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Managed Payroll Processing
Vishwanathan K A
Monday, July 12, 2010
Emerging businesses are faced with tough challenges in terms of people management, process improvement, and quick technology adoption. They are looking for continuously redefining their competitive advantage, strengthening the delivery of their value proposition in the market place and improving the overall organizational positioning vis-a-vis its peers. The role of HR in such organizations is becoming more strategic than operational. With aggressive business growth, HR heads need to build in scalability of HCM (Human Capital Management) processes in their long-term strategic plans.

Payroll processing, which is primarily managed by HR department in most of the organizations, offers a great scope for process improvement and cost reduction. Realizing this potential, some of the emerging businesses in the telecom, IT, ITES, and even manufacturing sectors have outsourced this to experts so that they are able to focus on issues more strategic in nature. This trend is catching up and the inherent complexity of payroll processing is making this ‘next-gen HR move’ a reality, quite sooner than anticipated. Current Issues Faced by Organizations in Payroll Processing

* Payroll is mostly ‘policy’ driven and partly ‘statutes’ driven: The business rules of an organization determine the apportionment of the various components of the payslip. These business rules are susceptible to changes due to various factors - competition changing the rules, aggressive growth trajectory of the organization, or it can also be based on demands of the various stakeholders. These rules are very specific to the organization; a simple example could be the incentive calculation for a manufacturing industry and a FBP (flexible benefit plan) for aservices industry.

Payroll processing is also affected by periodic statutory changes but they are far less complex in nature as compared to the policy driven issues. But statutes driven changes impact the competition also in equal measure and hence the overall effect is minimal.

Organizations having multiple locations have to make investment in resources to take care of the actual filing of compliance related procedures. This resource is expected to manage the relations with the local statutory office personnel and also be able to understand the periodic changes in regulations.

An in-house team will find it very difficult to make rapid changes in the payroll processing arising out of policy or statute changes, as payroll is construed as a non-core activity.

*Growth plan for payroll processing personnel: In most of the organizations the internal resources working on payroll processing do not have a career plan to look forward to. Due to the complex nature of payroll processing, their knowledge is indispensable to the organization and movements to other internal openings are not encouraged. This leads to sudden attrition and an open vacancy, which becomes difficult to fill as the expertise specific to company business rules is built over a time (big risk factor) and is available only with the individual.

*Lack of process innovation: Payroll processing is overlooked by organizations for improvements as generally no problem is reported on the overall delivery mechanism. Employees are also happy to get used to the existing process issues with their focus set more on the value of the payslip. The point to be conveyed is that simply everybody misses the opportunity and the scope ‘payroll processing’ provides as an improvement area and its contemporary alignment to overall business objectives. People are the most important assets of any organization and ensuring timely delivery of error-free payslips can add to the satisfaction at the workplace.

*Technology: Organizations use payroll application, which is a standard or customized solution provided by a vendor or a third party
service provider. In either case, upgrades call for investment which management is unwilling to make as payroll processing is not viewed as critical. Dependence on software service providers is high and further investment is difficult to justify in terms of ROI. End result: Legacy rule continues.

Way Forward ...IP3 Framework Service Providers
IP3 (Infrastructure–Product–Process–People) framework deployed service provider are the best fit service providers for the above issue. World over, Ramco are among the very few companies who have the IP3 framework advantage. This framework helps organizations to switch models; from BPO to licensing to hosting. The switching model gives flexibility to an organization to decide on the ‘right solution’ within its budget without compromising on the quality of delivery.

The author is Managing Director, Cisco WebEx India
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