Now that we’ve reviewed the various payroll management solutions, let’s review each step of the payroll cycle to identify the challenges, how they’re addressed by in-house and outsourced solutions, and the “pay-per-view” costs that could be incurred. We’ll first touch on hiring, paying and funding.
The payroll cycle begins when a new employee comes on board. Once the offer letter is signed and the employee is hired, there are a myriad of forms to fill out, elections to make, and data to enter. The hassles of adding an employee to a system are generally shared by the new employee and the Human Resource (HR) staff. On the first day on the job, the employee must fill out forms indicating his preferences regarding both taxation and benefits.
The HR person must set up a new record, review documentation, get approvals, and complete more forms. Finally, all of this information has to get into the payroll system. Whether that system resides inside the company or with a service provider, the same amount of employee effort is required. Fortunately, both outsourced and in-house solutions can be set up to allow an employee to enter much of his contact information via self-service access, so whether the system is online or on-premise, handled in-house or by an outsourced service provider, the time needed to enter basic employee information is roughly the same.
Capturing, recording, and reviewing time for hourly employees can be a lengthy, error-filled process. Fortunately, there are a number of automated time keeping and time-card systems that can be integrated with either on-premise or outsourced payroll applications. The more complex your work environment and the more detailed your tracking requirements, the greater the need to integrate your time-keeping and payroll systems. With proper integration tools, both outsourced and on-premise applications can help reduce the burden of getting your hourly employees paid correctly.
Paying salaried employees is usually less time-consuming than paying hourly workers. Salaried employees generally have fewer changes to their pay, although they make more frequent changes to their withholding and benefit elections. Salaried payroll should be exception-based so that entries are only required for paid time off, special situations or commission/expense reimbursements. In addition, most comprehensive payroll solutions allow you to enter changes that don’t take effect until some future date. Look for an effective date feature in any solution you are considering, whether in-house or outsourced. When it comes to piece-rate workers, you will need to capture and record per piece data and enter it in your payroll system. You might pull the data via an automated feed or re-key it in your payroll system. Either way, you need to know if your payroll system is equipped to manage this form of payment, and if so, what additional charges are involved for integration.
Regardless of payment method, payroll processing requires the time and attention of an HR or Payroll employee. While minor adjustments to benefits or elections can be entered by an employee via a self-service solution, changes to hours worked, rates and salaries, or piece rates have to be managed by authorized staff members. Once captured, the changes must then be communicated to the payroll system. Only then is the payroll solution or service provider able to process payroll, generate checks, and capture transaction details. Both outsourced and in-house solutions require equal amounts of time and effort to ensure that employees are paid the correct wages each pay period.
When it comes to funding payroll, no solution will remove the biggest hassle –coming up with the money. But beyond that, both in house and outsourced solutions can help you determine how much to fund and reduce the burden of getting the correct amounts to the proper authorities. The more options you offer for employee benefits, garnishments, bank account types and the like, the more complex the funding process will be. When you use an outsourced payroll provider, however, these additional options can result in additional charges.
The type of payroll option you choose will have a direct impact on your cash flow. For most outsourced solutions, you are required to calculate and fund the full gross payroll in advance of the pay date. For in-house solutions, you can generally transfer funds for the net pay amount on the pay date and then make additional transfers to cover tax and benefit payments when due. Outsourced solutions generally involve a single funds transfer while in-house solutions support multiple transfers of funds, but only when payments are due.
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