Outsourcing was the right course for Meadowbrook Golf. The Lakeland, Florida company owns, leases or manages 100 golf courses in 16 states; during the summer the employee roster swells to 3,500. Payroll and tax filing took two days to complete every pay period.
In one stroke, outsourcing sliced processing time to two hours. Meadowbrook was hooked.
Before outsourcing to MyBenefitSource Inc., a business process outsourcing (BPO) supplier specializing in integrated payroll and employee administration benefit services, Meadowbrook's payroll process was split in two. Meadowbrook's own administration department did half the work; the other half was completed by an outside service. Bert Mariani, Meadowbrook's director of finance who joined the company 12 months ago, realized one of the first tasks on his play card was to unify the payroll process.
"We researched the process and decided we really wanted to outsource the whole enchilada," he says.
Cost is the Driving Factor
Cost was the driving force in Meadowbrook's decision to outsource. Mariani's team discovered it cost more to process the ever-changing payroll in-house than to pay a supplier to outsource the process. One of the biggest costs was manually inputting the data into the correct fields in the payroll software. Then the staff had to input the same data again into the company's Great Plains program, since the two systems could not share data.
The biggest pain employers face, points out Edward Cain, CEO of MyBenefitSource, is that the payroll program rarely interfaces with the human resources (HR) system. "It's very rare that the HR software speaks to the general ledger accounting side," he explains.
For example, when an employer has a benefit enrollment period, 100 of its 500 employees may sign up for an insurance policy from Company A. This insurance company will consolidate the cost of all 100 hundred new policies and send the employer a single bill.
The employer hands this bill to the payroll department. In most companies, the process is manual. The payroll department has to enter the correct deduction codes for every payroll file for each of those 100 new policies so the next paychecks reflect the cost of the new insurance.
Cain says the process is further complicated for employers by the fact that benefit bills are as much as 60 days out of date because they do not reflect recent terminations or hires. The company's payroll department must constantly update the records to reflect the new hires and recent fires. "The process is tedious and never ending since the employee roster changes constantly," Cain reports.
MyBenefitSource's Web-based technology solves this problem by integrating benefit enrollment and administration with payroll. Payroll is the basic platform; from there the payroll department can access the company's benefit information.
The supplier's proprietary program can interface with other systems popular in the business world, like the Great Plains software that Meadowbrook uses. "Everything is synchronized with the payroll program," Cain says.
Since everything is online, employees can enroll in their preferred benefits programs and check their benefits status on the Web 24/7. Each time employees make changes to their benefits file online, the software notifies both the payroll and benefit administration systems.
No One in HR Has to Touch a Keyboard
The software automatically sends the correct deduction codes to the payroll system; no one in HR has to touch a keyboard. Eliminating manual entry was a big selling point for Meadowbrook.
Most new hires have to wait up to 90 days before their health care coverage begins. The system tracks new employee's eligibility. When the waiting period is almost completed, the system automatically sends an email alert with an enrollment kit to the new employee and another alert to the HR department.
MyBenefitSource software also automatically reconciles benefit premium invoices in real time, eliminating another manual process.
On the benefits side, MyBenefitSource, which is based in Atlanta, Georgia, offers a wide range of products and services, "creating Fortune 500 options for any size business," says Cain.
Tapping Into Top Talent
Meadowbrook also wanted the best payroll talent working on its account, yet wanted to keep its staff small. Outsourcing allowed the company to tap into top talent without adding additional staff. Today Meadowbrook just has five employees in its payroll department.
The outsourcing solution is also scalable to any size business. This is an important consideration for companies with seasonal employees, in a fast track growth mode, or scaling back in bad times. The size of the supplier's customers varies greatly. MyBenefitSource's smallest client has just two employees; Meadowbrook is the largest with 3,500. "We can scale to any size company," Cain notes.
Preparing the payroll also distracted Meadowbrook's five employees from performing more strategic and profitable work. "Payroll was taking time away from the operating end of the business. Outsourcing relieved our IT staff and our payroll people of the busy work. Now they can focus on helping the company make money," Mariani reports.
Finally, the golfing company wanted to upgrade its benefit systems and implement best practices. It wanted to sink its money back in its greens, not spend greenbacks on computer systems.
Letting the Supplier Invest in Technology
Companies today cannot afford to develop the technology that drives MyBenefitSource. Purchasing a similar system would carry "a high seven digit" price tag, Cain says. Compare that to the BPO supplier's $350 one time set up fee for traditional payroll processing and tax filing. The company also charges a "small user fee" for benefit enrollment and on-going administration.
MyBenefitSource is able to keep its entrance fees fairly low because it is the insurance broker of record for its customers. The supplier is licensed with more than 100 different insurance companies. The insurance commissions it earns on the benefits side help underwrite the technology and the services charges, allowing MyBenefitSource to keep its costs as low as possible.
Is there a need for integrated payroll outsourcing in today's business world? Currently, MyBenefitSource has 325 client companies providing services for approximately 20,000 employees. Cain says the company has been growing 30 percent a quarter.
Having been an employer himself, Cain felt he could pinpoint an "employer's pain threshold." He created MyBenefitSource to provide payroll and benefit services in the new Web-based world in April 1999. Programmers began writing its proprietary software in 1998.
His clients are glad he did. "Outsourcing was a hole in one for me," quips Mariani.
Lessons from the Outsourcing Primer:
- Employees can focus on strategic decisions and help the company make money when a company outsources the "busy work" of a process.
- Automated HR solutions allow general ledger and payroll systems to communicate. This eliminates all manual input and the need to do it twice.
- Outsourcing allows companies with just two employees to offer benefits that their Fortune 500 counterparts enjoy.