Outsourcing Trends – Payroll Outsourcing Considerations

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Financial Systems

In Financial Systems the essential issue is, do I keep it internally or do I outsource it to a software service, or infrastructure as a service or some other external provider and in the old days, prior to the great network and software as a service generally coming on stream. People would consider four things when they’re making an outsourcing decision:

  1. It’s the financial and that’s really around costs,
  2. The business and are we doing the things that we need to be doing and this still is just as important we’ve got the technical, which is can I get better access to better technical infrastructure externally?
  3. And the political
  4. Now people are looking for
  5. Better analytics,
  6. They’re looking for bench marking,
  7. They’re looking for innovation, and there’s a greater emphasis on compliance in terms of certain functions their outsourcing and innovation is another way,
  8. They see by taking an innovative approach to an outsourcing provider, and these reflect better on the happiness of the people, and that is going to flow through to better service quality.

It’s a partnership absolutely, and if you can make sure that the two cultures are aligned and that the people are providing the service at the level expected from the customer.

Then, it’s great you’ve got

  1. say payroll and
  2. you’ve got the cost of infrastructure,
  3. you’ve got the cost of the people,
  4. you’ve got the cost of printing the pay slips,
  5. you’ve got the cost of processing,
  6. the cost of restoring,

All of this kind of things and these costs can be quite high, they can be quite high. So the doing due diligence in that area, for example, people did due diligence on the use of credit cards, some years ago, I said “Will we have a corporate credit card or not?”, and they came up with the decision that, yes they will.

But of course, yeah there will always be going to be problems with those, with those types of issues. But if you got an issue like payroll then lots of different things that you need to take into account and it can be quite complex. When you’re evaluating do you really understand as a company the types of considerations that you need to evaluate whether to have a payroll in-house or a payroll outhouse? The types of things that you really have to consider is, well let’s start just with legislation. There is a myriad of legislation. I think there is a probably about 20 or 25. Acts across Australia which govern payroll and you’ve got, for example, you’ve got payments.

You’ve got Fair Work and this under, which comes all the enterprise bargaining agreements and boy there are so many of them. They are so complex, and there are a whole lot of issues around that. Then you’ve got the whole area of deductions, and you got family law issues in terms of paying, you know, you get divorced and things like that. You got HECS for students out there, you’ve got social security payments, and there are also payments and deductions. Then you’ve got tax; you know income tax, the fringe benefits tax, all of these have got to be taken into account.

Superannuation, that’s a whole other story. You’ve got child employment issues, which is an interesting one. So there are a lot of quite young people who are in employment for one reason or another, For example, acting, modeling, etc. and that needs to be taken into account, and there is quite considerable legislation around there.

You’ve got disbursement to creditors and payments and things like that, and then you’ve got new issues that are coming, arising from immigration, and 457 visas, and student visas and some of the issues that would have risen from there. We might, you know, touch at a later point. But there are all of these, and that’s before you even get to the enterprise bargaining agreements, which are quite complex as well. So, regarding how does that affect the internal management or payroll is that people have got to understand what this legislation means, particularly in large enterprises and certainly in the large and medium enterprises. These things need to be taken into account, which means the people who are managing these areas have got to be cognitive of it.

That means that they need training, and the training can be quite complex, and you know the costs go up as a result. For a lot of small businesses who are employing for example students, then you’ve got this whole lot issue of a restricted number of hours they can work and there are a lot of students who need to work and some of them are being, well, some of them are being cheated out of their money because they can, they only can work and be paid for 28 hours of work. But if they work more, they’re only paying them for 28 hours a week, and this really comes down to being a social justice issue.

In fact payroll, I believe, is a social justice issue, because you need to be paid correctly for the work that you do, and there are many, many instances of people who pay people incorrectly either deliberately or because they do not understand the complexities of the legislation or regulations and the enterprise bargaining agreements that are involved. So whether it’s intentionally or not deliberately, the thing is, that if families are not getting proper pay, then they’re missing out on essential services.

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