Lessons when transitioning to an outsourced payroll service

By November 10, 2016

How you manage the transition of payroll services from in-house to an external provider will affect the level of benefits the company receives. Make sure you approach the new partnership with these important points in mind.

Once you’ve made the decision to move to a managed payroll service, it is only the beginning of undertaking a transformation that must be approached strategically.

Not doing so will affect how well the supplier relationship will develop and the level of benefits your business will receive.

Here are the top considerations you need to take into account once you have appointed your new payroll company:

Don’t Underestimate the Transition Process

The transition of ownership from internal to external providers is a demanding part of the whole outsourcing process.  It’s even more important to manage it if you’re switching vendors.

With an importance of maintaining “business as usual” a successful implementation requires input and participation from all key parties.

So work with your provider from the beginning to create a project plan detailing:

  • The tasks requiring to be undertaken and whose responsibility it is to deliver them
  • A simple management process for the transition identifying rules, deadlines and the best communication channels
  • Reports that help track progress and highlight any unexpected project hindrances

Define Retained Roles

If you are moving away from a previously in-house model you will need to clarify the new responsibilities around any retained roles.

If your retained payroll people are allocated to manage the supplier relationship they may have a tendency to ‘double check’ the work of the outsourcers rather than focus on more strategic, value enhancing services.

This negates the benefits of outsourcing your payroll processing services and dilutes vendor responsibility.

Take the time to define their new roles and responsibilities and set new KPI objectives.

This should form part of the overall service level agreement to remove doubt about who does what, when and how. If need be, consider investing in training to gain a higher level of efficiency in delivering the core business.

Set Initiatives

The decision to outsource to a payroll company usually revolves around driving efficiency and effectiveness in the payroll operation.

When defining the new roles, also outline how you can drive the new payroll initiatives into the business to obtain greater efficiency, visibility to business information and effective use of technology.

Identify the business benefits that you want to achieve early on, what a successful model looks like, and set a schedule for milestones. Revisit these objectives after go-live and then every six months thereafter to ensure you are on track.

Supplier Goals

Suppliers should be contributing to these set initiatives and offering continuous improvement processes.

Ask the vendors what process or plan they use to achieve benefits and how is it incorporated into their service level agreements.

Again define these expectations with the supplier early, set measurable KPI’s, and check in regularly to assess whether they are performing as required.