliance is a key objective of the service that they are using. Reducing the risk of penalties and payroll or record-keeping errors is critical to running any business, so that it may continue to better serve its customers and employees.
Reduced Workload on Key Staff
Another benefit with rippling repercussions is the fact that staff who would otherwise be tasked with managing payroll are freed up to perform other core duties. Outsourcing payroll takes a load off of their shoulders and the positive effects of this can range from improved productivity to reduced burnout. This kind of change generally contributes in a big way to a more positive working environment.
Access to Specialized Tech
As the world is becoming more digitally dependent, data is becoming a big target for malicious players. Keeping payroll tech up to date isn’t just important for maintaining accuracy and compliance – it’s a security necessity in this day and age.
Ensuring that a business’s employees can trust their data won’t be breached is just as important as providing a safe working environment. Businesses that opt to outsource their payroll enjoy the benefits of the highly specialized and secure technology that payroll service providers prioritize the acquirement of. Needless to say; it’s a trust issue.
Company Culture Improved Over Time
The sum effect that all of these factors have on an organization is a three-part cascade. Initially, relief is felt at the front-line level. As payroll is run smoothly and securely over time, trust is built. When employees feel that they can trust their business, it translates and contributes to a more positive company culture, overall.
Of course, any departmental transition is a big decision for any organization – so what do the decision-makers need to account for?
Key Considerations for Outsourcing Payroll
There are without a doubt, numerous benefits to be gained by businesses that outsource their payroll, but it also pays to be prepared. Here are some key points that decision-makers should mull over while considering a transition.
Workforce Fluctuation and Company Size
Whether it is an industry with a high turnover rate, a seasonally dependent business, or a small team of permanent members, it’s a good idea to think about how the workforce needs of a business change. It is an unavoidable fact that the larger the business: the more complex the payroll. Businesses with high rates of workforce flux and larger organizations will stand to benefit greatly from the outsourcing of payroll.
Pain Points and Challenges
If it’s time to change the way a company’s payroll is done, it’s also the perfect time to evaluate where challenges have occurred, and where they might resurface. This helps the company to improve its internal process and gives the partner a head’s up as to what to keep an eye out for. It’s kind of like spring cleaning. It’s not just about improving the space, it’s purging the obsolete, dead weight.
Costs — a no brainer
A no-brainer to many – this falls under both challenges, pain points, and workforce demands, and makes a good place to start with each. How much does payroll cost the business really?
Is it possible to extrapolate the productivity of time lost? Doing so can help to support the case that outsourcing stands to benefit a business. Is payroll the only facet that needs outsourcing? Perhaps outsourcing recruiting or HR management altogether could stand to see much of the same benefits as outsourcing payroll.
In business, it always pays to follow the numbers.
Invest in a Reputable Partner
Last, though certainly not least, finding a partner that is a great fit for the company is vital. Not all industries were created equal, so it is important to find a solution that is well-suited. While one size fits all just doesn’t exist – Pivotal Integrated HR Solutions offers the next best thing in their highly diverse range of expertise. For businesses interested in the benefits of outsourcing HR facets or HR management altogether, Pivotal HR Solutions makes a great place to begin looking.