Common HR and Payroll Outsourcing mistakes #6: Buying on price alone
Posted by: on 20 June 2016 in Human Capital Management
HR & Payroll departments are under constant pressure to contribute to overall company savings and to find ways to reduce costs. Outsourcing can therefore seem an effective and attractive means of doing so. However, focusing purely on cost means only seeing a small part of the picture. A board’s decision is more likely to be influenced by the wider benefits of Payroll and HR outsourcing. Pay and Benefits magazine (‘Payroll Bureau: Working in partnership’, August, 2012) argues, “Today’s organisations are looking for a strategic approach to their payroll processes, with the main drivers behind adopting bureau services being to increase effectiveness, reduce overheads and aid business continuity while reducing risk and responsibility.” It concludes, “While cost is a major driver, it should never be the only factor.”
HAVING THE RIGHT PRIORITIES
If the business case is only to drive down costs then the priority is wrong. HR transformation has to focus on the needs of the internal customers, what they value and in which way HR can bring greater value to them and the business. Outsourcing Payroll and HR administration on price alone without focusing on the value the partner can bring will not benefit the internal customers as the quality and service levels are sacrificed to meet cost targets. In the long-term, the internal customers will be disappointed. By outsourcing Payroll and HR administration to free up resources and empower the provider to work in partnership (by delivering the highest levels of service and innovation), the greatest ROI and optimal total cost of ownership will be achieved.
“If the business case is only to drive down costs then the priority is wrong”
COST IS NOT THE ONLY FACTOR
In their paper for the International Journal of Innovation, Management and Technology (2011), Dr. Manisha Seth and Dr. Deepa Sethi recognise that “HR services are among the key elements in the enlarging outsourcing game”. Rather than simply cost, they argue that today’s drivers typically include freeing up management’s time from “mundane day-to-day processing work and focus instead on strategic planning, core competencies, customer satisfaction and decision making. A number of large companies, across the globe have begun opting for outsourcing of their Payroll and HR services”.
” Today’s drivers typically include freeing up management’s time to focus on strategic planning, core competencies, customer satisfaction and decision making”.
By looking beyond the costs, Payroll and HR outsourcing programs can be developed to optimise HR performance, which can deliver the following key benefits:
1. Globally consistent HR policies
2. A more flexible HR function that responds to business needs
3. Clarification of roles within HR
4. Harmonisation/ standardisation of HR processes to help ensure fair treatment for all employees
5. Real integration of HRIS with other systems
6. Improvements in the quality of HR services through service level agreements and changes to HR roles
7. Reallocation of HR resources to activities with higher added value
Written by: Connect@ADP team
Originally published June 20 2014