2 September 2013
HR Outsourcing
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Payroll Outsourcing Best Practices – 1: Steps to Take Before Outsourcing Payroll

Payroll outsourcing scope is great for businesses, especially when the main focus is growth of the business. However, before you opt for payroll outsourcing, there are a few points you need to consider.

Payroll process is one of the most outsourced service and is becoming a mature industry in itself. There are a lot of benefits that payroll outsourcing can bring to your organizations, one of the major being cost effectiveness. One other benefit of outsourcing payroll processes is that it gives an organization the opportunity to focus on its core business activities.

Outsourcing payroll, hence has many benefits for a business, but it is important that you have a clear idea on what, how and why you want to outsource your payroll process. When outsourcing, it is more like lifting and shifting an entire process from an in-house team to an outsourcing vendor. Many processes need to be redefined and your HR executives may take on new roles and responsibilities.

For each of these changes to be successful, your preparation and method play an important role. Some of the payroll outsourcing best practices include taking a few steps before actually outsourcing the function.

Payroll Best Practices

Steps to take before outsourcing payroll

1. Assessing the ‘now’

The first step in evaluating your decision to outsource your payroll process is to assess the current processes, practices, employees and existing costs in your organization. This gives you a clear picture on what your strengths and weaknesses are. The assessment will help in projecting the payroll outsourcing scope from your payroll provider as well. As a result, your overall decision making becomes more precise and suits the expectations drawn by your assessment.

2. Defining requirements

On completing the assessment of the current scenario in your organization, the next step is to define the payroll outsourcing scope. Which processes or what part of your processes are to be outsourced must be defined in this step.

3. Analyzing the provider market

Once you have defined what you expect from your payroll provider, the next step is to analyze what provider will best be able to meet your expectations. You will be required to consider the fact that all providers have some criteria for providing services to clients. To select an appropriate vendor, you hence will be required to have a broader scope in terms of your processes, activities and countries in which you are outsourcing.

4. Preparing the proposal

The next step is to document the expected payroll outsourcing scope in a way that the payroll provider responds in an efficient and effective way. Face to face discussions can further help in reducing and saving excess paperwork, time and effort on both sides.

5. Payroll provider selection

As a payroll outsourcing best practice, one of the most important step is the selection of payroll outsourcing provider. The key factors that you must consider while selecting an outsourcing partner are:

• Location strategy and geographic scope
• Proven track record
• Strategic sourcing capability
• Compatibility with your culture
• Standardized approach
• Strategy for use of technology
• Readiness for investment in transition management
• Governance
• Team quality
• Financial stability

6. Service level agreement

One of the most important step that you need to take care of before outsourcing your payroll processes is to prepare an adequate contract, or a service level agreement. Your contract should have the below mentioned points clearly defined:

• The respective responsibilities of your team and the provider
• A defined process for resolving possible disagreements
• Clearly defined responsibility and accountability in the case of payroll errors
• A defined process for identifying errors
• Defined time limits
• Scheduled negotiations

7. Implementation and transition

For successful implementation and transition of the outsourcing strategy you must ensure the following:

• Identify your responsibilities
• Your team is efficiently resourced and skilled
• Define the training or communication required
• Define your project governance process and tools to maintain control
• Define and track key milestones, checkpoints and go-live criteria

Payroll outsourcing best practices such as following the above mentioned steps before you outsource your payroll process will ensure that you are set for success . However, just as important, we have discussed about steps to take while outsourcing your payroll in part 2 of payroll outsourcing best practices.

We, at Rishabh, understand the importance of following the best practices for Payroll Outsourcing for our client’s success. Talk to our experts at 1-877-RISHABH (1-877-747-4224) or fill in the contact form for more information on our payroll outsourcing services.

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