/ Accounting for Payroll in VS .NET

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230 / Accounting for Payroll
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Create manual paychecks Some companies complain that they cannot easily determine the correct tax amounts to charge when cutting a manual paycheck for an employee This is usually needed when an employee is being released, and government regulations require that final payment be made to the employee at once, rather than when the next payroll processing period arrives However, several payroll suppliers now allow companies to dial up the database of information on each employee, plug in the special payment amount, and have the system automatically tell the company the appropriate amount of taxes to deduct from the paycheck Last minute changes Suppliers prefer to obtain all payroll information three or four days prior to the actual payroll date, so they have sufficient time to process the payroll However, this means that any last-minute changes to payroll information cannot be processed through the supplier s payroll system The result is usually the creation of manual checks by the company to reflect these lastminute changes, which must then be entered into the next payroll transmission to the supplier Must collect payroll data The payroll supplier does not collect payroll information The company must still collect it from a variety of sources, organize it, and input it into the supplier s system As this may be the primary source of clerical time in computing payroll, some companies may not see how they are saving money by outsourcing their payroll No control over supplier disaster recovery planning It is possible that a disaster may occur at the supplier s processing facility that will destroy a company s payroll database This is not much of a problem for large national suppliers, which have clearly defined disaster recovery plans, but may be an issue for smaller regional providers that have fewer resources available to set up such systems In short, outsourcing is an attractive option for smaller organizations, though the economics of doing so are less obvious to very large entities that can internally process payroll for thousands of employees at less cost than the rates charged by suppliers
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Contract-Specific Issues
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A contract for payroll services will only be negotiable on prices This is because a payroll supplier has thousands of clients and prefers to use a standard contract for all of them it cannot hope to track slight contract changes for all of those companies and so it does not allow them However, suppliers have modified their computer systems to allow for different prices for each customer, so this one area is subject to negotiation Pricing is typically on a per-person basis, plus a fixed baseline fee for various services Each of these fees can be changed A company has the most negotiating power if it has a large number of employees to put on the
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Outsourcing Payroll / 231
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supplier s payroll system; the prospect of losing all of that revenue will normally elicit price cuts by the supplier A small company will likely have no luck in negotiating reduced prices, for it has no basis for demanding a price reduction The one exception to this rule is that a payroll supplier will sometimes grant a price cut if the company employee who is sponsoring the supplier has brought the supplier into other companies as well this loyalty to the supplier can be worth a small discount Thus, payroll suppliers allow no contract changes, but price alterations are possible if the company has a large payroll
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Transition Issues
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When transitioning the payroll function to a supplier, the first step is to meet with the supplier about one month in advance of the conversion date (or earlier if the payroll system to be converted is especially large or complex) This meeting should cover all key conversion dates and who is to perform which tasks by those dates Since the payroll function must usually be brought online with the supplier as of the first day of the year, this is a very time-sensitive process, so the initial meeting with the supplier is especially important If various extra payroll features, such as automated check signing, are to be added to the payroll later on, these dates should also be agreed upon by both parties during the meeting The next transition step will be to transfer all payroll information for all employees to the supplier at the end of the year or slightly prior to that date This may require either the conversion of existing computer data to a format that is readable by the supplier s computer system or a large rekeying effort by the company s payroll staff It is particularly important during this step to provide time and personnel resources to review all rekeyed information to ensure that it is correct There must also be enough time to adequately train the staff members who will be inputting information into the payroll system on an ongoing basis Supplier representatives should be on hand during the first few data-entry sessions to ensure that all problem areas are adequately addressed If company management is interested in purchasing a number of extra features offered by the supplier, such as vacation time tracking or the addition of 401k services to the payroll, it is best to gradually add these features only after all baseline functionality has been converted and proven to be functioning correctly It can be quite difficult to add many features to a newly outsourced system and expect them all to work properly, so a little delay in adding some features will ensure that the entire system works better in the long run
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