Top tips for selecting an outsource payroll vendor

by Iain Hopkins27 Apr 2017
After years of lagging behind the US and Europe – where payroll outsourcing has been a mature market for some time – BPO analyst firm NelsonHall predicted in 2016 that the payroll outsourcing sector in Asia-Pacific is expected to grow at twice the rate of the total global market, valuing it at $1.2bn by 2020.

This uptake mirrors the ongoing shift of the HR function away from administrative work towards strategic work.

Zac Ma, Sales Director, HRO, SEA at Links International, told HRD that more and more organisations, especially in Asia, are beginning to recognise the importance of utilising their HR resources as a strategic business partner and are starting to see value in outsourcing administrative tasks like payroll. “They are also beginning to realise that very often there are actually tangible ROI benefits to it,” he said. 

There are, however, some fundamental questions to ask a service provider before making the jump. 

Firstly, and perhaps most importantly, Scott Thomson, chief operating officer, Links International, explained to HRD that the payroll outsourcing provider must be up to date with legislative changes. “This should be pretty much standard today,” he said. “Most service providers will have the resources to keep up to date with any changes and to communicate that to clients.” 

Ma said it’s important to understand whether the vendor is delivering payroll service as its core service or whether it’s a complementary offering. “This makes a difference simply because expertise is required. Use the analogy of going to a shirt tailoring shop to get custom shoes – the quality of advice and service might be questionable.”

Critically, vendors must prioritise the employee experience. The loss of an internal function should not mean a drop in service quality, said Thomson. “The best way to ensure top level service is to select a payroll provider with in-country support. You don’t want your employees having to deal with call centre operators who have no knowledge of the country in which you are based.” 

Ma added that poor first-hand knowledge on compliance and statutory requirements must also be considered if a service provider is not based locally.

Thomson also recommended that the payroll outsource provider should have industry-specific experience. “Finance payroll is very different to retail payroll, which is very different to manufacturing payroll,” he said. “With specific industry knowledge you’ll get much better support and industry leading advice and tips on how to handle any number of scenarios that could arise.”

It’s also advisable to partner with a service provider who can offer the latest technology. Ma said the benefit that most payroll outsourcing providers regularly push is efficiency through the use of Employee Self-Service – for example, E-payslip, E-leave etc. However, these are basically industry standard and a bare minimum now. 

Mobile focused apps and platforms have been in place for some time, and these are becoming increasingly important in sectors where employees don’t have access to computers. Employees need these apps to easily access their own payroll data on the go. Managers, meanwhile, must be able to access team information anywhere, at any time.

Thomson believes that technology tied to HR analytics will be the next major wave to sweep through the payroll provider sector. “Payroll providers should be able to help out HR directors with analytics and reporting which sits on top of the payroll data being processed,” he said. “It’s turning payroll into a function that can fundamentally impact the business.” 

Thomson added that “there is so much information” that can be gleaned from payroll data. Staff turnover trends, annual leave accruals – the list of ‘transactional HR data’ is endless. “HR can really add value to the business by using that transactional data and saying, ok, in this month we traditionally have high turnover of staff – why is this the case and can we proactively recruit people before this month to fill positions in advance? Or HR could spot that 40% of people who resign have taken extensive sick leave in the lead up to it. Can we engage with them earlier and find out what’s happening?”

On the technology front it’s also important to consider the type of solution that a vendor can provide against the organisation’s existing setup and platforms – for example, mobile ESS, or how well it can integrate into a financial system or global HCM. 

As a final tip, Thomson said it’s important to investigate a service provider’s level of data security or accreditation. Most Asian nations have little or no regulation on payroll companies, so data security standards are sorely lacking. 

Still looking for reasons why an outsource solution might suit your organisation? Look no further than HR’s own reputation. As Thomson told HRD, payroll is often the only direct interaction most people will have with HR after they’ve onboarded. “If you mess up payroll HR get a bad reputation. Instead of being able to transform an organisation and concentrate on strategic work, you’ll be dealing with a landslide of employee complaints.” 

Ma added that payroll professionals are often the least appreciated roles in the organisation and are often only noticed when payroll goes wrong. 

“Delivering timely and accurate payments to employee has a direct impact on employee morale and engagement,” he said. “Companies must realise that it ties back to the organisation’s credibility. When mistakes are made, the company risks bad press and might also be fined by authorities due to non-compliance.” 

 

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