How to choose your payroll partner
by Staff Journalist
Being compliant with new tax and employment law is becoming increasingly difficult and time consuming, as legislation constantly changes and the acts governing payroll become more complex. Instead of HR persistently sending staff on courses to update them on the latest laws and software, many companies are now looking to the booming payroll outsourcing industry.
In South Africa there are currently six acts governing payroll: the Income Tax Act, the Unemployment Insurance Fund Act (UFI), the Employment Equity Act, the Basic Conditions of Employment Act, the Skills and Equity Act and the Occupational Diseases Act. If any of these acts change, payroll management is directly affected.
While outsourcing payroll certainly reduces the load of keeping up with regular payroll policies, correct tax submissions remain the responsibility of the company (rather than the payroll management service). To avoid double checking the payroll calculations of your outsourcing partner – repeating their work at best or having to amend tax a couple years down the line at worse – it is crucial your payroll partner has a good legal record.
“Payroll is a required function in any company but is not its core business,” says Grant Lloyd, the managing director of Pastel Payroll. “In addition to reducing cost to company outsourcing payrolls streamlines HR processes. This gives companies more time to focus on strategy delivery, allowing them to focus on their core business with the peace of mind that their payroll is being systematically and legally managed.” Make sure this is the case when choosing your payroll partner.
For good payroll practice prompt delivery is a necessity. It is required that employees receive their salaries and payslips on time and tax needs to be submitted within the specified timeframes. Ask potential outsourcing partners on their legal records and past ability to stick to deadlines. Take note whether the payroll service you have approached stick to commitments.
Remember that payroll companies will have accesses to sensitive corporate information. A thorough examination of their privacy policies is therefore absolutely crucial.
Choose a company that offers a solution that best fits your HR requirements and bank balance. There is no point in paying for services you are not going to use or can’t afford. Take into account your permanent and part-time staff and any short term contracts and the different services that managing them all requires. “Comprehensive solutions include all aspects of transaction orientated functions such as: capturing of employee data; setup of payroll calculations; capturing of variable pay transactions and leave transactions; processing of payroll; reconciliation; corrections to previous pay periods if incorrect data was provided or for late submission of data; finalisation of payroll, salary and third party payments; management of legislative submissions; and tax procedures,” says Liz Bath, managing director of EducosVision Outsourcing. “Partial solutions may include joint administration; the client captures some information online and the processing is done by the provider.”
Write a list of the services you need and those you may need in the future. See whether the latter can be added on to your original package only when they become necessary.
Check the pricing models offered by different companies. In some cases the number of employees directly affects the costing models for outsourcing, as many payroll companies offer discounts the more payrolls they manage for a particular organisation. Costing of specific outsourced payroll plans may suit some companies more than others. Bear this in mind, even if you are contacting an outsourcing company on recommendation.