On a pay roll

by 13 Dec 2006

With almost 50 payroll system solutions available in Australia, many organisations have turned to technology to streamline their payroll processes. Teresa Russell talks with three companies about their diverse payroll needs and a panel of experts who discuss recent trends and the issues facing payroll managers over the next few years

With such a large number of payroll solutions available in the marketplace, it’s surprising there is no research available about market size and market share. “I can think of six or seven companies that each claim to have 20 per cent market share,” says John Macy, director of payroll consulting firm Competitive Edge Technology, which also keeps abreast of what systems are available in Australia (see box p 17).

Under the finance or HR umbrella?

Payroll resides in either finance or HR. Human Resources magazine’s panel of experts each had a different view as to whom most payroll managers reported and why.

Jason Low, managing director of The Association of Payroll Specialists (TAPS), says that payroll is traditionally a function of finance. “We did a survey on reporting structures a few years ago. Eighty per cent of respondents worked in finance, while just 20 per cent reported through HR.”

Paul McCarthy, managing consultant at SnP Consulting, believes reporting is split 50/50 between HR and finance. “In the sub-300 employees market, it tends to sit under the finance umbrella. If there is a mature HR function in the company, it is more likely to sit with HR, but if it is a very finance-driven company, it sits with finance,” says McCarthy. “If it’s in HR, payroll data generates HR management metrics such as turnover, demographics, EEO breakdown, etc,” he says.

Macy adds an historical perspective. “In the 1990s, when companies were downsizing, payroll moved to finance. HR maintained policy control over it, but the administration was done by finance. There is now a move to bring it back to HR because it is automated and there isn’t much manual work involved in preparing payroll,” he says. About half of payroll reside in HR and half in finance, according to Macy. All three companies interviewed by Human Resources magazine for this story reported through finance.

Types of solutions

All solutions can be divided into three basic types of systems (manual payroll is excluded from this report). The most popular type of solution is an in-house system, where software resides locally on an organisation’s system.

This can be as simple as an Excel spreadsheet or as complex as The Seven Network’s payroll system, provided by Northgate HR, which managed the payroll for over 12,000 permanent, part-time and casual employees last year. Medium-sized employer Elastomer Products Limited pays 150 employees at five different manufacturing sites across New Zealandusing the PayGlobal in-house system.

The second type of system – and one that has gained traction in the market in the last few years –is web-based payroll. Large sized company The Costa Group, a $1 billion, privately owned company and the largest Australian provider of fresh fruit, vegetables and grain, has found a solution for its complex, 1,000-employee payroll in a web-based solution provided by Neller.

In the third model, the whole payroll function is fully outsourced. This is useful for anything from five employees through to large companies and is provided by several local vendors, including TAPS.

Quite a few US companies have not just outsourced, but recently also “offshored” their payroll function to India. A few Australian subsidiaries of these US companies have done this too. According to Low at TAPS, those who have done this have reportedly “not gone all that well”.

Complex needs

Even small- to medium-sized companies can have payrolls that are quite complex. Marian Tredinnick is an accountant in charge of payroll at Elastomer Products in New Zealand. She moved the company’s payroll from a completely different platform over two years ago. When Elastomer first went out to the market, it wanted to include a time and attendance (T&A) system with payroll, but didn’t expect to be using bioscript finger scanning for clocking on and off. It ended up buying a fully integrated T&A in-house payroll solution.

One major problem Tredinnick wanted to address was the human error involved in interpreting two different awards (known as collectives in New Zealand) and allowances. She also needed to ensure accuracy in timekeeping.

Jacqui Page, group payroll manager at The Seven Network says: “Media companies like Seven can have daily changes to the structure of the organisation, as shows can come and go pretty quickly. You can come in on Monday and have 100 new people starting who need to be paid by Friday. You have to be able to handle change well, working here.”

Seven employs around 2,000 permanent employees, 1,000 “run of show” contract employees and 8,000 casuals covering production, editing, extras and actors. Payroll employs seven people. Page says that employing actors and extras causes the greatest amount of complexity. Actors get paid different hourly rates for different types of jobs and, for example, get paid more if they speak more than 50 words. To increase the complexity, employees are located all over Australia.

Seven also bought Pacific Magazines two years ago, which meant Page had to include a multitude of separate contracts into the payroll system that were different from Seven’s existing EBAs, awards and individual contracts.

Despite these issues, Page says the company went to a new system (Northgate HR’s PSE) in late 2000 because they needed more flexibility with their system in terms of both budgeting and importing bulk data from spreadsheets. “We also wanted to have greater control over reporting and the SQL database makes it much easier to access meaningful reports,” says Page.

Teneille Fulton, payroll manager at The Costa Group, has employees working in production, warehousing, marketing, logistics and on farms. Some people are paid an annual salary. Some are hourly employees. Others are paid by the numbers of boxes they pick, and others again by the number of rows they plant. Fulton does five to six pay runs each week. The company has awards, EBAs and AWAs.

The greatest problem the Costa Group needed to overcome was the need to centrally input manual timesheets that were sent in from all its remote regional and rural locations across Australia. Also, the company is continually growing and becoming more diverse, so it needed a payroll system that could keep up with its ever-expanding needs.

Choosing the best solution

Each company chose a solution that best addressed its particular needs.

Elastomer Products went through a request for proposal (RFP) process, approaching five companies and getting four proposals. Tredinnick employed the services of a consultant who knew about payroll systems to help them make the decision. They rolled out payroll as well as time and attendance (T&A) without any errors and are now looking at adding on further HR functionality next year.

“We have moved payroll forward from being not as exact as it could have been. It is now correct. Human intervention has been taken out of the process and now entitlements are always correct, based on the collectives,” says Tredinnick.

Page was not working at Seven when it bought its new system. At the time, Seven’s IT, HR and payroll managers conducted the tender process and assessed the bids. This included visiting reference sites. “We’ve always been a very budget driven company. There is an ongoing trend from our managers who need more reporting information on payroll and leave management. The system has been able to accommodate this. It has also coped well with managing the payroll of some of our more diverse acquisitions,” says Page.

Fulton is also happy with Costa’s web-based solution, which is able to be used by managers who might have never used a computer before, through to those who use state-of-the-art technology every day. All its farms have come on to the system in the last 12 months. Information is keyed in weekly at remote locations.

“We went with an internet-based solution because we didn’t have any IT support at many of our remote rural locations. It’s been an extremely cost-effective solution. It also provides each manager with the information they need. Farm managers may only want to know how much it costs to pick per row of grapes, while our logistics centre needs much more detailed reports,”says Fulton.

Legislation

Without a doubt, the biggest external force affecting payroll managers today is changing legislation. WorkChoices, choice of superannuation funds, changes to age-based deduction limits for super and compulsory time keeping have affected almost all companies in Australia.

Even in New Zealand, where WorkChoices does not apply, Tredinnick says that changes to the way holiday pay and sick leave are calculated has meant Elastomer’s vendor has had to make changes. New Zealand is also about to introduce superannuation, which companies will have to administer on behalf of their employees.

It is often not the actual changes that cause organisations trouble, but rather the short lead-time given to implement them, and the lack of foresight demonstrated by politicians about the issues around the implementation of their laws.

TAPS runs a helpline for its members. “About 80 per cent of our calls used to be about how to tax termination payments. The volume of calls has increased markedly since the WorkChoices legislation has come in. At the same time, a lot of small businesses have stuck their heads in the sand and are hoping it will go away,” observes Low.

After the outcry surrounding the requirement to have all employees record the hours they work, the revised rule is to record the hours of all those earning below $55,000 per annum. Low points out that this has raised a new set of problems around privacy. “If two employees are doing the same job and one is earning above the cut-off mark and another below it, then everyone will know, because only one will need to record the hours he or she works.”

McCarthy says that if a company has employee self-service (ESS) as part of its HRIS, it can be used for this sort of record-keeping. However, it is not linked into payroll, so the information can’t then be used for calculating wages.

According to Macy, the effect of this new legislation is nothing new. “For years, people have been making decisions about operational issues without considering administrative procedures and the impact on technology.” Macy recalls management negotiations with unions 15 years ago that resulted in a pay rate agreement with three decimal places. The payroll technology being used in that company only went to two places.

Human Resources magazine made repeated attempts to arrange an interview with Kevin Andrews, Minister for Employment and Workplace Relations, to answer criticisms from payroll managers about the implementation of various aspects of the WorkChoices legislation. His office failed to return seven phone calls over five working days.

Crystal ball gazing

McCarthy acknowledges that predicting future trends is difficult. “A while back, I predicted there would be rationalisation among payroll system providers that sell to medium to large organisations. It hasn’t happened yet,” he remarks, although he still believes it will happen. He says there will be a continuing trend for global HR systems, with local payroll solutions for global companies, while some companies are looking for Asia Pacific payroll systems.

He also says payroll will integrate with e-recruitment packages and that there will be a move towards “browser-based applications for the backend of the system.” This is known as a zero-footprint, where nothing on a local machine is unique.

“ESS forms will move to becoming user-defined and may have nothing to do with payroll and HR. It could be something like getting approval to attend a conference,” says McCarthy, who also sees a growing demand for users to administer self-service themselves. “That way, companies can start simple and add more functions later without incurring additional consulting fees,” he says.

Macy says that a future issue for vendors will be to design programs using Web 2.0 technologies that will incorporate, among other things, business rules. Web 2.0 allows users to easily compose and orchestrate new business processes, by swapping out and rearranging discrete modular services, as required. That way, when legislation changes, vendors will just need to change the overarching rules, rather than have a vendor rewrite software.

Neither consultant expected the difficulties faced by companies with poorly thought through legislation were likely to diminish in the short term.

Keeping up to date

One of the greatest challenges that all payroll managers face is keeping up-to-date with change – be it legislative, technological or organisational. Many belong to TAPS and use that organisation’s newsletters, training courses, breakfast meetings, seminars, weekly email updates, bi-monthly journal and help line to stay on top of payroll issues.

User group meetings (organised by software vendors) are also usually well attended. Some industry groups (usually accountancy and HR) provide news, information and professional training around payroll issues.

Whatever solution is used, payroll managers can be certain of one thing: change. While the rate of change may vary, it will be constant.

Payroll companies in Australia

Company Website

ADP www.adp.com

AIM Software www.aimsoftware.com.au

Attache Payroll www.attache.com.au

Aurion www.aurion.com.au

Axapta www.scalableds.com.au

CHRIS (Frontier) www.frontiersoftware.com

Commacc www.comaccpayroll.com.au

Core HR Systems www.hrsystems.com.au

Cyberaid www.cyberaid.com.au

D-Bit www.d-bit.com.au

EmployeeConnect www.employeeconnect.com

Empower www.empower.com.au

ePayDay www.e-payday.com

EPayroll.com.au www.epayroll.com.au

Favour www.favour.com.au

Greentree www.greentree.com

Harmony www.harmony-solutions.com.au

Heartbeat HR www.sdconsult.com.au

HR3 www.hr3.com.au

IFS www.ifsworld.com

Merlin Products www.merlinsoftware.com.au

Micropay www.sagemicropay.com.au

Company Website

Mincom www.mincom.com

MYOB www.myob.com

MyStaff www.mystaff.com.au

MyWorkplace Solutions www.myworkplace.com.au

Neller www.neller.com.au

Northgate www.northgate-is.com.au

Oracle www.oracle.com

PayGlobal www.payglobal.com

Paywell (The Pay Office) www.thepayoffice.net

PeopleSoft www.peoplesoft.com

PowerForce www.powerforcesoftware.com

Ramco Systems www.ramco.com

Rockfast www.rockfast.com.au

SAP www.sap.com

Snowdrop www.snowdrop.com.au

SSA Global www.ssaglobal.com

Stargarden www.edgehr.com.au

Talent2 www.talent2.com

Technology One www.technologyonecorp.com

Tempus Fugit (opus ONE) www.tempus-fugit.com.au

WageEasy payroll (Australian Flagship) www.flagship.com.au

Compiled by John Macy. www.component-exchange.net.