Outsourcing payroll not yet understood by SMEs

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Consultant.jpgWhile trends world-wide indicate that more small and medium businesses are relying on payroll outsourcing solutions, Anton van Heerden, MD of Softline VIP, a leader in the provision of HR, payroll and tax software, says that the concept remains misunderstood in South Africa. 

“While companies often recognise that they need to outsource critical areas such as payroll, they do not realise that they cannot fully abdicate this function and that it will also not necessarily be a cheaper option.”

The payroll function in any business has become immensely complex with the constant changes to local legislation governing payroll. As a result, the role of a payroll manager has also evolved into a specialist function, as opposed to the generalist role of the past. 

Van Heerden says that having the correct person in charge of the payroll within the company is vital: “When considering an outsourced model, the employee responsible for the payroll becomes even more important. They have to be at an appropriate management level and able to sign-off the payroll each month.”

Key benefits of outsourcing the payroll function

  • Core business - outsourcing payroll functions saves time and frees the company up to concentrate on its core business
  • Knowledge - a third-party provider is responsible for keeping abreast of legislation and other developments, and to regular training of staff to ensure they have the latest knowledge
  • Compliance - lack of compliance in in-house payroll is one of the most common complaints outsourcers hear
  • Problem solving and query handling - outsourcers are aware of the most common queries and problems employees may come to the payroll administrator about, and are able to address these timeously
  • Continuity - turnover in any function is a huge concern to a business. An outsourcer has access to qualified staff that can step in whenever necessary
  • Security and confidentiality - Better control on confidentiality is a given with an outsourced solution

Understanding the outsourcing process is also key to the success of the outsourced model. Too many companies assume that when the payroll is outsourced, they no longer hold any responsibility and that it lies entirely with the service provider. This, he says, is a recipe for disaster:

“From our perspective, control must always remain with the customer.  Complete abdication of the function and its related responsibilities is a grave error to be made in the payroll outsourcing environment.”

Van Heerden says that it is also important to understand exactly what the service entails: "When considering this option, make sure you understand what it is and what you need before deciding who you partner with.”

“Reputation, stability and a good track record counts when looking for a good outsource service provider. Don’t go for the cheapest option; go for the one that has the best credentials. To partner with the wrong company when it comes to outsourcing your payroll is a not a risk anyone should take,” concludes Van Heerden.

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