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Why Companies Outsource Payroll - Some Key Drivers

On July 25 2013, MidlandHR was awarded a payroll BPO and HR software contract by UK General Insurance. This is a full payroll BPO contract with MidlandHR providing management and operations of payroll including:

  • Processing of gross to net
  • Data entry, both manual and electronic
  • Provision of automated or manual calculations
  • Checking of input, validation, sensibility checks, investigation and resolution
  • Employee payments by BACS, EMTs subject to customer authorization
  • Provision of interfaces
  • Production and distribution of payslips
  • Provision of employee self service
  • Employee help desk, etc.

Several key drivers for this outsource were included in NelsonHall's Q2 2013 payroll BPO market analysis:

  • Compliance and risk management: remaining fully compliant with current and changing legislation. For example, UK General Insurance stated Real Time Information (RTI) compliance and transitioning has not been an issue as it was automatically included as part of the outsourced service. In sum clients are able to remove the risk of payroll accuracy, timeliness of payments, data security, legislative compliance and system and infrastructure issues
  • Strength of the payroll solution, including technology, in this case MidlandHR's iTrent platform. As is common in most payroll outsourcing contracts, UK General Insurance was looking to automate paper-based processes and provide employee self-service, allowing employees online access to their pay statements and associated data. Additional self-service aspects of iTrent modules selected by the client include absence management and holiday requests, travel and expense forms, updating of employee data and access to learning
  • Freeing HR resources by saving time on administrative functions, enabling the client to focus on its strategic objectives. In the case of UK General Insurance this means focusing on strategies aligned to organizational business goals, including workforce optimization and employee engagement.

Additional client drivers identified in Nelsonhall's study include:

  • A multi-country / global payroll platform managed by a single vendor
  • Standardization and centralization of processes and technology, leading to increased efficiency; applicable to single and multi-country payroll and applicable to all clients, including those who have recently gone through an M&A
  • Reduction and control of costs.

If you are a buyer or provider of payroll services, what were the primary drivers that led to the decision to outsource in your contract?

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