Whether in-house or outsourced, payroll systems are one of the most crucially scrutinised elements of any company. Management wants maximum efficiency at minimum cost, while employees want to be paid the proper amount at the correct time. Angus Kidman examines how technology is helping to keep payroll systems running smoothly in an era of ever-changing requirements
While staff may not be aware of many of the systems that HR and finance departments utilise to keep the business running smoothly, they’re quick to notice if they get paid late or don’t get the correct amount. Payroll services remain one of the bedrocks of any overall staff technology management system, and the increasing range of options they need to handle – individual agreements, variant working hours and superfund choices – make it all but impossible to keep payroll accurate without a well thought-out technology backend in place. While the incentives for rolling out a new payroll system can range from a desire to work more effectively to the need to handle staff following a merger, the task always benefits from detailed planning.
With a staff of just under 200 serving a community of more than 16,000 people, The Victorian Deaf Society (Vicdeaf) is well aware of the importance of maintaining an effective payroll system. However, the impetus for it to upgrade its payroll package and integrate it more closely with other human resources functions came from a relatively unusual source: an audit to meet ISO 9000-2001 standards.
“We have an incredibly varied type of payroll. We are an agency, and as part of our business we do several things,” says finance and administration manager Gary Hunt. “Our primary existence is to serve the community, but some of the services are driven from other organisations. For example, we deal with client services and case management for the adult deaf community, and we’re funded by the Department of Human Services to do that.
“As the Department of Human Services and government bodies evolve, they put in place compliance requirements, one of which is that they need to have the quality systems in place,” Hunt says. While meeting the requirements of a complex ISO standard does create additional pressures and administrative work, there are also some benefits. “It creates a better work environment for staff –everything’s documented.”
Vicdeaf is annually audited by BenchMark to see how it measures up to those standards requirements, and it was the February 2006 audit that led to its recent payroll update.
“One of the things that stood out from last time was that our HR function wasn’t very sophisticated in terms of how it documented a range of processes,” Hunt says. “Our HR manager was using spreadsheets and word documents, and it was just fairly basic.”
To manage systems more efficiently, Vicdeaf needed to more closely integrate its payroll and HR systems. Its existing MicrOpay payroll solution had been running for some years, and Vicdeaf was aware that newer HR-integrated options were available – but not on its relatively aged platform.
“We’re aware that we do a lot of things well behind most other people,” Hunt says. “We deal with limited resources and because we’re funded through public funding, we have to make sure that we really utilise resources as efficiently as possible.” MicrOpay eventually negotiated a bargain rate to move to its new Meridian platform, taking into account Vicdeaf’s budgetary constraints. “Even as a pre-existing MicrOpay client, we’ve probably done quite well out of it,”Hunt comments.
While the audit took place in February, Vicdeaf waited until November for its upgrade (in part because it represented the optimum period for Hunt, who also manages all of the organisation’s accounts, to devote a large amount of time to the project.) After carefully planning for its needs, Vicdeaf ran two parallel payrolls – the first with trainers also onsite – to ensure the system ran smoothly before turning off the older standalone payroll.
“It was fairly straightforward,” Hunt says. “The unexpected things that popped up for us were the backups and how they ran on our servers, but that was resolved fairly quickly.” (Prior to the upgrade, Vicdeaf had still been using floppy discs in a manual backup process.) A small amount of tweaking was also required to ensure that timesheets being emailed could make it through the organisation’s security firewall software.
Vicdeaf is already noticing major benefits from the new platform. “Historically we’d start payroll on Monday morning and transfer funds on Tuesday. Now everyone gets paid on Monday afternoon. It’s halved the time of our processing, and the staff have a comfortable feel about getting their money earlier.”
Future enhancements include making greater use of the product’s superannuation management features, which can cope with the multiple funds now used by Vicdeaf employees. Primarily, however, the efficiency goals have been reached.
“Sending payroll and timesheets by email is great,” Hunt says. “It just feels more professional and it saves time.”
Delivering payroll information electronically has proven increasingly popular with many companies, since it reduces the cost of distributing payroll information while also making it more accessible to employees. “Not only will there be improved savings on our weekly payroll functions but a focus on improved employee service and the administrative simplicity of the system,” Bendigo Bank chief manager of enterprise projects, Derek Waddington, said when the bank shifted to an entirely electronic payroll system from Empower late in 2006.
Making those transitions always requires careful planning. “Allow yourself appropriate time to process the change from the old to the new and make sure you’re comfortable with what’s going on,” Hunt counsels. “Give yourselves time to make sure you do it properly.
Making the switch
Time is not always a luxury that payroll departments have, however. UK retailer Hughes Electrical found itself needing to radically shift its approach to payroll when its longstanding payroll manager of 17 years decided to leave and pursue a career in counselling. “That was a major trigger point,” says personnel director Nick Heffer.
With 450 staff spread across multiple stores, Hughes’ remuneration system was highly complex, especially because many of its staff saw their salaries and commission structure change on a monthly basis following scheduled monthly reviews. “Any system has to be flexible enough to cover increases on a regular basis,” Heffer says. “We don’t want to employ a large personnel and payroll function, but we want it to be accurate.”
While the company had a basic payroll system in place, a huge amount of pre-processing was being performed. “There was effectively a payroll system being run in Excel before it even hit the main system,” Heffer says. Adding to the complications, Hughes had also acquired a number of smaller rivals, some of whom “had even weirder pay structures”.
IT management was also a complication. “IT people don’t want to know about the payroll network,” Heffer says. “And I’ve seen so many software packages that don’t actually deliver.”
When the payroll manager departed, Hughes weighed up the alternatives, none of which seemed particularly effective. “Staying in-house wasn’t going to work. The costs for outsourcing were prohibitive, and we really didn’t fancy it because it meant giving up all control. We wanted to maintain control of the database but get help when we needed it.”
Hughes eventually decided to adopt a ‘half-outsourcing’ approach, hiring specialist consultancy HeadCount to run its payroll, but maintaining the ability to customise its own database. Basic changes, payroll despatching and year-end reporting are all handled externally, but adjustments to reflect new corporate structures can easily be made in-house. Switching to a hosted model also eliminated the need to stress about backup and software maintenance.
“It’s given us future flexibility,” Heffer says, though he’s quite glad not to be on the bleeding edge of new developments. “I don’t like pioneering in payroll systems; it’s not a good idea.”