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What to consider when outsourcing

Kobus Van Zyl

Human resources are pivotal to any business and many payroll system providers are stepping up to the plate with specially tailored products that, are designed to take the complications out of payroll administration by taking the process online. Karen Schmikl, the VIP Liquid Payroll business manager for Softline VIP, says there are many benefits to taking the payroll process online, especially for small business owners who play an increasingly important role in South Africa’s economic environment.

What to look out for when considering HR and Payroll software vendors

Start Up Nation, a small business knowledge hub, suggests:

1.    Reputation

Hiring a payroll outsourcing company based on recommendations from other businesses is always a safe bet. Ask others in your industry how easy the “call in” process is, and if the company they work with provides good customer service. Ask if the payroll processing company guarantees its work by paying fees or penalties based on late or erroneous filings. If so, ask how many times a vendor has paid these fines in the past year. Make sure to read a contract or service agreement thoroughly, and make sure you are aware of your rights if employees are paid late, or if taxes are calculated incorrectly. As a business owner, you are responsible for employee and government agency payments, irrespective of the actions of a third-party payroll company.

2.    Services

 A vendor should offer the services you need for a reasonable cost. If you need industry-specific services like increased insurance or workman’s compensation amounts, long-term care or specific medical savings accounts, or catastrophic loss insurance, look for a vendor that can provide these services. Don’t assume that all companies can offer all features. Choose a vendor with experience in your industry.

3.    Procedures

Businesses choose one payroll company over another because of user interface. How you “call in” or input payroll information can have a big impact on your business. Some key considerations are timing, access and reminders. Timing refers to how far in advance you need to provide information. The shorter the better - if you need to call in a week before checks are processed, this leaves a large window open where employee information can change, resulting in errors. Access refers to your account. Can you input information online, or have a bookkeeper submit information? How many people can be “authorised” to provide pay information? These are important considerations. If you are away from the office, traveling, or unavailable, another employee will need to provide information.

4.    Reminders

These are also important. What happens if you don’t provide information on time, or if you are unable to calculate hours worked for some reason? Make sure the company can address all of these issues.

Payroll and IT

The IT infrastructure is hosted by the service provider, which shifts the cost of maintaining the infrastructure to the service provider. “You simply log in remotely to the system from any location. The client does, however, need to make sure that they utilise the correct internet browser, which needs to be coupled with an internet connection. That is all you need,” says Schmikl.

Many are sceptical of the security aspects surrounding an online payroll system. “The information contained within any payroll database is highly confidential and in light of that, an online payroll system needs to be absolutely secure. The data transferred over the internet needs to be encrypted and secured with SSL certificates at a minimum. Data stored must be secured behind firewalls and should be encrypted to ensure that the data security is ironclad. The system also needs to be backed up regularly and backups stored in an alternate location to the original data,” explains Schmikl.

How to communicate your payroll information

Nothing in your relationship with a payroll service provider is more critical then when, how and why you communicate with them regarding regular payroll input, changes, last minute fixes and more. Spend a lot of time when reviewing your potential providers talking specifically about these issues.

Will information for each pay period be sent via a telephone call, fax, email, remote entry or other means? Are they flexible enough to meet your needs?

  • The “traditional” method of the employer calling the information to a service representative offers the least flexibility as it means the two of you must find a mutually agreeable time for both and must do so each payroll period. What happens if you get tied up with a profitable customer and miss the time? Are there any penalties?

  • While fax machines provide a more flexible method, they do also have some security issues. Review procedures regarding this method to avoid problems.

  • Remote entry may sometimes cost more but can be an effective means of entering data because you do it all yourself.

  • Internet entry is still another way of entering data and communicating.


Kobus van Zyl is the Marketing manager at Softline VIP for the last 12 years and has been actively involved in building the VIP HR and Payroll brand in southern Africa.

Kobus specialises in the following fields: general marketing, brand management, project management, creative development, graphic design, internal marketing & branding, direct marketing, marketing communications.