How to Select the Perfect Payroll Service for your Business - EmployeeConnect HRIS
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payroll system

How to Select the Perfect Payroll Service for your Business

There’s a growing trend for companies of all sizes to call on the expertise of payroll service professionals to manage & execute their payroll. Naturally, the complex, legislative/statutory driven & rather repeatable nature of payroll, lends itself to outsourcing, but it still remains one of the most critical & intimate processes in running a business whose impact for getting wrong can grind the business to a halt. It therefor remains; any decision to partner with an external payroll service provider needs to be strategic.

Payroll  outsourcing is no small matter.  If indeed this is for you, your expectations will be met with significant cost reduction & the ability to free up resources so you can focus on your core business. For the more sophisticated companies, you will embrace the benefits of consolidated reporting & integrated workflow processes building an agile culture that makes strategic HR decisions faster. In short you will build a foundation that will allow you to optimise a holistic talent management process that integrates learning, performance, recruitment training, performance,recruitment and many more.

Questions to ask yourself

Payroll outsourcing is extremely effective and it streamlines a lot of business process, but it does carry with it a number of requirements in part of the business as well.  There are several important things that a business must think of before committing to an outsourcing model.

Here are some questions that each business must ask before pursuing a working relationship with an payroll service company.

Do you have an outsourcing culture?

Having an outsourcing culture is pertinent when a company decides to start utilising a vendor for its payroll services. As mentioned earlier, the advantages of utilizing outsourcing are many, but it does require several adjustments on the part of the business as well. A company which is not ready to outsource will not be able to take advantage of the opportunity it presents, after all.

Have you successfully outsourced before?

Having experience in the outsourcing business is not a requirement, but it does give a company an advantage when it comes to finding a partnership with the right vendor. There are many vendors offering outsourcing services all over the country, and it takes a lot of research and thought when deciding which vendor is the right one for the business.

Does the business support outsourcing as a growth strategy?

Different businesses have different growth strategies. There are businesses that support outsourcing and there are those which do not. Thus, it is very important to do an analysis of the business’s core components before deciding on whether to outsource its systems or not. Growth is among the most important things that a business must consider. Hence, outsourcing must foster this, not stunt it.

Here are some specific questions that can help in analyzing the business, and in deciding whether outsourcing is the right option for it.

  1. How does outsourcing fit with your company’s overall strategy and its HR strategy? How will this integrate moving forward?
  2. Are you prepared to support the payroll system in-house?
  3. Are you prepared to champion the implementation of the system?
  4. Have you mapped the process & know what can be outsourced?
  5. Have you mapped internal costs & know drivers savings ROI to make this partnership viable?
  6. Do you know the competency, experience, reputation, geography of the providers involved, as well as the cultural fit, of the vendor that the business will utilize?
  7. Have you standardized and simplified your payroll processes and procedures prior to considering outsourcing?

If the answer to all of these questions was a yes, then your business is ready to be outsourced. The things to think about before outsourcing however, do not end here. Once a business determines if outsourcing is right fit for its processes, then answering the question of what the right payroll  service is becomes extremely pertinent.

What to look for in a Payroll Service Provider

Looking for the right payroll service involves a lot of important decisions. There are several key indicators when looking for a vendor that offers and provides the right solution. Following is a brief discussion on each, as well as some specific questions that help in determining whether a vendor provides the right solution to a business’ needs.

Overall, a vendor providing the right solution to a business must be able to deliver several key services in vital areas of the business operations. Services such as legal advice, optimisation of the HR system, as well as filling in statutory and legislative requirements are among these services, to name a few. If a vendor is able to provide these in a very effective way, then it can very well be the outsourcing partner that your business needs.

Identifying the right payroll service partner for your business becomes an important subject to look into. It was mentioned above that though there are numerous vendors all over the country that can offer its outsourcing services to your business, not all of the vendors available will be able to provide your company with the system optimization outsourcing processes usually brings. This is because not all payroll service providers are created equal.

Again, the question of how a business should decide on which payroll service partner to go on a partnership with emerges. If specific, select vendors are the best for your company, then how can you choose? Here’s a roadmap/criteria to help you select the right payroll systems outsourcing partner.

  1. Local Expertise. The partner you choose for your businesses must be stable and knowledgeable in the area that your business is running. It also has to have significant experience in the demographic that your business belongs to, in order to fully utilize its potentials.
  1. Payroll Professionals. The vendor you choose must be a payroll professional. That is, it is a company that knows exactly what it is doing, in the most efficient way your payroll processes can be done.
  1. Proven Track Record. The partner you choose must have significant experience in the field of payroll outsourcing. This gives the vendor the necessary credibility to assure peace of mind for your company.
  1. Cultural Alignment. It is no secret that in the business world, culture matters. Having the necessary cultural alignment enables your payroll service provider to optimise a business engagement to its workforce while fostering loyalty to the company.
  1. Technology Roadmap. Having a plan is definitely something that is necessary when looking at possible partners in your business’ payroll system. Since having a technology roadmap enables a business to have a clear view of both its long-term and short-term goals, it is something that a vendor must definitely offer.
  1. Scope of Service. Vendors must of course be able to cater to the business in a vast demographic. It must not be limited, especially since businesses by their nature are ever expanding.
  1. Financial Stability. Of course, the financial stability of a payroll system outsourcing partner must be tried and tested. The payroll processes of your business is delicate, and you would want only the most stable of hands handling it.
  1. Audit & Governance. The ability to audit and govern the processes of a business’ payroll systems is something that is highly valued among vendors in the outsourcing field. It is therefore imperative for you to make sure that your payroll systems partner is able to conduct these important processes.
  1. Implementation Process. The implementation of processes in the payroll system is yet another aspect that must be checked very carefully before committing to an outsourcing vendor.
  1. Change Management. As it is with businesses, the aspect of change is something that a business be forgone. Thus, it is imperative that vendors be key players when ushering and implementing change within the company structure.

Recently, the term SmartSourcing has emerged to signify a focused yet holistic approach to the field of outsourcing. This is especially true among vendors which have chosen to develop their outsourcing systems in such a way that they develop into more than just an external company that a business hires to streamline its operations. With the key concepts of SmartSourcing in mind, the business and the vendor exist as partners, ushering in the evolution of the business side by side.

Change Management is something that is emphasized greatly in the field of SmartSourcing. In the roadmap above, Change Management was included due to the business world evolving at a very fast pace. With vendors who practice SmartSourcing, a very smooth payroll process has never been more certain. This is due to a number of factors, such as the presence of executive support and the emphasis on inter and intra-business communications.

There is a flip-side to this, however. Outsourcing on its own carries with it some significant risks, many of which were discussed above. This could range from a business or a vendor having very limited experience to a business culture that is resistant to Change Management. Instances of data being of poor quality have also been observed in some cases, as well as the lack of preparation and contingencies when crises and uncertainties arise.

Lessons from Experience

With all these in mind, several important lessons could be inferred. In terms of payroll outsourcing, businesses have learned these top lessons. Taking all of the contents of this paper in mind, here are the top ten lessons of payroll outsourcing:

  1. A clear Requirements Definition must be ensured.
  2. Early engagement must be emphasized.
  3. Vendor experience must be verified.
  4. People who will be engaging in the process must be qualified.
  5. Culture is extremely vital.
  6. Contract process is pertinent.
  7. Expectations that are set must be realistic and attainable.
  8. SLA & Reports must be defined very well.
  9. Continuously improvement must be pursued.
  10. Relationships are worth investing in.

With these lessons in mind, your business can very well be able to utilize the opportunities provided by SmartSourcing payroll systems, enabling you to focus on the core tasks that will enable your business to grow and thrive without stretching you thin. With the correct partner, your business reaching its peak will simply be a matter of time.

It is no secret that Payroll Outsourcing was a trailblazer that paved the way for a new and more effective way to manage a company’s payroll systems. However, just as the nature of business is evolution itself, it too, stands today at the brink of change.

SmartSourcing has recently emerged as a field that offers a more in-depth and holistic approach in outsourcing. In an exclusive interview with, Tom Koulopoulos, founder and CEO of the Delphi Group and author of the book Smartsourcing, stated that SmartSourcing is not synonymous with simple, textbook outsourcing. He quipped that when one looks at the two fields side by side, one would note that conventional outsourcing forms only one component of SmartSourcing.

Their main differences lie in the heart of the two processes. Whereas traditional payroll service providers emerged as a way for companies to reduce the cost and transfer the risks of payroll processing to a qualified third party, SmartSourcing utilizes qualified third parties to help a company focus its resources on developing its core processes, balancing its risks and opportunities, lowering its operational costs, and generally putting in place a working attitude that optimizes a business’s strengths socially and politically. In a nutshell, SmartSourcing approaches a business as a whole, while focusing on its intricacies at the same time, making the working relationship between a business and a provider more of a partnership. This is very true of course, when it comes to SmartSourcing a business’ payroll system.

Overall, SmartSourcing is not simply outsourcing. Whereas outsourcing is delegating tasks in order to foster optimum company growth, SmartSourcing goes a step further. With SmartSourcing, fostering relationships between your business and the vendor becomes the key in letting your company achieve its full potential.

Ari Kopoulos

CEO at EmployeeConnect