8 October 2013
HR Outsourcing
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How to Design an Effective Payroll Outsourcing Model

Enterprises can define a payroll outsourcing model that works best for them based on a few criteria.

Since payroll outsourcing has been a part of the BPO industry for a while now, many companies opt to outsource their Payroll processing so that their primary focus can be sales and growth of their business.

Statistics suggest that payroll of nearly 20% of Europe’s employees’ is outsourced to third party vendors. Although payroll outsourcing is on the way to becoming an industry in itself, there are no particular payroll outsourcing models that payroll companies apply. However, an organization looking forward to outsource their payroll processes can design a model based on a few criteria.

Criteria for effective designing of payroll outsourcing model

Payroll Outsourcing Model

Responsibility that is transferred

The first criteria that needs to be considered while designing your payroll outsourcing model is to identify the responsibilities that are to be transferred. You need to have an idea of whether a complete process is to be outsourced or a part of the process. You should also be clear on whether the provider is going to take over your personnel or an entire department.

The next thing that you need to decide is whether your provider is simply going to provide the means or results. Identifying the base unit of invoices can help you decide the exact nature of transfer. Payroll outsourcing services can be provided at two different levels – process and function. Under payroll outsourcing services, the process level invoices are decided on the basis of number of payslips produced.

When the payroll is outsourced at the function level, it is either ‘lift & shift’ or managed services. If the payroll outsourcing model includes managed services, then the invoices are based on the number of employees that the vendor manages. On the other hand, if the outsourcing model includes the ‘lift & shift’ approach, the invoicing is done on a due diligence assessment.

Outsourcing is shared or dedicated

The second criterion that will help you design your payroll outsourcing model is the type of environment your service provider has set up for providing their services. The service environment can either be dedicated or shared. The model that has a dedicated service environment is known as a one-to-one model while the latter is termed as one-to-many.

When you ‘lift & shift’ your entire payroll process, the teams and infrastructure provided by the payroll company remain dedicated to your organization. On the other hand, under, managed or processing services, the companies providing payroll outsourcing services rely more on shared infrastructure, applications and teams. This helps them deliver their services to a multitude of clients quite easily.

When you are applying the one-to-many model, the processing services generally correspond to the central, transactional part of the process. This suggests that there will be a strong commitment at the service levels. Managed services, on the other hand, cover the entire payroll value chain. It can prove to be a comprehensive payroll outsourcing model.

For any payroll outsourcing model to be successful, it is important that you design it keeping in mind the two criteria mentioned above. At Rishabh BPO, our experts can design an outsourcing model that fits the two criteria. For more information on outsourced payroll processing, talk to our experts at 1-877-RISHABH (1-877-747-4224) or fill in the contact form.

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