Laying the Groundwork: Preparing for a Successful Payroll RFP

It is always a challenge for HR when comes to sourcing for a payroll system. How can you start with a “request for proposal” (RFP) project? It’s always a question mark for many when you need to source for the information, gather them and decide based on the shared system functions, specifications and commercial information.

This article is to share with you the general end-to-end process of a request for proposal (RFP) in sourcing a payroll system vendor based on my experience. There is no concrete right or wrong, but it must be per your organization’s sourcing policies.

Predominantly, an RFP project or programme, can be divided into three processes as follows 

1. Pre-Process

2. During the Process

3. Post Process

Pre-Process:

The respective project manager (PM) of the RFP project will lead the following tasks before RFP document is issued to the potential vendors:

1. Sourcing of potential vendors
2. Conduct request for question (RFQ)
3. Preparation of business case
4. Preparation of overall RFP project plan

To source through procurement vendor list, recommendations or browse through websites. At least 10 will be a good number to start with, especially when evaluating vendors that provide global payroll software capable of supporting diverse regulatory and operational requirements.

• Once the vendor list is established, RFQ can be conducted via phone or email to gather high level information of the vendor e.g. corporate profile; support and services; system functionality and capability; project implementation methodology and tentative timeline; account management approach; commercial.
• It is also important to know whether the vendor is interested or ready to participate in the next RFP process. From experience, had encountered a vendor decline to join the RFP process.

List down challenges of current state in four main areas as follows. The current state could be either an inhouse payroll processing or payroll outsourcing or in a hybrid model.

• How much time is spent in the payroll processing from data input to salary and statutory reporting and remittance? List down how many manual cumbersome manual steps and the respective time taken.
• What is the current service level (SLAs) – does it meet the agreed level or below bar?

• If it is an in-house processing, how robust is the current system? Is the system competitive and cater for latest technology e.g. built-in AI, bot functions etc. 

• How many times there are near misses to cope with the regulated turnaround time for regular pay, termination and layoff final payment? 

• How much is the cost per payslip and other associated costs in the current arrangement?

• How competitive is the current arrangement in supporting business growth? It is crucial to understand the capability of the in-house or vendor’s system robustness for future expansion or acquisition that could be implemented within a short time frame. This becomes particularly important for organizations planning regional expansion or evaluating a multi-country payroll solution as part of their long-term payroll strategy.

• What is the NPS (Net Promoter Score) in current processing approach? Is it meeting employee’s expectations? 

• If it is not per expectation, list down the critical areas that are affecting the NPS? This can be included as considerable areas in the RFP.
• Can the current approach be improved to raise the NPS, if it is possible how much time, effort and cost shall be allocated to make it happen? This will be an option in the RFP evaluation whether you should remain in status quo or to adopt a new payroll system.

• Are there any compliance issues with the current payroll arrangement? 
• Are the latest regulations being updated timely and correctly in the payroll system?

Once the current state is ready. With the collected information from RFQ, you can prepare a SWOT analysis in all areas that could be in areas of people, process, technology and cost to answer few important questions for RFP justification in sourcing for a payroll system:

• How efficient of the system in saving resources manual effort and processing time? Objective: To find out cost savings in terms of people cost and/ or current outsourcing cost to compare with the new implementation and subscription fee. Which approach is higher in its overall return of investment (ROI) and the duration of breakeven. 

• How new system can help to improve employee experienceg. what are the unique features, capabilities and value propositions of the system? Objective: To list down the advantages of functions in the new system that can help in improving the processes and users (employee and HR) experience.
• What are the business reports, analytic functions and AI features of the new system that can help HR, business and other stakeholders to work effectively? Objectives: To ensure new system with comprehensive functions that can help in regulated survey, business forecasting, compensation analysis and design etc., while providing the standardized workflows and visibility expected from an enterprise payroll system.
  
  
• How new systems help in compliance reporting? Objectives: To ensure all legislation updates are captured timeline and with a clear support model from vendor from the update being communicated, tested, rolled out in the system.

With the completion of business case, justification at management level shall be carried out. Once it is justified, the PM can move on to next task.

• Prepare a project plan to list all tasks in pre-, during- and post-processes. This will let everyone in the project have an overview of the tentative timeline for the entire vendor selection project.
• Besides, the project plan is a good communication and change management planning tool when working collaboratively with all stakeholders, sponsors and the external parties. It allows everyone to schedule ahead to make themselves available for tasks that need their participation e.g. panelist assessment etc.

Templates that can be used for understanding the reason for change and scoping the Global Payroll RFP

What is working and not working

Product Level

Service Level

High-level Scoping

While the decisions are made in the headquarters it is very important to understand every country is different and current process has difference in scope

Its also important to understand how the processes are manged within the organization as few countries may handle the process differently and it’s important to document the current process in a structured manner and my suggestion is to follow below order in documenting

1. New Joiner registration
2. Payroll Processing
3. Leaver De-Registration
4. Compliance report creation
5. Compliance report submission
6. Remittance of income tax deduction
7. Remittance of social security deduction
8. List of statutory current vendor or system provides
9. List of customized reports currently used and do we need the same with new vendor
10. If Yes, Reasoning for the custom report requirement

Countries by acceptance

While the headquarters and the countries in the region may be okay for the transformation, you will also have countries where change is difficult, and it is very important to consider their payroll transformation in the later part of the waves so that they can see success story and join the transformation.

Language Requirement  

It’s also very important to consider whether the all the countries will be okay for seeing their UI/UX in English or any specific language and it’s important to understand what the languages are needed in the UI and needed for conversing in the implementation phase for making this successful  

Cost analysis

It is also important to understand cost benefit analysis of what the current expense across the location vs is how is it going to be done in the new method and we suggest below template for analysing the same

In conclusion, laying the groundwork before initiating an RFP for a Payroll solution is crucial for a smooth and effective selection process. By carefully defining your needs and gathering key information, you set yourself up for success. Don’t miss Part 2 of this series, where we’ll dive into the During and Post RFP stages. In the meantime, simplify your search by downloading our exclusive RFP template, designed to guide you through every step of finding the right payroll solution.