Digitisation is being reckoned as one of the major driving forces for the future. As a result of which, the sector of payroll & accounting are facing considerable pressure to digitise their processes. The payroll sectors in numerous organisations are still functioning manually, occasionally analogously.
Concerns surrounding security and data protection rise and become one of the prime motivations to digitise. Yet, payroll & accounting is falling a bit behind in the adoption to digital trends. Hence, it is high time that digitisation and process improvement take the front row in payroll & accounting processes.
Key drivers for payroll outsourcing
The major reason why payroll is outsourced is because of the digital pressure on HR departments. Mainly because other business areas have often been fully digitised for years. In many cases, this makes cooperation with the departments even more difficult. Making it complex to communicate the change and distribution of tasks in dynamic parts within the company.In addition, this is why traditional payroll management as the central interface between employees and its organisation is slowed down. Through digitisation and automation via outsourcing, HR & payroll processes can be better integrated into existing business processes.
Outsourcing the payroll processes also means personnel security. Payroll accounting is comparatively restrictive in most companies, as we rarely see more than one or two positions planned for this.It is one of the most complex areas in day-to-day business, and if any personnel is changed in the department, it would result in high process friction and losses. This is why it is also difficult to compensate for unplanned absences, for example due to illness or parental leave. On the contrary, external service providers have the necessary personnel reserves and specialist knowledge to efficiently compensate for the lack of in-house personnel.
Digital payroll and accounting has the advantage of eradicating errors from the start. Subsequently, effort involved in monthly payroll is effectively reduced. Now, corrections and lengthy checks of all invoices are becoming a thing of the past.
Enormous efficiency and cost advantages are achieved post-outsourcing implementation. Now, the concentration of these HR & payroll resources can be diverted towards the core business.
How does payroll outsourcing work?
The effort involved in the transformation and digitisation process is immense. In principle, 9 to 12 months as a time requirement for the complete takeover of all payroll processes should be anticipated. Firstly, it begins with extensive consultations with the management and the employees of the HR department. Partners like us also try to involve work councils in the process as early as possible.
During these discussions, we get to know the structures and payment-related processes. If necessary, we also consult with employees in the individual departments. This is important to keep the upcoming onboarding at its simplest. Additionally, training and information must be planned in good time. Together, with the HR department, competencies that already exist in the departments are checked.
With the company, a tailor-made solution is developed in order to digitally map existing processes. The tasks of change management can be challenging. Hence, companies that start the outsourcing process must plan the necessary resources sensibly beforehand. Else there is a risk of delays that result in additional costs. Certainly, we also support in estimating the effort.
Outsourcing more HR processes other than just payroll, can take longer. For that, we provide an individual, realistic estimate of the time required during the first consultation.
What will change for the employees?
The digitisation of HR processes benefits the employees in the company a great deal. Particularly, communication with the responsible departments can be simplified on digitisation. Hence, viewing personal information and reporting new data becomes easier digitally.
Many companies are now using central employee apps for this purpose. These can be used for calling up or to enter current information about working hours. Additionally, sickness reports and holiday requests can also be made via these. Individual inquiries can also be processed faster through these apps, making the interface between companies and employees simpler and more permeable.
For the company, this has the advantage that employee feedback is recorded more comprehensively. Improvements can often be implemented much more quickly.
What options are available for payroll outsourcing?
Payroll can be outsourced in three different ways. These differ primarily in the scope of the sub-areas taken over from a partner, like Zalaris.
- In the simplest variant, cloud payroll solutions can be with specialised infrastructure. In practice, this means that the company and their HR department continues to monitor the payroll modalities. Meanwhile, the partner takes care of the server, software and data backup. Hence, the company is set free from the time-consuming task of securing data. Now, the complete concentration can be shifted on the actual payroll processes.
- Alternatively, there is also the option of letting the partner take care of the payroll as well. This means that company employees take care of data maintenance, while the partner takes care of all tasks at the end of the month. Including the creation of the accruing receipts and documents for them.
- On the other hand, there is also the option of outsourcing all personnel accounting. Here, the partner takes over the entire data maintenance for the customer or company. Subsequently, the customer benefits in terms of efficiency and cost savings. At the same time, however, the conversion is comparatively complex. Hence, gradual outsourcing is usually the most sensible way to outsource existing payroll to the cloud.
What are the operational costs of payroll outsourcing?
One thing is clear: Payroll outsourcing can save costs in the long term. But what is the total expense a company can expect when initiating a transformation like this? This doesn’t have a simple and straightforward answer. Meanwhile, there are the costs that are incurred in the company during the change. Depending on the size of the company, certain human resources are required. As described above, the transformation typically takes up to a year.
Additionally, upfront costs for software are also to be considered. At Zalaris, we have the opportunity to purchase many licensed products in large quantities at lower prices.Depending on the scope of the project, unexpected and unaccounted for costs can arise. In many cases, however, it is possible to reflect the licence fees in our general service costs. This allows you to benefit from costs that can be planned in the long term across all elements of payroll accounting. Of course, we also check which existing licences are suitable for further use.
The regular expenses for payroll outsourcing amount to around ten euros per month per employee. However, these costs may vary depending on the scope of the service.
How secure is the payroll data?
Personal and financial data of a company are undoubtedly sensitive. After all, these not only affect the organisation, but also their employees. This is why, at Zalaris, we develop all our services keeping data security as a priority from the start.
The data we process is exclusively stored on the servers located within the European Union. This is applied to both, the productively used versions and backup copies. Needless to say, we strictly adhere to the requirements of the European General Data Protection Regulation (GDPR). Additionally, we are also certified according to the International Standard on Assurance Engagements. The ISAE 3402 certification confirms the reliability of our internal control systems.
Furthermore, we have a reliably secured system for the delivery of any data. The regular payroll information is transmitted to us via an encrypted connection. If additional data is also relevant, for example to pay out bonuses, we create additional channels for it. Such information can be transmitted, for example, via a Virtual Private Network (VPN). Alternatively, there is also the option, for example, of delivering encrypted data carriers to us.
We hope to have given you a first impression of the opportunities offered by payroll outsourcing. From our point of view, it is particularly important not to underestimate the transformation process. This is because payroll management is one of the most complex tasks in everyday business. Hence, the opportunities through efficiency gains and digitisation are all the greater. We would be happy to advise each potential and present customer individually on the effort that is to be expected for such a transformation.