Payroll Outsourcing

Payroll outsourcing of a globally active company

The Situation

Many companies operating internationally are currently verifying whether administrative work and the associated costs for payroll can be reduced by using only one service provider worldwide or for specific groups of countries. However, there are only few providers who can offer this. A globally active manufacturer of electric power tools and accessories started a respective project in which it would work with a single payroll service provider for the whole of Europe. An international project team had already taken action internally and had drawn up a schedule in different waves for all European countries. The German company then employed an interim project manager through the IXPA partner butterflymanager in Switzerland to provide support during the change of provider.

The Solution

The task was to take into account and implement respectively all the necessary points that such an outsourcing project entails, also in Germany: Company pension scheme, capital-building payment schemes, semi-retirement, parental leave, permanent illness, attachment. Furthermore, the interface of time management and the interface for accounting still hadn’t been set up. Taking the global, strategic specifications of the company into account, a realistic approach was planned and implemented together with the international project team. The following check-list proved very helpful in choosing the right payroll outsourcing partner:

  1. Agreement: First of all, all the participants should be informed and involved to provide input on which service should be concluded in the agreement. It can happen that a standard service is negotiated conveniently by the purchasing department, but that it does not consider the respective situation at all.
  2. Responsibilities and process description: All the processes should be described as accurately as possible, and the responsibilities should be established clearly. Since outsourcing can sometimes lead to downsizing, one must consider what is actually still possible.
  3. Availability and reaction: A frequent key issue is the availability of the external provider or of the competent contact person. Since help is needed urgently in some matters, availability should always best be guaranteed from 8am to 6pm
  4. Professional quality:It is always preferable to meet the competent contact person in person and get to know them in advance. This is to ensure that they have the necessary professional qualification. This could otherwise lead to errors at a later stage, which must be repeatedly reworked and are always linked to significant costs.
  5. Service availability:Regardless of the standard process, special cases frequently occur, particularly rare or urgent matters. These cases show the service provider’s effective customer orientation or flexibility, if, for instance, it only refers to a ticket system.
  6. Easing the burden:After the implementation, companies frequently find that the amount of internal work after outsourcing barely decreases or does not decrease at all. The amount of work has often even increased, for example due to additional administrative processes for management and communication with the external provider. Furthermore, the aim of saving costs is often not reached.
  7. Deadlines: Respective deadlines are also included in accurate process descriptions – for the provision of information as well as for the return of results. Only in this way can information be communicated also in one’s own organisation so that everyone can adapt accordingly.
  8. Capacity:Companies should check how the external provider has the done the resource planning. One should analyse how a task which is internally completed in full time should now be carried out in half the time.
  9. Prices:Depending on how a conclusion of a contract has taken place and which service was agreed: For standard service, special prices are often offered; however, other services – as an offset – are expensive. This price should also be negotiated correctly.
  10. Documents: A key point is the agreement on how and which documents are passed on. Some providers have set up a drive where data and documents can be filed.
  11. Cover concept: Even if you have been allocated a clear contact person for support and have a trusting cooperation with them, holiday and illness cover can become a problem. For example, during summer holidays, you don’t want to have to wait three weeks for a query to be resolved.
  12. Information: Last but not least, higher and higher standards must be set for communication and information to an external contact person, compared to when this is carried out internally. This can also lead to linguistic problems. Many businesses have moved their services back from India or Eastern Europe, because they failed here due to linguistic difficulties.

The Outcome

The project was implemented by the Interim HR Manager of butterflymanager in due time and in consideration of the global requirements of the company and of the specific local features in the subsidiary company. An Interim Manager with respective experience in similar projects on the subject of payroll outsourcing can provide help in choosing the right partner and active support in the implementation. The check-list indicated above is a pragmatic tool for practical implementation.