Sep 16, 2009
Companies could be doing more to ensure their payroll function is running efficiently, according to research by ADP Employer Services. The payroll service provider surveyed over 750 HR and finance professionals in charge of payroll and found that fewer than half of them have any efficiency measures in place. Surprisingly, finance professionals actually faired worse with only 39% measuring efficiency compared to 49% in the HR department.
The research also found that a third of those in charge of payroll would not examine payroll expenditure (outside staff costs) when looking to cut costs in the business. With many respondents feeling that costs could be made on areas such as administration (52%) and minimising errors (43%), this could be an area where organisations are losing out.
“The wage bill accounts for 50 – 80% of an organisation’s expenditure and the costs of preparing payroll can be significant,” commented Don McGuire, managing director at ADP: “In light of the current economic climate, businesses should be looking at areas where they can increase efficiency and cut costs. Payroll is one area that is often neglected.”
The research also highlighted some disagreement amongst HR and finance professionals as to who should have responsibility for payroll. Despite what many may think, payroll is actually more likely to sit under finance (49%) than HR (40%) with this number rising amongst smaller organisations (69% to 31%). However, the research has found that a quarter (25%) of finance professionals in charge of payroll would actually rather it was part of HR and almost that many (22%) of their HR counterparts say they would rather it was part of finance.
“Payroll is important to both HR and finance, with both sides requiring the data and information that it provides,” explains McGuire. “But there seems to be a lot of disagreement over who should take overall responsibility and a lack of best practice as to how the two departments should work together. The fact that so many HR and finance professionals feel that it shouldn’t sit in their department highlights that neither see it as part of their core job role.”
Despite this seeming reluctance to be involved in payroll, the majority of organisations (63%) still retain the function in-house, with this rising considerably among finance respondents (76%). Reasons for this include keeping control of data (86%), seeing no reason to change (84%) and security concerns (80%).
“Once again we see a reluctance to outsource due to issues around control and security. But many people don’t realise that these factors are often significantly improved with a reputable payroll provider,” argues McGuire. “At ADP, there are differing degrees of outsourcing, from a bureau, where control is retained in house, to a fully managed service, which takes away the burden altogether, so it is not necessary for an organisation to lose touch with its data.
“Regarding security, ADP has structured its whole business around ensuring its people and systems are compliant, payroll payments and reports are processed on time and that rigorous continuity plans are in place. This allows organisations to focus on their core business while we mitigate the risks on their behalf.”
Of those respondents who outsource, 68% do so to a bureau service with the remainder outsourcing to a managed service. Reasons for doing so include freeing up internal staff time (82%), access to greater expertise (75%) and reducing costs (69%). Not surprisingly, finance professionals are significantly more likely to outsource due to the cost savings, with 88% agreeing this was a factor compared to only 66% of HR professionals.