How to Structure Your Company's Payroll Function

An effective payroll department is crucial to maintain a high level of employee satisfaction and enhance overall organizational productivity and efficiency. Employees expect their organizations to pay them consistently and on time with the amount stated in their contracts.

A slow, too complicated, or error-prone payroll process can result in a strained relationship between employees and the employer and squander the HR team’s time.

So, how to structure the payroll function to achieve efficiency, be compliant and ensure timely payment?

Deciding on the payroll function’s structure is an important part of every organization’s payroll strategy – irrespective of whether it operates globally or just in its home country. The structure mainly depends on two things – how concentrated the payroll activities are and what should be the level of payroll activities outsourced vs. in-house. Let us walk you through these two considerations in the succeeding sections.

Degree of Concentration of Payroll Activities

As an organization starts expanding across states, provinces or country boundaries, the number of employees increases, and the workforce becomes diversified. And in turn, the payroll process becomes more complex because of varying regulations and laws applicable in different regions.

Initially, a company’s tendency may be to have different payroll departments for every business unit or location, which usually results in non-standard processes, redundancies, and inefficiencies.

Therefore, the leading practice is to concentrate all the administrative and/or transactional finance activities, including payroll, in a centralized model. For example, Deloitte conducted the Global Payroll Benchmarking Survey which cites that 77% of their survey respondents have centralized payroll systems. For large-size global organizations, centralization generally takes a regional model’s form because having one centralized team for the entire global workforce may not be enough.

In the ideal world where organizations have very mature payroll departments, the organizations will work towards establishing a Payroll Center of Excellence (COE) responsible for overarching governance, policies and processes, standards, technology, continuous improvement, automation strategy guidance, and developing a set of measures for the enterprise’s payroll. Then these policies and guidelines can be tailored to the individual regions or locations as needed.

Additionally, a global process owner can be designated for the end-to-end payroll process to provide dedicated governance and focus for the process.

Large, geographically distributed organizations can also consider a regional payroll shared services center(s). Such service centers foster the development of process expertise, standardization of processes, reduction of duplicate efforts, better reporting and analytics and monitoring and facilitating compliance.

Level of Activities Retained In-House vs. Outsourced

Generally, organizations consider outsourcing non-strategic activities or those that others can do better in terms of keeping up with the lower cost, better efficiency, compliance, and/or providing specialized expertise.

Specifically, the payroll process has various complexities due to frequently changing rules and regulations across industries and countries. No wonder why businesses frequently outsource the entire payroll process or at least some of its important aspects like taxes. Some of the top reasons to outsource payroll include:

• Saves time
• Minimizes payroll errors
• Improves security
• Maintains compliance
• Integrates data
• Facilitates employee self-service

Usually, it is recommended to opt for an end-to-end payroll solution as it connects all the aspects of workforce management to the payroll system. Right from hiring to benefits to performance, it is all integrated into one platform, thus, providing businesses with the ability to run detailed reports, increasing overall efficiency by replacing multiple platforms with a single platform, facilitating communication between employees and employers, and more.

Ramco offers best-in-class end-to-end payroll solutions tailored to the specific needs of businesses. Our unified platform powered with advanced technologies like artificial intelligence, machine learning, RPA, and advanced analytics aids businesses in automating payroll processing besides providing self-service payroll management tools for the employees. Other reasons why businesses choose Ramco’s payroll outsourcing services are:

• Centralizes payroll operations across all the offices (irrespective of their location)
• Improves employee engagement and response rate
• Modern cloud infrastructure
• Proven payroll processing experience
• Intelligent automated helpdesk

Our 25+ years of experience, robust software and exceptional services make us one of the renowned payroll outsourcing service providers across 100+ countries covering Asia/Pacific region, Middle East and Africa, Oceania, Europe and Americas. Contact us to explore our payroll solutions.