Making payroll more efficient

15th March 2012

If you want to make payroll processing more efficient there are lots of software and services designed to help. But as the lines blur between payroll bureaus and managed services and software as a service, the selection process is not getting any easier, as FSN writer Lesley Meall discovers.

Let’s start with the bad news. Payroll is complex, it can be an administrative nightmare, and there is almost no room for error. Pay employees late or the wrong amounts and your ears will soon be ringing with the cries of complaint; make mistakes on statutory forms or returns, or file them late with the tax authorities, and their tills will soon be ringing in your penalty payments. Fortunately, there is good news: it has never been easier to automate or outsource payroll functionality. But this can be a mixed blessing, because the ever-increasing range of software and services out there can make the selection process almost as complex as payroll itself.

So, where do you begin? Well, this depends on the approach you are currently taking to payroll. ‘We have 20 retail stores around the world, and each of those countries uses a payroll bureau,’ says Charles Anderson, head of finance with Ted Baker, the international clothing and lifestyle brand, so you may wonder where the business would have the scope to make its payroll function more efficient, and the answer would be budgeting. ‘Each store previously used lots of spreadsheets,’ he explains, and these were then consolidated at head office to create an annual payroll budget, but Ted Baker recently adopted a cloud-based solution.

The finance function has built a single payroll model that reflects all the different needs and requirements of its multiple stores in multiple countries, using an on-demand budgeting and forecasting solution from Financial Driver, and Ted Baker now publishes this single payroll model online, where it is being used by around 250 people. ‘It looks like a spreadsheet and it has a chart of accounts type structure,’ says Anderson, and although using it is ‘simple and straightforward’ this masks its multi-dimensional complexity, which reflects national differences in things such as bank holidays, or the need to include medical benefit costs in the United States.

Controlling and monitoring the annual budgeting process has become much easier for the finance team. ‘Managing lots of Excel spreadsheets was fraught with problems,’ recalls Anderson. Some people didn’t complete them on time, unexpected adjustments or changes to formulae made data unreliable, and monitoring the progress of the process was difficult and time-consuming. ‘Somebody in HR acts as the gatekeeper, who is responsible for approving or rejecting each national payroll budget,’ he says, ‘and in finance we can just sit back and monitor progress towards the consolidated annual budget, as several hundred people all enter their details into the model.’

Of course, not all organisations are structured in a way that makes the annual payroll budget this complex. So for many, using software or services to automate, or streamline, or outsource payroll is more likely to focus on the monthly (or weekly, or two-weekly) payroll cycle. Though the move away from spreadsheets can still be a characteristic, as can the move towards internet-based data entry – even when payroll is being handled by a third party managed service provider.

‘When we used a manual system payroll was completed by keying into spreadsheets and then forwarding those to a small payroll company,’ says Sue Evans, head of human resources at the retailer Gant. ‘It wasn’t an efficient system. It was time consuming and mistakes were easy to make,’ recalls Evans who selected a replacement that would make payroll more efficient – and across the entire organisation, not just within the HR and finance functions. Gant has opted for a fully managed service from Trace Payroll, which integrates HR and payroll and enables individual store managers to submit their payroll data online – and just once. ‘We’ve seen a welcome end to double keying between our payroll and HR functions,’ she says. ‘Our information is right first time and consistent across payroll and HR.’

The managed service from Trace Payroll is, of course, just one of very many variations on the bureau and managed services theme. There are almost as many types and level of bureau service available as there are providers. So there is a great deal of scope in terms of how involved a business remains in its payroll processing, when it decides to hand some of it over to a managed service provider, and there is also wide variation in terms of the resources and functional scope on offer – and that’s before you start trying to figure out where to draw the line between these managed services and Software as a Service (SaaS) payroll offerings, or find out what lies either side of that line.

Some SaaS payroll services are a variation on the theme of managed services and are amongst the offerings of these providers. But having remote web-based access to payroll software and the associated data doesn’t necessarily mean taking the traditional managed service/outsourcing approach. There are also a growing number of SaaS payroll solutions to consider. These range from fully functional systems that may even extend to integrated human resources features, down to very focused ‘point’ solutions that offer something as simple as electronic payslips. So when Basingstoke and Deane Borough Council couldn’t get its existing payroll software to produce online payslips that looked exactly like the paper versions it wanted to replace, it was not without alternatives.

After considering various possibilities, Robert Crawford, the council’s payroll, transport and insurance team leader, opted for the SaaS solution Epayslip from Prolog Print Media. Any council employee with internet access at home or work can now view their payslip 24 hours a day, and they like what they see. ‘I’ve had users asked if we had been printing and scanning the payslips in previously, because the online payslips look so like the printed versions,’ says Crawford. ‘Being able to use data files from our existing payroll system made the transition process quicker, smoother and much more cost effective than investing in new payroll software,’ he adds.

As Basingstoke and Deane Borough Council was otherwise happy with their existing payroll software, using a SaaS electronic payslip offering was the perfect way of getting the additional functionality they required. Not all organisations are quite so happy with their existing approach to payroll, and the benefits of SaaS are convincing some to bring payroll that had previously been outsourced back in-house. Farley’s & Sathers Candy Company opted for the SaaS payroll system UltiPro (from Ultimate) in preference to a bureau service that had been marred by recurring issues with data reconciliation, lack of control over deadlines, and extra costs for reports that were outdated by the time they arrived.

The bureau solution also seemed haunted. ‘Data was altered that no one had changed, and updates that we made were not applied,’ reports Angela Meyer, payroll manager, who now has more confidence in Farley’s and Sathers payroll data. ‘We know the information we enter is immmediately reflected in UltiPro, and we don’t have to look through a five-inch-thick master report to check or verify our efforts,’ says Meyer. IT is also easier to manage. ‘We almost forget that the technology components exist because Ultimate handles the upgrades, hardware, and system maintenance for us, and our information is secured in Ultimate’s state-of-the-art data centre so we’re confident that it is safe,’ she explains, adding: ‘SaaS gives me one less thing to worry about.’