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What's new in shared services
An organisation’s payroll is becoming more and more complex. Legislation is ever changing and for payroll professionals, we all know the impact of the recent Budget announcement and what kick-started the 2007/2008 tax year. There is little wonder that organisations are turning to Shared Service providers who, in the case of public sector payrolls, are not only up to date with legislation but have knowledge and expertise of local councils’, schools’, colleges’, and police and fire services’ terms and conditions.
Over recent years Shared Service providers have evolved to provide a wide range of services. So it is not so much ‘what’s new’ but how Shared Services have and are evolving to provide improved levels of service through new technology which can assist in cutting employers costs. The ultimate end product being that organisations who have outsourced do receive a good provision of services, both for internal departments and employees alike.
As well as my own experiences on this subject I have been speaking to payroll professionals and service providers to find out how service provision works for them.
It is clear that Shared Services has many variations and the individual needs of an organisation will determine the service level agreement chosen.
I have looked at this provision both through the eyes of the provider and organisations that have utilised service provision. If you are a local authority that runs an in-house payroll and HR function but you are considering the use of an outsourced service provider this feature should give you food for thought!Available associated payroll services
The feedback I have received from users of Shared Services has been largely positive. There is the odd complaint here and there and on investigation, this usually lies with the service level agreement and what this actually covers. There are a great many service providers, ranging from small bureaux services to large organisations. Provision can include one, all or a mixture of:
- Other associated financial services
- Document management
- Absence management for sickness, maternity, paternity, holidays, compassionate leave etc.
- Occupational Health for return to work interviews, organising physiotherapy etc.
- IT support – possibly the employer uses the providers software
- Human Resources to cover starters, leavers and recruitment
- Interaction with the teachers and local government pension schemes
- Employee Assistance Programmes to help with debt management, looking for schools in the local area, elderly and dependant care assistance to name but a few
This list is by no means exhaustive. I have a quote from a colleague which I think sums up payroll service provision, in short “What sticks to payroll?”
Shared Services can be provided in many guises. For instance you may wish to run part of the function in-house and the remainder outsourced. For a full service provision my short quote above should make you stop and think!
Who provides what?
Circumstances vary widely depending on the nature of the organisation. Let’s take local authorities. State schools fall under the council remit and it may be that the council themselves are a Shared Services provider; however the school is free to choose its own payroll/HR provider.
Then we have councils that do not provide a payroll function and outsource their payroll to a specialist service provider. In the case of a school not using the nominated provider for the whole payroll function, can cause problems. One example of this is a local authority in the South of England. They outsource their payroll and HR functions to a nominated provider who is totally converse with the local authority terms and conditions to include teachers’ pension and local government pension. When it comes to collating the teachers’ pension details, in order to satisfy the obligation to submit annual returns, the main service provider has to rely on the school for the information.
Some local authorities will outsource to other local authorities and from this you will certainly gain:
- Best practice
- Potential cost savings
- Specialist knowledge to deal with the complex terms and conditions within the public sector
- Possible use of integrated HR and payroll systems to prevent duplication of effort
- Use of up to date development and technologies
So what's new?
As far as payroll is concerned they have to ensure that the obligations to Her Majesties Government (HMG) are met:
- Her Majesties Revenue and Customs (HMRC) for student loan collection, tax, national insurance and year end obligations
- Department for Work and Pensions (DWP) to ensure the correct treatment of statutory sick, maternity, adoption and paternity pay and leave are met.
- Courts, local authorities and Child Support Agency for calculation, collection and payment over of Attachment of Earnings Orders
- Department of Trade and Industry (DTI) – If the HR function is outsourced then consideration to the Working Time Directive will have to be adhered to.
You could say this is nothing new, but the systems used have to be regularly updated in line with ever changing legislation in order to honour HMG obligations. Many good Shared Service providers have their own research and development, technical teams and service provision managers who constantly strive to keep systems and process as current as possible.
If you are a public sector organisation looking to outsource payroll and related services, it pays to do your homework. Take care to scrutinise service level agreements as you can be tied in for 5 to 7 years. You are looking for organisations with dynamic strategies to keep up with the 21st century developments. Above all your aim will be to reduce payroll running costs and receive peace of mind.
Finally, when discussing the prospect of utilising Shared Services you need to cover many eventualities so again “What sticks to Payroll?”For more information