The complete process of outsourcing payroll

There are many companies who opt for a new payroll system because they do not want to manually process payroll for their employees. They are well aware that their focus should be on their core product or service. Manual payroll processing can become an administrative burden and as it is easily one of the most inefficient part of their business. Besides processing employee payroll manually can quickly become a nightmare if you aren’t sure of all of the legal and financial complexities. The entire process can be quite variable as some of the regular tax policies and regulations may change from time to time which makes it difficult for companies to stay compliant if they aren’t aware of these changes or do not have a thorough understanding.

The easiest and most efficient way out here is to adopt a new payroll system that can enhance the accuracy as well as reduce time taken of the payroll process. A few ways to streamline the payroll system implementation process are:

Identify all requirements:

The first and foremost step to be taken is to determine the volume of payroll that needs to be processed. The entire process needs to be carefully documented and at the same time it needs to be checked whether the new systems can be integrated with the existing systems. For example, some companies may have an independent employee leave management system which needs to be integrated with the new payroll system to ensure accurate tracking of all information. Determine if the new payroll system can be customized according to your corporate culture, business model and unique requirements. Make sure you work closely with the service provider to finalize the processes that need to be outsourced and outline the details.

Prepare your staff:

The process of implementing a new payroll system can typically take up to 12 weeks. Thus, the company will have to rely on its existing system to make sure the process is carried out uninterrupted. After all it will take some time before you are confident the new payroll system is ready to finally be used. During this the existing payroll staff should maintain employee master information in both the new payroll system as well as the old one till the process is sorted. These individuals should be comfortable able to handle the extra workload otherwise it may put on a strain on their productivity. In such cases it is ideally recommended that help be taken from other departments or hire temporary staff to support the implementation.

Create a formal schedule:

Create a formal flexible schedule beforehand to  ensure adequate data validation, employs use case testing, and provides extensive staff training. The start of the fiscal year or as per calendar is a good time but it can also be done at the start of a new quarter as well. Always have a backup date in order to avoid any surprises. Mistakes in payroll can prove to be costly to the company in terms of employee confidence and moral and possible in financial liability terms too.  Take your time and make sure everything is completely accurate before going live. In case of companies spread across multiple regions consider a phased implementation schedule.

Prepare for data migration:  

One of the biggest problems during this process that busts the budget and schedule early in a payroll implementation project is Data Migration. The company payroll staff and the service provider needs to work together to make sure that the data is smoothly transferred. The payroll experts will be sufficiently able to interpret the extracted data and ensure its validity.

Review compensation policies:

Analyze the existing compensation policies and procedures and identify if there are any inconsistent application, outdated or inefficient workflow patterns. There could be problems such as incorrect overtime calculations in one department or location but not in another, leaves that are not in accordance with company policies, inconsistent salary processing across departments, divisions or locations. Manual processing does tend to cause a lot of these problems. Employees should be trained for any changes to come with the new payroll system.

Check systems for integration compatibility:

Payroll systems rarely operate in silos as they require to be integrated with one system or another. Time clocks or leave management software are some of the typical examples. Synchronise all this data in one format so that integration is smoothly done.

Note: The entire process needs to be reviewed from time to time. These additional control checks during implementing automation ensure that the system is implemented in the right manner.