Three Common Misconceptions Associated With Managed Payroll Services

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Although many businesses in Ireland choose to keep their payroll functions in-house, increasing numbers of firms choose to outsource instead. There are plenty of benefits of so doing that should not be underestimated. However, some Chief Financial Officers, Managing Directors and even decision-makers in IT teams can raise objections about the use of managed payroll services. More often than not, their doubts are down to myths they have read about with such services rather than a true representation of the nature of the situation. If you have also read such myths, then now would be a good a time as any to deal with them for what they are – popular misconceptions.

What are the most common misunderstandings that impact on the way retailers, construction firms, financial services companies – and others – think about managed payroll today and what are the best ways to dispel such myths? Read on to find out.

Misconception One – Merely Outsourcing Payroll Leads to Operational Efficiencies

The reality of the situation is that just outsourcing your firm’s payroll to an accountancy firm, for example, will not necessarily lead to greater efficiencies. In some cases, it might even cost your company more if the firm of accountants you select are using legacy payroll systems themselves. Of course, it really boils down to the number of employees you have on your payroll currently. Smaller enterprises which cannot afford their own specialist payroll clerk will often benefit from outsourcing. The same goes for very large corporations with lots of employees on their books and which also have a significant amount of staff turnover to consider each month.

The problems tend to arise with medium-sized companies. Although outsourcing their payroll to a specialist might generate operational efficiencies, the truth is that it won’t – not always, at least. This is why a much more integrated approach is desirable among most middling firms. To put it more simply, what you should be looking for if you have anywhere between around a dozen to two hundred or so employees is not just an outsourced payroll company but one that offers integrated payroll software. The reason for this can be boiled down to a single word – scalability.

As most operational directors or human resources managers in medium-sized companies would agree, the ability to change the way you work with a growing business is key to ongoing success. All too often, operational problems are felt whenever a medium-sized business grows. In fact, the same is true when they shrink due to changing customer demand or seasonal issues. In terms of payroll, what you need, therefore, is a scalable system that can offer the flexibility that allows you to handle some seasonal workers on weekly pay alongside salaried workers on monthly pay schedules, for instance. Not all outsourced payroll service providers have systems that can manage this. Nor will they all be able to cope with increasing numbers of employees year on year. Indeed, some charge is such a way to make growing numbers of workers almost impossible to manage.

What an integrated software system allows for is a much more manageable approach to payroll. Integration doesn’t mean you’ll need to retain in-house payroll skills, however, because you still should be able to benefit from the cost-effectiveness of outsourcing. Nevertheless, if you want to integrate payroll with HR management systems – for things like onboarding and holiday entitlement, to name just two areas – then an integrated platform, like Snow’s, is very much what you should be looking for in whoever you choose to outsource to.

Misconception Two – Data Generated By Outsourced Payroll is Only Useful for Financial Directors

Who uses payroll data these days? If you think that it is payroll managers only, then you are mistaken. Equally, it is not just financial directors of businesses that should be interested in the sorts of information that can be gleaned from modern payroll systems. This is because managed payroll services collect a huge amount of data on employees and, what’s more, much of it is extremely helpful from the perspective of business planning. Again, legacy payroll systems tend to be focussed on simply ensuring that employees are paid correctly and on time. Although this is, of course, very important, managed payroll systems can deliver so much more.

Let’s look at it this way – the majority of Irish businesses – and, indeed, organisations throughout Europe – were not prepared for what they needed to do when the coronavirus pandemic struck. Of course, that is understandable given how unprecedented the event was. However, by and large, businesses with more insights into their employees and their available workforce were better placed to cope with the trading conditions that the healthcare emergency inevitably led to. For one thing, finance directors had to be much more considered in their approach to HR expenditure. The ability to ramp up production as the emergency subsided had to be handled very carefully so as not to spend too much on pay while normal trading conditions were re-established. As such, metrics from managed payroll data became a key tool for many businesses as they sought to manage their way out of the pandemic sustainably.

Of course, the pandemic was a one-off event but what it demonstrated to many forward-thinking businesses is that payroll data is – and always has been – a crucial operational management tool. The fact that it has been under-utilised because so many in-house payroll teams haven’t made such information available to planners is neither here nor there. Today, many businesses that are planning for growth into new markets and sectors see their payroll data as a primary business analytic tool that they can leverage to gain a competitive edge. If you are not making sufficient use of yours, then consider why switching to a managed payroll service would help to understand what the metrics are telling you about pay, operational efficiencies, human resources and company-wide structural issues.

Misconception Three – Workers Only Care About Their Pay

Needless to say, the average employee will care a great deal about their pay, whether they’re paid weekly, monthly or on some other schedule. Working towards bonuses and obtaining performance-related pay awards is a crucial part of motivating individual employees, after all. However, from the point of view of managed payroll services, ensuring pay is accurate and in the bank accounts of workers when it should be is just one aspect of the overall approach.

This is because employees also care about their record-keeping. The ability to access past payslips over a secure platform is also very important to many Irish workers today. The same goes for their tax. Everyone wants to know that they’ve paid the correct amount of tax and that deductions for personal tax – as well as things like pension contributions – have been made properly. In the end, it is about providing employees with something they value, the ability to serve themselves at a time that suits them when they want to check pay, tax, pensions and everything else related to their earnings. The same goes for holiday entitlements, too, of course. Nowadays, many of the leading managed payroll systems will have holiday management integrations that keep all of these important HR functions in one place for greater efficiency.

Would you like to find out more about how Snow’s systems are helping to bust numerous myths about outsourced payroll today? If so, it is possible to book a demo of our software and to discover how our highly customisable service is enabling Irish businesses to grow without being tied to old and out-of-date approaches to payroll.

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