Payroll is one of the most vital activities for a company. An employee’s salary is his/her single largest connect to an organisation and at the foundation of employee motivation/success. Payroll information is critical and highly sensitive. Any seasoned HR or admin person knows that it can make or break an employee’s relation with his employer.
Given this scenario and the time & effort needed to maintain payroll administration & data security, many corporations worldwide outsource payroll to specialists. Outsourcing of HR administration and payroll in the Asia Pacific region is estimated to be one of the fastest growing markets, touching at least $4.6 billion by the year 2015.
In India too, more and more companies are realizing that payroll information is sacrosanct and needs a 24X7 dedicated resource to maintain the standards of confidentiality & service, while delivering on employee expectations and cost effectiveness.
There has always been a large emphasis placed upon the necessity of good payroll management within organisations, but those that just consider it to be a crucial, non-core administrative function are missing the point. In fact, payroll divisions and their personnel are responsible for the management of the largest controllable cost of a business, as well as protecting that company’s reputation by ensuring compliance with a vast range of legislation. As a result, the need to get it right has never been more important.
Wages and salaries represent the largest recurring expense for any organisation, but in order to evaluate the true cost of managing an internal payroll function you need to look beyond the superficial headings and take cognizance of the less obvious, but equally related, secondary costs.
For instance, any in-house payroll function will incur expenditure under the following headings:
Software & IT
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Office
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Labour
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Payroll Software, Security Software, License
Fees, Upgrades, Maintenance, Disaster Recovery Programmes, Printers.
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Fixtures & Fittings, Rent, Utilities,
Stationery, Storage.
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Cost of Trade Union Activity (staff resistance to
change), Retraining, Staff Expenses, Annual Leave, Absenteeism, Decision
Making, External Consultancy, Resignations, Recruitment.
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Therefore, the diversity of the financial burden placed on companies that opt to run their payroll internally goes a lot further than the direct cost of the labour involved. That said, it is only one of the parameters to be considered when evaluating the viability of running it in-house. Far greater challenges to the successful and smooth running of an internal payroll function lie in the area of compliance.
