When does it pay to outsource your payroll, and what does the new trend of "On Demand" services mean for HR?
Sometimes it pays to “outsource” your payroll. There is a new label emerging in the outsourcing business and it is called “On Demand” systems. An On Demand system or service is simply a “hosted” solution, sometimes referred to as an ASP solution, and it is a form of outsourcing.
The most common form of outsourcing in the payroll business has involved providing data to a service bureau which in turn processes that data and then returns the results. An On Demand system accomplishes the same result, but allows you to process the data directly as if you had your own in-house system, but without the related costs and management infrastructure required to handle an in-house solution. It is particularly beneficial when dealing in a foreign environment.
Unlike the traditional outsource model, a significant benefit with an On Demand solution is that it allows you to process “live” and to see the results instantly, rather than to see what has happened after processing is complete. This can be important when processing payroll, particularly in North America where time lines are often unreasonably tight. The results improve accuracy and thus a happier workforce.
Other benefits can include no large capital investment up front when acquiring an in-house solution. Not only can the up front cost of a license be significant, but implementation costs frequently can amount to two to three times the license costs, not to mention the time to get up and running. There are minimal worries about software upgrades and day-to-day management of the system and the data base. There is no need for dedicated costly servers and their maintenance and controlled climate floor space.
When it comes to handling your payroll and human resource needs in a foreign setting, a managed On Demand solution is even one step better. The solution provider not only promises the benefits of an On Demand system, but also can provide you with the local knowledge and customized systems in order to ensure you are meeting the regulations and legislative requirements of the foreign location.
- Bill Smyth CPA, FCGA, FCPA
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