Weigh the pros and cons to determine if payroll outsourcing is right for your organization.

More and more organizations have turned to outside vendors for payroll processing needs. Deciding to outsource your payroll is a big move. Before you determine if it's the right choice for your organization, it's important to weigh the pros and cons of outsourcing.

Weighing the pros and cons of payroll outsourcing requires context of what "outsourcing" means. Technology is changing so fast it's difficult to keep up with the current definition of outsourcing. See the table below for the definition of the different types of outsourcing.

Outsourcing relationship types
Type	Function/process ownership	Technology ownership
Application service provider	In-house	External service provider
Traditional payroll/benefits outsourcing	In-house/external service provider	In-house/external service provider
Business process outsourcing	External service provider	External service provider

Vendor-hosted payroll applications

In an outsourced environment, the payroll vendor hosts all of the technology systems and software needed to manage and process payroll. This means that the outsourcing employer doesn't need to commit any of their internal technology resources or hardware to run payroll services. The vendor also takes care of all of the payroll solution upgrades. The employer simply accesses the payroll applications via a Web browser.

Some worry that when an organization outsources payroll functions, they lose control. This is not the case with vendor-hosted payroll applications because the company continues to handle the responsibility of managing administration of the payroll. They still must input payroll-related information into the system such as hours worked, promotions and benefits selections.

Reasons companies decide to outsource payroll

There are many reasons why an organization may decide to go with an outside vendor for payroll applications. Decision drivers may include a desire to:

Focus on core competency
Because payroll functions are process-oriented, many organizations decide to outsource this aspect of the business. This allows them to focus more of their resources and time on strategic initiatives and core competencies.

Reduce costs
By outsourcing payroll processing applications, many organizations are able to streamline processes and reduce costs. The organization does not need to invest money in maintenance and upgrades. It also saves time because internal technology personnel don't need to troubleshoot problems, because the payroll vendor manages everything on the technology side.

Accelerate implementation time
Some organizations have chosen to outsource payroll processes and applications because the vendor handles the implementation. Because they are experienced at implementing and integrating technology solutions, the payroll vendor is able to get an organization up and moving on a new application quickly.

Improve service levels
Service levels may improve when applications are outsourced because some of the service expectations fall on the payroll vendor's shoulders. Because the vendor specializes in providing outsourced payroll services, they typically will give considerable attention to maintaining high service levels.

Leverage specialist resources
By outsourcing payroll to a vendor, an organization can gain access to expertise that may not be available internally such as payroll compliance specialists and software support experts. These experts often provide clients with insight on industry best practices and consultation on how to make payroll processes more efficient and cost-effective.

Source: Deciding to Insource or Outsource for Human Resources, Gartner Group, February 2003

Ceridian-hosted payroll solutions

With a hosted solution from Ceridian, you can rest assured that your organization will always remain compliant with ever-changing payroll tax laws and labor regulations. Ceridian has built tax codes and regulations into our payroll systems and continually updates them with the latest information. For example, if Michigan makes a change to their state tax code, Ceridian updates it in our payroll systems so clients are automatically compliant. This holds true for any location across the country.

Ceridian also provides our payroll clients with consultation on best practices and advice on how our clients can be more efficient.

Find out more about Ceridian's payroll solutions

Call 1-800-PAYROLL or contact us online.

Adapted from the February 2006 issue of Ceridian Connection.