In recent months there have been a growing number of organisations coming to market, seeking to replace or outsource their payroll software and services. Some have made direct contact with suppliers, whilst others have engaged their advisory partner or selected a third party procurement specialist.

So what are the drivers behind this surge in activity, these invitations to procurement portals and the considerable investment in time and resources? Why is so much effort being put into writing and issuing Request for Proposals, creating scoring matrices and pulling together evaluation committees, before facilitating the rounds of presentations?

During the past few years, businesses have no doubt continued to work even harder to operate their payrolls, often with resources unexpectedly working remotely. Historic processes, software and IT infrastructure usually weren’t well suited to this model, all whilst the clock has been counting down on the external commercial contracts underpinning these operations.

Contract countdown

Often these long-standing contracts, range from software running the payroll, to service providers supporting and operating the payroll. The origin of these contracts, the software configuration decisions and the evolution of the payroll service model, has typically been associated with people who have since left the business.

In addition, key payroll colleagues, often with more knowledge and experience in their heads than has ever been written down, are nearing retirement or have made the decision to bring it forwards rather than return to commute to the office.

In some instances, the legacy payroll software is unexpectedly nearing its end of life, a decision often accelerated by other transformation programs, or upgrades to the organisation’s HR, rostering & scheduling, or Financials cloud platforms. The time between any replacement payroll software being selected and indeed implemented, is often less than the time available until the software unsupported at the next month of April.

Other positions involve the payroll outsourcing partner’s contract nearing its renewal date, again often delivered on ageing on-premise software, no longer able to scale to support employee growth, evolving business complexity, or the inclusion of other countries with their additional legislation and taxation requirements.

Business case

In the meantime, businesses are being asked to reduce their operating costs, to improve efficiency and reduce risk, so payroll is an obvious candidate for such business cases. All this at a time when there is a typical need to consolidate payroll software and services across operating units and countries.

Payrolls are also increasing in complexity, with changes to legislation, working patterns and business reporting. There’s more focus on benefits and reward strategies to enable recruitment and reduce attrition, plus more emphasis on the employee experience such as the rise of earned wage access solutions, against an operational background of payroll talent attrition and knowledge leakage.

Solution options

Outsourcing the payroll to a cloud vendor can improve the business case, with the subscription costs being spread over three to five years, instead of the upfront license cost with annual support and maintenance. A tier one of two platform will offer an integrated HR and Payroll platform, which reduces integration costs in the short term whilst reducing operating and support costs in the longer term, further improving the business case.

Payroll services partners are usually able to deploy their chosen platforms faster and therefore beat the April deadline. They’re also able to smooth some if not all of the transformation and deployments cost over the lifetime of the payroll service, particularly when the payroll service is also outsourced, improving the business case yest again and moving more of the budget from Capex to Opex.

Payroll software vendors and their services partners, from transformation to deployment, and from payroll processing through to cloud support, all have their strengths and weaknesses. They all have different commercial, technology and operating models, but the right answer will be out there and it’s more than likely that another business has already started or achieved a similar solution to the one sought.

Next steps

Businesses need to check their contracts, termination periods and look for any software ‘burning platforms’ which are being supported. The latter is a strong driver to ensure the decision isn’t to ‘do nothing’ when HR and Payroll are competing for budget against other business priorities.

Whilst portals can ensure consistency and facilitate the sharing of information, there is no substitute for meeting suppliers, whether that be virtually or increasingly, face to face. Meeting the supplier’s team and meeting their clients, is the best way to make the right decision, taking advantage of their collective experience of having been there before.

The businesses who are most successful in selecting a partner and not just a supplier, don’t focus on the software functionality and the minutiae of contract clauses. They concentrate on the business case and how it aligns with the business strategy, whilst supporting the needs of the business, the Payroll & HR teams, and the employee. This ultimately enables the successful delivery of the program and achieves the benefits identified within the business case.