Seven ways Managed Services can reduce your payroll costs

Payroll is a major cost centre in almost every organisation. The cost of setting up and running payroll operations – not to mention the cost of employing a dedicated team – is higher than you might think.

The economic shock of the past 18 months has highlighted exactly how mission-critical the payroll function truly is: the effects of the pandemic resulted in financial strain and workforce disruption for many organisations, and placed further pressure on already stretched payroll and HR teams. 

Zellis research found that payroll was hit hard, with almost a third (30%) of organisations reporting a loss of payroll capacity in the early months of the pandemic. What’s more, four in ten believe they now have less efficient payroll and HR processes than they did a year ago.

Below are seven ways in which partnering with a Managed Payroll Service provider could help improve cost control and futureproof your company’s payroll system:

1.     Removal of indirect costs

Indirect costs in a payroll context go beyond the usual overheads of property and equipment; payroll departments typically have high printing and stationery costs and system maintenance costs in keeping aligned with company changes and consuming latest legislation.

When bringing in a payroll partner, you no longer need to worry about these extra costs as the Managed Service provider will take them on instead, making your costs much more predictable and easier to manage.

 2.     Superior process efficiency

Many organisations are still reliant on long-winded, manual workarounds and paper-based processes for key payroll tasks. Streamlined and superior processes can help optimise costs in a big way.

By utilising automation and highly sophisticated payroll software, as well as developing best practice processes from working across a wide spectrum of industries and workforces, Managed Service providers can provide increased process efficiency compared to in-house payroll teams.

 3.     Error reduction

Not only do expert providers typically hold more extensive payroll knowledge compared to many in-house teams (with dedicated training functions), but they can also utilise the very best in technology to significantly reduce costly errors.

Managed Service providers also work to strict Service Level Agreements (SLAs) to ensure pre-agreed levels of accuracy are maintained throughout the partnership – and the best ones should be amenable to offering service credits, due to how confident they are in their performance. Setting out these clear accuracy standards, along with utilising automated payroll technology, helps to significantly reduce costly errors such as overpayments.

 4.     Stricter compliance

Since Managed Service providers handle personal data and deal with compliance for hundreds of customers, they are typically much more up-to-speed with ever-changing payroll legislation and regulations compared to in-house teams.

This level of assurance around compliance significantly reduces the risk of your organisation falling foul of crucial regulations and will ensure you steer clear of costly penalties, employee dissatisfaction and reputational damage.

5.     Economies of scale

Economies of scale are typically achieved by increasing production while lowering costs. Larger companies can do this much easier than smaller ones, because their costs are spread over a much larger area.

A Managed Payroll Service provider can achieve economies of scale in much the same way. For example, when running a large number of payrolls for various client organisations, management overheads are significantly reduced, and more efficient processes are developed.

Plus, as a customer you benefit from the expertise of a dedicated, highly knowledgeable workforce, which typically covers a large range of different industry requirements. This allows Managed Service providers like Zellis to provide a high quality, non-compromising service that is highly tailored to your business needs, but at a lower cost than you would be able to provide yourself in-house.

6.     Labour arbitrage

Some Managed Service providers operate internationally, which can bring two main benefits. Firstly, they can gain access to top talent from across the globe, ensuring the highest quality service for your business. Secondly, providers can offer you a lower price due to a labour arbitrage benefit.

Together, this means you can reap the benefits of lower costs while still feeling confident that the quality of service is not being compromised.

 7.     Strategic insights

Many organisations are unable to access the information needed to make smarter strategic decisions which lead to more profitable outcomes. They either do not have the right systems and processes in place, lack the skills, or they simply don’t know where to look to unlock these crucial insights.

Payroll is a prime example of a business function with an extensive amount of untapped data potential that can really make a difference to your strategic decisions, and ultimately, your cost control.

Managed Service Providers like Zellis have both the technology and expertise to help you harness your payroll data and convert it into cost-driving insights. Sharing these insights in the boardroom empowers business leaders with the right knowledge to make the most cost-effective decisions.