Co-Sourcing: A Better Solution

Addressing the Limitations of Payroll Insourcing and Outsourcing.

Introduction

Top executives at small and mid-sized companies often find themselves frustrated, disappointed or dissatisfied with their payroll function. Payroll is critical to the operation of a business. Whether you are managing payroll in-house or outsourcing it to an external party, you are bound to confront a series of key performance limitations.

 

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Many small businesses are fined each year due to violations of payroll compliance rules.

Limitations of In-Sourcing

Companies that handle payroll in-house (“in-sourcing”) often worry about the threat of tax penalties, the burdens it places on management time and the added expenses associated with technology upkeep.

The limitation cited most often is taxes themselves. Companies suffer severe financial penalties if taxes are misfiled. This is a major issue. Many small businesses are fined each year due to violations of payroll compliance rules.

 

Limitations of Outsourcing

Companies that outsource the function typically have limited access to payroll and human resources information, suffer hidden costs, and must file their payroll on their external provider’s rigid schedule.

Outsourcers also have frustrated their clients by creating complex pricing methodologies, loaded within hidden fees and veiled price increases. While fees are itemized in payroll reports, it’s often difficult to decipher exactly what fees have been added and how they line up with what has been previously quoted.

Fortunately, there is a third solution that draws on the best of in-sourcing and the best of outsourcing, while addressing the limitations of these two approaches. This new solution — payroll co-sourcing — lets companies focus on what they do best. But it also gives company leaders the control, flexibility and real-time, data access necessary to manage their payroll and people.

 

The Payroll Co-Sourcing Solution

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Payroll co-sourcing addresses the limitations of both in-sourcing and outsourcing.

The Internet has evolved to allow real-time, secure and feature-rich access to software functionality that is hosted on the Web.

Hosted solution providers (“on-demand providers” or “application service providers”) now have the ability to rapidly roll out new features without requiring any downloads or upgrades on the part of the user. They can give companies the ability to outsource payroll processing services without sacrificing the control, flexibility and accessibility associated with an in-house payroll function.

In addition, payroll co-sourcing providers are now able to leverage the economics of the Internet to cost-effectively integrate key elements of HR analysis, management and support into the overall solution – giving business executives and managers the ability to better manage their people as well as their payroll.

Among the key advantages and benefits of this approach are:

Management Control.

The company retains the ability to control and manage payroll and employee data. Payroll co-sourcing provides all the control over such data that is typically associated with in-house payroll functions.

Process Flexibility

With payroll co-sourcing, business leaders have the same flexibility to file their payroll and check it for errors and inconsistencies that they would have with in-house payroll.  They would also be liberated from the rigid deadlines and schedules of conventional outsourcers.

Real-Time Data Accessibility

With on-demand access to information, companies gain immediate, real-time access to the data they need to plan, make decisions and execute payroll and HR activities.  The data is clearly accessible; it is not hidden in the conventional outsourcer’s system, or even worse, in their spreadsheets.

Core Business Focus

While conventional outsourcers leave much to be desired in terms of control, flexibility and data accessibility, payroll co-sourcing is designed to enable companies to focus on core competencies without outsourcing key payroll management factors that are critical to overall performance.

 

What to Look for in a Payroll Co-Sourcing Solution

co-sourcing-payroll-solutionsFor companies that are interested in exploring the payroll co-sourcing solution, it is important to have a solid set of criteria to guide one’s consideration and decisions with regard to potential service providers. Here are six key factors to look for in a payroll co-sourcing solution:

  1. Dashboards and management reporting tools. Services should offer high value analytical and custom reporting tools that make it easy to access employee and payroll data.
  2. Payroll visibility. The online service should allow you to view and verify the accuracy of submitted payroll data and calculations prior to finalizing the payroll run.
  3. Real-time, Web-based. The solution should provide immediate access to payroll data from anyplace at anytime.
  4. No software to download or manage. The solution should be completely hosted, freeing the customer from having to update software, back up the data or manage hardware. It should be fully Web browser-enabled with no need for special plug-ins.
  5. Integrated payroll and HR capabilities. The economics of the Internet now make it cost effective to offer an integrated solution that enables the management of both payroll and human resources data.
  6. Clear pricing. It should be clear and obvious how services are priced and what you are being charged. There should be no hidden fees.

Payroll co-sourcing represents the best of both worlds. It’s an opportunity to gain the control, flexibility and accessibility of in-sourcing, while leveraging the benefits of outsourcing by focusing on the core competencies of your business.

The key is to ensure you recognize the limitations of current approaches and can fully assess the costs and risks associated with them. If it makes sense to consider payroll co-sourcing instead, then it’s vital to find a highly capable and trustworthy partner that can take your payroll and HR processes to the next level of performance.