The pay play: in or out?

by 28 Apr 2009

Advances in payroll technology in the last decade have been largely responsible for allowing HR to move from a transactional to strategic function. Teresa Russell talks to several organisations that have both outsourced and run payroll in-house about which works best?

In 1999, the Howard government made public its agenda to significantly reform the Australian Public Service. It envisioned a highly efficient, globally competitive, customer-focused public service that benchmarked best practice in organisation management.

Commonwealth agencies saw benefits in outsourcing a range of corporate sup port functions including payroll services, records management, human resource management and human resource devel opment. Several years later, Democrats Senator Andrew Murray criticised the Government. “There has been a huge increase in (government) outsourcing, but there hasn’t been a similar increase in accountability,” he said.

Australian Hearing is a Federal Gov ernment agency that outsourced its pay roll according to government policy at the time.

The organisation provides hearing- related services to people of all ages to help manage their hearing impairment. It employs about 1100 staff in 100 perma nent and 200 visiting sites across Australia, competing for clients on the open market.

Peter Deverell, Australian Hearing’s manager payroll and HR systems, says that in 1999 payroll was outsourced to a private firm, Can Deliver, which used Frontier Software’s CHRIS21 as its out sourced solution. Deverell was work ing on-site for Can Deliver, but in 2005 got an offer he couldn’t refuse to join the client.

He brought the other three members of the payroll team with him. In October 2005, Australian Hearing went direct with its relationship with Frontier, continuing to outsource the backend function to it.

“The main reason we continue to out source payroll is that the board and our executive prefer payroll to be calculated off-site to protect the organisation against fraud. We see the license as a very expen sive one-off cost and feel it is better to use a per-person-per-pay system,” says Deverell.

Denise Hanlon, executive manager people and performance, has overall responsibility for payroll at Australian Hearing. She previously worked in a smaller organisation where payroll was managed by finance and was then brought under HR’s wing.

“Payroll was a law unto itself [when situated in finance]. The more customer-friendly that payroll is, the happier staff are … and the opposite is also true,” says Hanlon, who believes that organisational priorities get proper focus when HR has ready access to information such as turnover and absenteeism rates.

“The power lies with payroll. It adds a financial dimension to HR. The trends it gives lets you know what is happening in the business,” says Hanlon.


Australian Hearing has realised significant savings since it brought payroll back in-house. Deverell says that initial huge savings came by cutting out the middleman. These included removal of a monthly fee, commission and the intermediary’s profit margin.

The organisation also renegotiated its contract with Fron tier and achieved a better rate than it had been paying through the vendor. Employing the previous contractors directly also realised savings, despite the fact that the payroll team itself was taking home more pay. The team has now been cut from four to three, with Deverell’s management role largely focused on HR metrics.

Deverell says that efficiency gains have been tenfold as a result of moving from a manual system to a kiosk-type system. “There are no more payslips to get out every pay day and leave applications are approved by managers online,” he says.

Information revolution

Usually twice a year, Australian Hearing gets access to enhanced features of the Fron tier system. Because it is a statutory author ity, it has to report HR statistics such as turnover, unplanned leave and staffing pro files to the minister and Department of Human Services. Deverell’s role has evolved into one of analysing, advising and report ing on the HR trends in the business, as well as managing payroll staff.

Hanlon says that for the last 12 months line managers have been receiving data packs about what needs attention on the people side of the business. “The system has allowed us to target absenteeism hotspots, expose areas where several retire ments are imminent at a particular site and compare salaries around the country.”

The private sector targets its audiolo gists for poaching, so management tries to ensure that these salaries are on par with the market, to minimise turnover related to wage rates.

Hanlon concedes that the only weak ness in the payroll system at present is that Deverell is the only point of contact for mining this information through reports and that, in future, line managers may well have access to these reports directly.

Case study

Norske Skog Tasman Ltd is a New Zealand-based pulp and paper mill that provides newsprints for the Australasian markets. Its 380 employees are located in the one mill in Kawerau on New Zealand's north island.

Over the last 10 years, it has used three different payroll providers, both on-site and outsourced, going live in September last year with outsourced payroll processing to The Pay Office, using its Affinity system.

Walter Naera, Norske Skog's HR advisor, says that legislative changes in the last two to three years have increased the complexity of payroll processing, thanks to the introduction of a government superannuation scheme (Kiwisaver), taxation changes, The Holidays Act 2003 and individual and collective employment requirements.

"Payroll used to be like an accounts payable function, but now it's about adding value. We have partnered with a provider that has a proven track record supplying technical expertise to the New Zealand market. With The Pay Office administering the back-end processing, we can focus on the front-end relationship with our staff," says Naera, adding that experience, transparency, auditand reporting functions were key criteria in vendor selection.

Payroll processing costs were halved in terms of time and money, allowing the payroll function to become a developmental HR advisor role as well, providing a succession path that previously did not exist.

Naera stresses the importance of choosing tried and tested software backed up by a local provider that employs experienced people. "It gives you confidence when dealing with people's pay that the people who wrote the software are still with the company 10 years later," he says.

Vendor news

Frontier began in Melbourne in 1983, Frontier Software has developed one of the world's most successful solutions for human resource and payroll management. The CHRIS (Complete Human Resource Information System) product continues to evolve to meet the changing requirements of its international client base. chris21 is the product of choice for 1500 organisations throughout Australia, New Zealand, the UK and Asia. chris21, a fully integrated HR/Payroll system, is supported by a range of products which focus on specialised areas such as Online Recruitment, Performance Management, Learning & Development, Employee/Managers Self-service and Web Services and is brought to life by a financial and philosophical commitment to web technology.

Sage MicrOpay's range of Human Resources and Payroll software encompasses Australia's most advanced solutions for businesses of all sizes. Our systems are fully featured and easy to learn and use while providing flexible and accurate HR and payroll management. As well as being packed with productivity-enabling functionality, our software is designed to streamline the payroll process and ease the talent management burden. Our offerings include e-HR, e-Recruitment, employee/manager self service, learning and education, timesheet management, workforce planning, performance management, executive reporting and payroll. For more information email, phone 1300 729 229 or visit

SuperChoice Services Pty Ltd is an online clearing service that enables employers to make superannuation payments through one simple transaction. More than 50,000 businesses across Australia realise the benefits of transferring super contributions electronically, saving time and money. Data from any payroll system is easily uploaded to pay any complying superannuation fund. Our robust validation methodology reduces errors and returned cheques, further lessening payroll workload. SuperChoice clears $7 billion in superannuation contribution payments on behalf of 1.75 million members annually. Building on strengths created through collaborative development and legislative expertise we are Australia’s leading superannuation clearing service. For more information please contact Tony Russell on 0423 895 440 or email or visit