PAYROLL OUTSOURCING - OVERVIEW - THE DELOITTE DIFFERENCE - PROVIDING THE PAYROLL AND HCM SOLUTION WITHOUT MAKING ANY UPFRONT INVESTMENT - ONLY PAY FOR WHAT YOU USE, WHEN YOU USE IT - OUR UNIQUE CO-SOURCING SOLUTION - SERVICES - KEY COSTS AND RISK ASSOCIATED WITH AN INTERNAL PAYROLL DEPARTMENT - CONTACTS INTRODUCTION Outsourcing in perspective In its simplest generic form, outsourcing is simply when you get some one else to do something for you rather than doing it yourself. This is of course not a new concept and as a matter of fact many services, which we take for granted, are not even viewed as “outsourced” in terms of the strict definition. So for instance, for centuries companies have been outsourcing their mail to the post office rather than attempting to each deliver its own mail. Similarly we use commercial airlines to travel, rather than own our own planes or we make use of hotels rather than purchase our own accommodation and we buy electricity or telephone services from the utility companies rather than setting up our own infrastructure. Although these are all examples of “outsourced” services, we usually do not include these when we talk about Business Process Outsourcing (BPO). In terms of the new wave of outsourcing activities, the literature usually only include those services, which traditionally were performed “in house”. In this process there may be services, which at one stage were regarded as outsourced (with some companies doing it internally) but now falls into the category of being an accepted “purchased service”. There also appears to be different views between “outsourcing” and “subcontracting”. The difference being that the former is regarded, as permanent while the latter is a temporary arrangement. This is an academic distinction and whether you get someone to do a project intervention for you or you get someone to fulfil a function for you on a permanent basis, both can be regarded as “outsourced services”. One can hardly imagine a company today that does not outsource some aspect of its HR function, even if it is only the fund management of its pension scheme. The objective of outsourcing (generally) is to free up the internal resources so that they can concentrate on strategic issues important for the health of the company. The outsourcing of payroll functions to a “bureau” has been fairly commonplace for a number of years now. Unfortunately most companies found that contrary to their expectations, these bureaus did not “remove” the burden of payroll administration from them. A clear distinction should be made by the client considering outsourcing of his payroll between a simple “bureau” service, and the complete “payroll service” as offered by Management Solutions. Rationales for outsourcing Need for specialized Expertise This is fairly self-evident. The question is: “What is it we will never be experts at or shouldn’t spend time doing?” or “Outsource if some-one else can do it better than you can yourself”. HR Information Technology In essence, outsourcing means you don’t have to buy. It could also be an imperative to rationalise diverse systems. Time pressures The HR executive needs a service that will free up the time that he currently spends on his payroll service. Cost Savings According to the literature, the vendor does not necessarily get economies of scale through size, but rather through best practices. One has to be careful that cost is not the sole driver, it could result in a decline in services (or you could find that the service selected is not comprehensive enough and you do not achieve your goals of freeing the time of your executives). Vendor efficiency & Service On specialized functions such as payroll administration, the service and efficiency of the vendor prompts the outsourcing decision. Strategic Focus The HR department lacks strategic focus because of a pre-occupation with operational activities. Outsourcing these activities, frees up time for refocusing strategically. Reducing bureaucracy and culture change Using a vendor is often the best option to manage a change requirement. Especially where the internal department has become rigid and bureaucratic – or – where your environment is complicated by a merger or an unbundling. Management and Organizational development Quote “Outsourcing is the antidote to inward thinking”. It stimulates the HR executive and broadens his mind. Outsourcing provides a big picture perspective. Relieves the “I can’t see the forest for the trees” syndrome. What to outsource? Deloitte & Touche Management Solutions does not deliver a “one size fits all” solution. The offering to each client is structured to meet the needs of the customer and to fit its strategic intent. Specifically we will not try and sell a Bureau service when what the client really needs is a comprehensive payroll service. Payroll outsource vendors do not all offer similar services. Be very careful in your selection of a partner. Make sure they have the capability to meet your needs completely. What this means is that you should define your needs before you go shopping for a vendor. Check each vendor’s service against your needs and make sure that their service offering is broad enough in scope to meet your needs. It is important to note that where-as the main driver for the large corporate is efficiency, outsourcing is not necessarily cheaper for the smaller client. The smaller client is focussed on delivering a service, which often does not exist and obviously this would result in increased costs. The advantages of Outsourcing Reducing or eliminating fines and penalties by keeping pace with changing government regulations. Achieving measurable, bottom-line results by increasing efficiency and leveraging our economies of scale. Lowering infrastructure and facility costs by having the Payroll function administered off-site. Sharpening your business focus by eliminating interruptions caused by employer obligations, risks and liability. Saving time by eliminating the need to hire multiple companies to address your Payroll needs. Maintaining total control over your company. You don’t enter into a "co-employer" relationship with Deloitte & Touche Management Solutions. We’re not a professional employer organization (PEO) or an employee leasing company. Improving employee retention and morale by providing timely answers to payroll and benefits questions. Expanding scope and level of service. Your Payroll department can’t be subject experts in all areas. Implementing organizational initiatives that link to your overall business plan: Payroll becomes strategic, not tactical. Deloitte & Touche SETA Services. Copyright 2004. All Rights Reserved.