Shopping Around - Bureau Focus

"Good morning, I'd like to buy a payroll bureau service, please." "No problem, there are many different models, do you know exactly what you are looking for?"

There we come to the problem that faces every shopper for payroll products and services. What do you need to do? "Producing payslips and paying people" is a superficial answer. A newcomer to payroll could be forgiven for thinking that, with such a standard, statutorily defined output, one payroll department should operate the same as any other. Not so. In fact, it would not be extreme to suggest that no two payroll departments operate in the same way. Some of the variable factors are listed in the adjacent table.

Factors that distinguish one payroll operation from another

• where payroll sits in the business and the level of control exercised; i.e. finance, personnel, or
elsewhere, and the degree of autonomy enjoyed by the payroll manager

• the perceived role and status of payroll in the business; i.e. simply a producer of payslips, or a
contributor to or even a driver of pay policy, or with responsibility for enforcing compliance
with tax legislation throughout the business

• the level of investment that the business commits to payroll

• the quality of staff; their commitment, motivation and skills

• the range of work that is also done in the department; e.g. accounts work, maintenance of
personnel system, pensions administration

• the complexity of pay-related terms and conditions; related to the industry in which the
business operates and to the industrial relations environment

• the pay period; one or more of weekly, monthly or some variation

• the nature and technological sophistication of the computer environment in which payroll
operates; e.g. standalone PC, local area network, wide area network, terminals to a
mainframe

• the level of systems support available; e.g. none, in-house IT department, support by
software supplier

• the method of payment; one or more of cash, cheque or direct credit

• the method of data capture; e.g. keyed from source documents, keyed by line departments,
OCR scanning, time clocks

• the nature of the interfaces required with other business systems; e.g. ledgers, personnel,
pensions, and whether manual or automated

• the nature of the payroll output; e.g. the design and format of the payslips, the range of
standard reports produced, the level of ad-hoc reporting that is required

Such a diverse range of factors that distinguish one payroll department from any other emphasises the need for great care in selecting a payroll service that will suit your own particular operation, and allow you to meet the expectations of your business for a payroll service. It would be wrong to simply buy a payroll system off-the-shelf, or to take on the services of any old bureau service provider capable of producing a payslip and originating direct credit payments, without matching its capabilities with the overall demands of your payroll operation.

It would be equally short-sighted, even irresponsible, for someone in personnel or finance to ignore or set aside the unique requirements of their payroll operation, and select a personnel or accounting system that matches their own business requirements, and then take whatever payroll module or service that comes with it. Payroll is a critical business application in its own right, and the means of providing it should not be a by-product of a choice made for some other system.

Evaluating the choices

If the business preference is to find a service provider for payroll, rather than run in-house software, the selection process must be no less rigorous. As many bureaux provide a fixed service for companies with perhaps 50 or fewer employees, there may be little in the way of choice for such companies. Beyond that, however, the major bureaux will offer a flexible range of services that, at one extreme, involves only the submission of pay data, gross-to-net processing by the bureau, the printing of payslips and reports, and payment by direct credit and, at the other, a fully managed service that does away with the need for an in-house payroll department altogether. The choice is not in the extremes, but in the almost infinite range of options between the extremes.

Having approached a payroll service provider, you should expect the reaction that we started with; "We have many options aimed at meeting your requirements. So let's talk about what you need to do in the context of your payroll operation and the expectations of your business." The bureau will want to understand not just your requirements, but also the environment that makes them so important to you.

The bureau may suggest some compromises in how you currently operate, but don't be put off by this. It is a matter of economics, both yours and theirs. If the bureau has to provide a service to your specification exactly, and that differs considerably from the services provided for the majority of clients, it will cost you. If you can reasonably make compromises on how you do things to match the more routine methods used by the bureau, the service will be cheaper for them and for you.

Some of the areas where bureaux should be expected to be flexible is their services are listed in the table alongside.

Areas of flexibility and choice

• running and re-running the payroll at times to suit you, not the bureau

• capacity to handle your calculation and processing requirements within their computer system,
almost irrespective of complexity, without them having to write something special for you

• optional range of charging structures to suit clients prepared to pay for what they need as they
go along and those with a fixed budget

• a range of input methods, including telephone, paper, fax, on-line, front-end PC, diskette, time
and attendance

• a range of output methods, including paper, on-line transmission, diskette, and microfiche

• if a front-end system is used, or on-line access to the bureau's computer, a fully-developed
personnel system that shares the same database as the payroll data, with capabilities such as
basic record-keeping, administration of recruitment, training, and organisation structures,
"point-and-click" reporting, and screen design facilities

• the means of performing a one-off pay calculation as required, with no waiting

• choice of who prints the payslips, and if the bureau does it, choice of distribution methods

• choice of methods of producing reports, by the bureau or client, and if the bureau writes them,
immediate turn-round

• access to payroll data using the company's preferred reporting tools

• a range of help desk and support services, with support staff who have achieved or who are
expected to achieve a payroll qualification

• the ability to make direct credit payments through BACS for payment of expenses, and to
recipients who are not employees

2000 and EMU

The two "hot" subjects that are as relevant to the selection of payroll services as they are to in-house software are compliance with the date requirements into the next millennium, and the currency issues introduced by monetary union.

If you are a payroll bureau user, you should be concerned about the year 2000 even if you submit your pay data on paper each month. For payroll systems, the big issue is not whether the bureau's own processing computer and any front-end system are compliant. The bureaux guarantee that either they are already compliant, or they will be in time. But, what about the rest of the bureau's business systems, those that are nothing directly to do with payroll? You should really be asking whether or not the bureau itself is 2000 compliant, not simply the payroll processing capability. Will the bureau still be in business in the year 2000?

Even more important, will you still be in business? If you are using "2000 compliant" front-end software, are the hardware you are using and the interfaces with personnel and accounting systems full compliant? Has your bureau provider contacted you yet to come in and give you a "health check"? To some developers and service providers, such checks are considered too expensive to provide. But can they really afford not to do them? They could be inundated with payroll failures among their clients, not because their software is faulty, but because the client's systems environment is not 2000 compliant. Hopefully that will not happen, but will the bureaux cope if it does? Or will they just point out that it is the client's responsibility if the payroll fails due to the client's neglect? What does your contract with your bureau provider specify are your responsibilities with regard to the systems on which you run the bureau's software? What will be your bureau's reaction if your system fails, at the same time as many others?

Concerning European Monetary Union, there are no systems, either in-house packages, or bureau services, which meet all the payroll requirements that will be required. The significant reason is that no one knows exactly what they will be because they have not yet been fully defined by the European governments. However, some systems are more "ready" than others and are already able to handle several currencies and convert between them. The 2000 issues may be more pressing at the moment, but monetary union and its payroll implications will have longer-term impact. They should both be major features in the requirements of all shoppers for payroll systems, including those looking for a payroll bureau service.