Payroll Outsourcing Becomes Payday For Suppliers | Article

payroll outsourcingLast year payroll literally became the central focus of human resources outsourcing. “Payroll processing is central to all activities that in occur in a company’s back office,” says Matt Vettel, partner, BPO outsourcing for Great Hill Partners, a venture capital firm based in Boston, Massachusetts. The firm invests in IT, telecommunications, media, and BPO companies.

Last year, payroll suppliers didn’t experience the drop in business some other BPO suppliers faced. “While higher unemployment will have some effect on the payroll processing industry, the long term trend of outsourcing payroll marches along,” Vettel notes.

While payroll processing is “the most complicated process to integrate,” once a supplier has identified a workable payroll platform, the rest of the HR processes fall in place. Worker’s compensation, health and disability insurance, tax filing, and benefit management-all transaction oriented processes-mesh with the payroll platform as long as it sits in the middle of the process. “Payroll integrated with health and wealth benefits reduces a lot of the paper processing in the back office,” Vettel says.

Employees can take care of these tasks themselves either online or by using an interactive voice response (IVR) system. “This saves a lot of time and money,” Vettel points out, especially for employers.

Big Payroll Suppliers Integrate Offerings

The big players already have strong payroll offerings, the venture capitalist continues. Last year these companies began to integrate their offerings. “I look for more of that in 2002,” Vettel says.

Another big BPO trend is the growing acceptance of eLearning. “We are seeing corporations continue the migration from site-based learning to eLearning. This is an easy way for training departments to stretch their budgets,” Vettel says. Some private companies are co-developing eLearning content with universities with the plan of selling it to the general public.

In the finance and accounting arena, companies are reviewing options for outsourcing the systems and administrative components. “Today, companies can benefit from running their general ledgers on a hosted basis,” Vettel observes. The finance department can close its month online and decide which invoices to pay. “Outsourcing the administrative tasks of the finance department is an advantage because the company doesn’t have to worry about staffing and the typically high personnel turnover,” says Vettel.

This year, Vettel predicts companies will accelerate their efforts to outsource their back offices, building on their decisions to outsource payroll and benefits systems. They don’t want to make the costly investment in payroll systems. Instead, they will hand over the transactions to a supplier who can process the functions more efficiently.

Vettel expects 2002 will be a good year. “BPO still has plenty of room to run,” he says. He sees only a 30 percent penetration, creating plenty of new opportunities for BPO suppliers.

Lessons from the Outsourcing Journal:

  • Payroll platforms have to be central in an HR offering. They are difficult to implement, but once done, they remove much of the need for paper forms.
  • Self-serve HR processes create sizable savings for employers by allowing the employee to complete the forms online.
  • This year the rate of BPO acceptance will accelerate.
  • Companies are partnering with universities to create context for eLearning sites.


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