Roll on payroll

by 27 Apr 2010

HR professionals are continually striving to find the most cost-effective, efficient and user-friendly payroll system. HR Leader looks at some of the latest trends in payroll and how HR can go about choosing the right payroll system for their company

While technology has made payroll administration easier in recent years, ever-changing legislative requirements make compliance trickier for HR and payroll professionals.

There is a common misconception that payroll is easy and that the software does all the work, according to Jason Low, general manager of The Association for Payroll Specialists. However, it is essential that payroll professionals stay current to avoid non-compliance penalties. This year sees the introduction of Reportable Employer Superannuation Contributions, and on 1 July 2010, some superannuation contributions need to be reported on employee payment summaries. Low notes that the contributions that need to be reported, for the most part, will be amounts the employee has chosen to salary sacrifice into superannuation from their pay.

On top of compliance, companies are always striving for greater efficiencies in their payroll processes, and Low says payroll best practice is about providing a faster, cheaper and more productive service with fewer resources.

The top four areas of payroll best practice are: a focus on technology for collecting time data and leave requests; the use of electronic systems to disperse wages, superannuation, deductions and pay slips; making singe payments per pay cycle and avoiding off cycle payments by investigating and eliminating errors; and creating a stronger relationship with HR to streamline the end-to-end process, according to Low.

Picking your payroll

Depending on the size and complexity of your payroll, there are three options for paying employees, Low explains. The first is in-house, whereby software is loaded onto your computer to assist you in processing payroll. The second option is to outsource. Most payroll companies can now process your payroll for you, including submitting all necessary tax payments, deductions and generating reports. The last option is going online, and Low says using the internet allows you to make real-time changes and run and download reports from anywhere.

“There is no single solution for payroll. The level of complexity in your payroll will be the driving force,” he explains.

“If you have a small payroll, an off-the-shelf product may be ideal. If your payroll is complex, you may want to consider outsourcing or using a more advanced payroll product. The key to determining an ideal payroll solution for your business is to be realistic about how much time and money you can devote to this task.

“Also, consider whether you have an employee in accounts or HR with the knowledge and time to dedicate to payroll. If a payroll system isn’t working for you, don’t feel tied to it just because that’s the way it’s always been done.”

10 steps to picking the right payroll system

To ensure the evaluation process is consistent, transparent and relevant to the business, it needs to be well documented and communicated to relevant stakeholders. At a minimum, it should cover the following elements:

1. Functional requirements. Most payrolls pay people accurately and in a timely manner, but in order to differentiate you will need details, down to the field level, ability to handle master file, legislative and statutory rules, pay grades and rates, allowances, deductions, leave accruals and management, processing, end of month, end of year, general ledger, ESS/MSS, and whether it's date driven or not.

2. Reporting requirements. Ultimately, your financial and strategic decisions will be made on the quality of the output data. Ask for examples of reports, look at format and how easy are they to manipulate.

3. Technology. The things to consider here are technology platform, database and the delivery method. It would be wise to ask existing clients how they feel about the product, its user interface and compare the user feedback from different vendors.

4. Project methodology. Look for proven methodologies that include scoping, implementation, testing, pilot, quality assurance, roll out and of course change management. Presence of all these phases will ensure the technical solution meets the people and process requirements.

5. Value added services. Does your vendor offer process re-engineering, outsourcing, legislative advice, time and attendance, as well as HR solutions, in-house or through partnerships?

6. Training, documentation and support. Does the vendor have a formal process for identifying and delivering training needs? What materials are provided? What is the help desk like and, in particular, the service level reflected in the agreement?

7. Quality management. Take the time to understand the vendor's quality management philosophy and process. How will the vendor ensure that your requirements are continuously monitored, met and addressed if out of control?

8. Due diligence. Look for relevant industry experience and proven service levels. Check references thoroughly and insist on a site visit. Searching within the blogging community also yields brutal honesty on a vendor's performance, limitations and general reputation.

9. Total cost of ownership. Consider the total cost of the solution by calculating license, implementation, training, consulting services, support and upgrades and factor in your operating cost.

10. Risk assessment. Each vendor will have a level of risk associated that should be taken into account. Is payroll their core and only focus? How are they doing financially? Will they be around in five or ten years? Have they been up for sale? What is their technology direction? Do they offer an exit strategy? Are they culturally compatible?

Source: Ari Kopoulos, national sales and marketing manager, EmployeeConnect

Return on investment strategies for a new payroll system

Are you convinced that your organisation will benefit from a new HR and payroll system, but are you having difficulty getting budget, senior management buy-in or support? Here are some suggestions for getting your proposal across the line:

Identify your pain: What is your greatest headache with your current system? Is it the manual paperwork? Do you spend hours answering staff queries? Clearly identify the problems and name them from the outset.

Muster the troops: Who else in your organisation will benefit from a new payroll HR solution? This will most likely include your executive management team and your financial reporting team. Involve these stakeholders and include the decision makers from the start.

Understand the tangible from the intangible: ROI will outline the tangible (easily measured in dollars) and estimate the intangible (difficult to quantify) benefits. By ensuring you have covered as many tangible benefits as possible means that you will be able to present your case in a more meaningful way.

Gather the facts: How much money and how much time are you currently spending on the upkeep of your current system? How much time do you currently spend on common tasks?

Talk holistically: After you've gathered all your information, make sure you highlight all the benefits (both tangible and intangible) that the entire business will experience from your new proposed system. Think about the impact across all areas of the business.

Ask an expert: Talk to different vendors of various solutions. Each will have case studies. Find out how other similar organisations have achieved process improvements and cost savings through implementing their new solution.

Source: Rob Hill, national business development manager, Neller