Results from a study conducted by PricewaterhouseCoopers (PwC) uncovered a number of hidden costs associated with in-house Payroll and HR functions and found overwhelming evidence that outsourcing these functions saves businesses considerable amounts of money and time.
Through their research PwC found that most organisations tend to underestimate the true cost (Total Cost of Ownership – TCO) of processing payroll, administering employee health and welfare benefits, and managing other key HR systems and functions. By their calculations PwC explain that to manage payroll and HR functions in-house costs 18% more than to outsource these functions. It’s a surprisingly large commitment of time and resources that most business owners don’t think about.
What we found interesting in this report was the fact that administration costs have continued to increase since 2003 which increases the cost of payroll and HR in-house management. The study showed that despite technological advances administration costs have increased as organisations focus on technology transformation rather than process transformation, and many organisations aren’t as efficient as they think.
The study identified the top cost-reduction strategies for Payroll and HR functions, which are:
- Outsourcing to HR and Payroll experts (saves 18%)
- Utilising a common vendor or solution (in-house management with one system saves 18% compared to in-house with multiple systems, but those that outsource multiple functions to one vendor with one system save 32%)
- Providing payroll and HR self-service functionality to employees (saves up to 50% on administration costs)
- Integrating time & attendance with payroll (cost efficiency of 14% compared to manual or non-integrated functions)
If you want to truly understand the expense of managing your own HR and Payroll functions, PwC suggest you consider all these areas that affect the total cost:
- System installation costs—The one-time costs related to the initial acquisition and implementation of an organization’s Payroll (PR), Workforce Administration (WA), Time & Attendance (TA), and WHS systems
- System upgrade costs—The periodic acquisition and implementation costs related to upgrading to a more current version of the PR, WA, TA and WHS systems
- Direct labour costs—The cost of labour (salary plus benefits) of the direct staff necessary to support the PR, WA, TA and WHS functions
- Direct non-labour costs—The total costs of consultants, vendor fees and facilities, G&A, and corporate overhead related to the PR, WA, TA and WHS functions
- System maintenance costs—The IT costs specifically related to maintaining the current systems
- Indirect labour costs—Cost of labour for employees not directly related to the payroll and HR departments supporting these functions in the field (i.e. collecting, approving and preparing employee hours for payroll; distributing pay checks; answering employee questions about benefits, etc.)—Where employees are typically spending only a fraction of their time on these activities
- Outsourcing costs—The total annual costs of any outsourced services related to processing of PR, WA, TA and WHS such as tax filing, pay check printing, etc.
There are many other reasons to outsource your Payroll and HR functions beyond the monetary savings. Our clients have shared with us that by partnering with Workplace Central they have saved a considerable number of hours each week and no longer stress about their employee requirements.
“One of the most obvious and immediate benefits we’ve received from working with Workplace Central is definitely the time we’ve saved… By having Workplace Central take over our payroll processing it immediately freed up that time for us to focus on actually running our business. It just meant we were able to let the experts handle what they do best, so we could get on with what we do best!” – Hello Baby 3D
By partnering with HR experts, you can also rest assured that the work being done is accurate and compliant with fair work regulations, and the right pay rates are being paid on the correct dates and all paperwork is in order. It’s hard to quantify how much your sanity and stress levels are worth, but we’re sure you’d be grateful to not have to worry about all that!
“It’s great peace of mind knowing we don’t have to worry about whether or not we are compliant and we don’t have to trawl through the Fair Work website to check if we ever have any queries!”- Hello Baby 3D.
To find out more about the PwC Study click here.
If you’d like to talk to a Workplace Central Growth Partner about how we can save you time, money and sanity by taking care of your Payroll and People, give us a call on 1300 766 380 or email [email protected]u