Payroll and accounts have long been the darlings of Business Process Outsourcing (BPO).
Upsetting your employees by botching their payroll is not only bad for morale and staff relations, it also makes you look unprofessional, and can wind up costing you time and money rectifying silly mistakes. Not paying your suppliers isn't a particularly good look either. This is why internal and external money matter -- payroll and accounts -- have always been first out the door when it comes to business process outsourcing (BPO).
And it's easy to see why. Traditional company payroll models are generally costly, inefficient, and rarely a core competency of an organisation. Payroll is a tricky business and companies are generally keen to get help wherever they can. IDC estimates that the global market for HR management and payroll processing software will grow at 5.6 percent each year through to 2007. That will see a rise in overall market value from US$4.3 billion (AU$5.5 billion) in 2002 to US$5.7 billion (AU$7.2 billion) in 2007.
Rolf Jester, chief analyst for IT services at Gartner, says outsourcing payroll and accounts is one of the oldest outsourcing businesses of all. "From small one person businesses to huge companies, outsourcing finances and payroll to a third party has been happening for many years," says Jester.
Handing over the headache
If you choose the right supplier you can effectively wave goodbye to a lot of headaches. You can forget all about leave management (annual, sick, long service, time in lieu, and so on), electronic funds transfers to employee accounts, payment summaries, superannuation guarantee reporting, employee declarations to the Australian Tax Office (ATO), end-of-year reports, and general ledger reports.
PAYG tax can be remitted electronically to the ATO, payroll tax reports can be calculated for you, superannuation reports calculated in accordance with SGC guidelines, and termination calculations taxed as per ATO requirements.
IBM offers outsourced accounts, payroll, HR services, CRM, and procurement outsourcing within a service offering called Business Transformation Outsourcing, and last year signed a global deal with consumer packaged goods giant Procter and Gamble.
According to Bill Farrell, IBM's Asia-Pacific partner for human capital management, the company's customers typically have in excess of 20,000 employees, but he points to smaller pure-play providers such as ADP which cater to smaller companies. Farrell says that some companies outsource accounts separately from payroll and some bundle them together.
"It depends where payroll sits within the organisation," says Farrell. "If it sits within finance and accounts then it tends to be outsourced as a package. However, increasingly we are seeing it sit within the HR department alongside recruitment, enquiry management, and administration, so it is more often being outsourced alone or with those functions," he adds.
Farrell says that to outsource both HR and accounts is a huge task and they both have different challenges in terms of data reporting and technology, and a different customer set. "Finance and accounts customers tend to be internal chief financial officers, whereas HR counts the entire staff as its customer, so it's difficult to keep these two functions together," he says.
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