Myth: Outsourcing Leads to Increased Efficiency
Reality: Integrated Technology Enables Payroll to Efficiently Scale
While companies may gain a desired result in terms of completion of the task, outsourcing comes with a hidden cost: sacrificing control of the payroll process and the nimble flexibility to adapt to the needs of the business.
For example, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) included a tax credit for retaining employees and deferring Social Security tax payments for a specific period.
The impact of the CARES Act for small to midsize companies was more than complying with new payroll tax guidelines. The legislation was designed to provide business relief, which meant that companies needed to consider how the employee retention tax credit and Social Security tax deferral could help the business strategy.
The CARES Act — because of the strategic business implications — showed that efficiency in payroll isn’t about outsourcing tasks. Efficiency is the ability to quickly adjust to a changing business strategy.
“Companies are really looking for a technology solution and a service solution that can change on the fly as their business strategies change,” says Gaye Krisantz, vice president of payroll at OneSource Virtual.
An integrated technology platform, such as a cloud-based human capital management (HCM) system that includes payroll and timekeeping, enables a lean payroll team to efficiently adapt its processes to the needs of the business. So when an organization creates a new sick leave policy, which many businesses did during the pandemic, its payroll team will be able to quickly document and apply pay changes without needing to wait on a service bureau provider.
What’s more, an integrated technology platform with a unified data core funnels the day-to-day HR transactions straight to its integrated payroll system. As a result, the platform keeps payroll up to date and frees the payroll team from data entry tasks, allowing it to put more focus on data analysis for making strategic business decisions.
“The old lift-and-shift traditional model where you just lift the traditional business practices into the new technology has gone to the wayside,” says Krisantz.
Simply put, companies that outsource payroll administration won’t be able to easily adjust bureau software as the business strategy changes. They’re missing the critical component of what truly enables payroll to efficiently adapt to changing times: integrated technology.
Myth: Payroll Data Is Only Relevant for Financial Reporting
Reality: Payroll Data Is Important to the Entire Business
Often, relying on the expertise of a payroll service bureau is thought of as the best solution to handle payroll processing, tax filings, and payments. According to The Deloitte Global Payroll Benchmarking Survey conducted in 2020, 73% of organizations outsource some aspect of payroll.
However, Deloitte notes that while “outsourcing can reduce the administrative and transactional components of payroll administration, payroll specialists are still needed to drive policy and decision-making.”
Consider this: Companies couldn’t predict how the pandemic would affect their business — the pandemic has been described as “unprecedented” for a reason. Seasonal or historical data couldn’t reliably be used to determine staffing. But payroll data offers real-time insights into staffing trends and how payroll costs would affect the business, which enabled company leaders to be more proactive in navigating the pandemic’s impact on the business.
What’s more, the pandemic has made finance and HR collaboration a must. For HR, payroll data is necessary for ensuring that the business is compliant with current legislation and gives insight on employee and business data. For finance, payroll data is critical for accurate general ledger reporting, tax compliance, and ensuring that employee wages — which are often a company’s biggest expense — are balanced with the health of the company.
In other words, payroll efficiency is less about producing financial reports and more about the ability to share data with finance and HR. This is possible through a cloud-based reporting and insight-giving HCM solution that has a unified data core. The ability to access payroll data is necessary for finance and HR to navigate disruptions with data-driven decision-making. And in situations where business demand changed seemingly overnight — which was common during the pandemic — finance needed real-time insight into the total cost of the workforce to make business continuity decisions.
“This year just really put people on their toes to ask, ‘Do I really have the right data? Is my data easily accessible without requiring additional report development?’” Krisantz says. “The stress that the pandemic puts on companies to get that real-time insight into your financials and the financials across your business has been very important.”