Boom in outsourced payroll services

With financial services firms having to slash costs to stay competitive, it is logical to assume that services to help them do so will be in demand. This has been the experience of Ceridian, a Limerick-based technology and services provider ultimately owned by US investments giant Fidelity.

There are two sides to its business: the development and marketing of HR software and the provision of managed payroll services. As the recession has deepened, it is the payroll services division that has taken off, as clients - a growing number of whom are in the financial services area - queue up to avail of its outsourced managed payroll service.

In January alone, ten new clients were activated, according to Morgan Danaher, payroll operations manager at Ceridian, bringing the firm’s Irish customer base to about 150. Ceridian processes 12,000 to 15,000 payslips a month on behalf of these customers, which include leading investment firms and banks.

Outsourcing has always carried with it a certain baggage - fears businesses had over losing control of their data, breaches of confidentiality, and so on. But, according to Danaher, the massive cost savings firms can make through outsourcing their payroll, combined with the technical expertise on offer, are outweighing any fears customers may have, and are pushing them down the outsourcing route.

‘‘Doing the payroll has become a very different kettle of fish over the past few years,” said Danaher. ‘‘Traditionally, it was seen as an add-on function to finance or HR but now it’s become much more complicated, and payroll staff have to be constantly trained up on changes to the tax system, etc.

‘‘The decision to outsource is based on two criteria. One is the expertise that a dedicated firm like Ceridian can provide; the other is cost - outsourcing of payroll costs a fraction of what it costs to do in-house.”

Ceridian charges out its service per payslip per month, so the more employees the client has, the more the service will cost. But Danaher estimates that an average SME that employs a full-time payroll executive on €25,000 a year can reduce payroll costs to the €5,000-€6,000 range by outsourcing to Ceridian - a saving of 75 per cent to 80 per cent. Although its clients buy a service rather than technology, it is still technology that underpins Ceridian’s whole business.

In order to process a client’s payroll, Ceridian must be able to connect into the payroll management system it is running and has developed its own software to do this, according to Danaher.

‘‘We developed an extract program which pulls the data from the HR system. That data is then transmitted to Ceridian and we have SQL programs in place that pull that data into the payroll engine with minimum manual intervention, which reduces the potential for error. The client can receive any bespoke reports they want or do any analysis, however basic or complicated. We also create general ledger interfaces, etc. So really the model we’ve aspired to is a fully-automated model of payroll processing.”

As well as basic payroll management, Ceridian offers clients additional services. One of the most popular is a ‘payslip narrative’ tool, which tells an employee why his or her payslip changes from month to month.

Source: http://www.sbpost.ie/