Save Money and Jobs: Change Your Payroll Software

In the current recession, businesses are forced to lay off employees at a record pace in an attempt to reduce expenses. Organizations are rapidly evaluating many types of proposals to reduce expenses and cash requirements across all aspects of business. For Human Resource Managers, expenses and cash flows are driven by regulatory requirements and employee head count. The big question business leaders must ask themselves is: What can you do to help your company during tough times?

HR and Payroll Managers nationwide are re-evaluating their expenses to save money. How? By re-evaluating one of the many major issues like the way they pay for payroll and human resources software. An organization of 2,000 employees that outsources payroll at only one dollar per employee paycheck will spend over $100,000 each year to process their weekly payroll, and that estimate assumes rates will never go up.  If the same organization could invest in a solution that cost $100,000 over five years, and the solution included equivalent compliance updates, the Human Resources department could achieve real savings of a half million dollars.

Of course, every situation is different. However, you can quickly determine how much you spend on payroll and human resources software or outsourcing each year by checking the invoice you get from your vendor. With a few phone calls, you can easily determine whether you can save your company hundreds of thousands of dollars, and save your department from some layoffs.

Are the alternatives really worth it? We spoke with Lane Nelson, president of HarrisData, a software developer marketing Human Resources, Payroll, as well as Time and Attendance software that is generating a lot of interest from companies that want to save money.

How does HarrisData Payroll compare to a typical outsourced payroll solution?
At a high level, the HarrisData solution requires the same kinds of work on the part of the Human Resources and Payroll staff as just about any other modern payroll solution. The staff member collects and inputs employee information and payroll hours into the system through their desktop computer. By pressing a “magic button,” they quickly process the payroll so other staff members can check and double-check the results. Finally, they print and distribute the payroll stubs. The process should be so easy that the staff member doesn’t really know – and probably doesn’t care to know – where the actual data is stored or processed, as long as it is secure, reliable and correct. So what’s the difference? The difference is mostly cosmetic; different users like different systems.  

So, are you saying that outsourced solutions are more expensive than in-house solutions? I thought companies outsourced to save money?
Companies should outsource non-core functions if they can make more productive use of the money they save. Unfortunately, the conventional wisdom regarding outsourcing is based on assumptions about pricing that are simply no longer valid in today’s marketplace. Software has dramatically reduced the labor involved in payroll processing. The total cost of server equipment has been declining rapidly for decades. The value proposition of outsourcing to avoid large capital expenses and take advantage of cheaper skilled labor simply doesn’t measure up to the prices being charged in the market. An in-house solution can be as much as 80% cheaper than an outsource solution on a cash basis, an attractive reduction in today’s world. The only way to know for certain is to compare your current bills to a firm proposal from an alternative vendor.

What about compliance risk? How do companies using in-house solutions keep up with the rapidly changing rules of the new economy?
In-house software applications have a bad reputation in this area. Applications were traditionally designed to sell; keeping customers upgraded to current versions has not been important to these vendors. At HarrisData, one of our key targets is the percentage of our customers that have upgraded to one of the two latest versions. By providing significant value in upgrades (including regular compliance updates) with an easy upgrade process, HarrisData can regularly report over 80% of our total customer base have adopted current versions of the software. We also leverage partners to aid in more complex compliance issues, which allows us to offer full tax rate and calculation services across virtually the same spectrum of payroll taxes as the major outsourcers, where necessary.

What about companies where the Human Resources and Payroll departments are last on the IT priority list? Why should they look at bringing the payroll in house?
Software has come a long way since HarrisData started back in 1972. Back then, when you bought a car, the first thing you looked for after you drove off the lot was a good mechanic because you knew you would be seeing them often. Today, there are cars that require virtually no scheduled maintenance, have substantially higher quality, and the corner gas station is equipped with a convenience store instead of a service bay. The industry simply made better cars and required fewer and fewer specialists to keep them running. In my view, a similar trend has happened in technology. The legions of specialists required to implement, customize, service, and operate software applications like payroll have been replaced by software functions ordinary business people can use. At HarrisData, we engineer services out of our offering, consistently delivering more than 90% of our revenue from software licenses, not extra services. Consequently, bringing payroll back in house has a much smaller impact on IT – in both labor and equipment – than most people expect.

Are there any other reasons your customers have cited for bringing payroll back in house?
Many of our customers are mid-sized businesses that like to control and manage their cash. When they outsourced payroll, they had to provide cash to the outsource vendor with each payroll cycle for all liabilities, even liabilities that might not be due for a quarter or so. With an in-house solution, these customers can put that cash to work for them and earn a decent rate of return. When you look at the amount of cash involved, the period of time it sits, and the rate you can earn, you realize that the ‘float’ you are giving the outsource vendor is worth a lot of money. If you’re comfortable managing your own cash, you can save a lot of money by bringing payroll back in house.

Let’s wrap this up with one final question: What’s the key factor in deciding whether to outsource or bring a payroll solution in house today?
The biggest factor is the comparable expense. If you add up the expenses associated with each approach, and one is dramatically less than the other, you should consider a switch. The next most significant factor is whether you prefer owning or renting. The outsource model is fundamentally a rental of the software, equipment, and labor involved in making the payroll solution available to your staff. Like most rentals, you can usually depend on prices going up. The HarrisData model allows you to own your license, for a fixed price over five years, and get as much value out of it as you can. Just as there are circumstances where the choice between owning and renting a car might yield different answers for different customers, the choice between owning and renting payroll software will be different for different organizations. At HarrisData, we’ve chosen to serve those organizations that have an ownership mindset.

Contact details:
Michael Mallen
Executive Vice President
T: 800-225-0585
E: sales@harrisdata.com
www.harrisdata.com