Payroll Outsourcing : Is change management necessary?

In accounting firms and cabinets of a certain size, outsourcing payroll involves many external partners and constitutes a structuring operation. For example, in the case of leadership change or that of an acquisition, it can be a first positive action taken by the new leader in order to stimulate a new dynamic, by freeing the HR or social division from complex and cumbersome tasks. To ensure the success of the project it is necessary to accompany it effectively.

Joint interview with Ronan GUELLEC and Xavier THEOLEYRE

Ronan GUELLEC is an expert consultant in business transformation strategy, change management and human capital development. He has been working alongside leaders of organizations and their teams for over 10 years now.

Xavier THEOLEYRE has been the Marketing and CRM Manager of Rue de la Paye / Fred Payroll for 2 years now. He is in charge of hosting and maintaining this blog and acts as the customer’s spokesperson within the company.

RG: We are discussing today about change management during the implementation of a payroll outsourcing solution for a SME or a large accounting firm. But what is the very purpose of subcontracting payroll?

X.T.: French payroll is complex and the rules that govern it are one of the law makers’ favorite playgrounds. The primary objective of payroll outsourcing is a simplified management for businesses and accountants. Entrusting payroll to a specialist reduces the risk of error and transfers the responsibility of regulatory watch to the subcontractor.

Outsourcing also allows diversifying costs depending on the number of employees. This is indeed the basis that specialized companies are charging upon. The price per employee includes pay-slips, social declarations, input and output documents and accounting entries.

A good payroll manager is a scarce resource. A payroll manager leaving the company is often synonym with disorganization. The pay-slip is nevertheless one of the cohesion elements between the employee and the company. Failing to deliver it in a timely manner can be detrimental to social stability within the organization. By choosing to outsource, the leader is sure to have these documents in due time.

X.T.: Is change management really necessary when outsourcing payroll?

RG.: Yes. Outsourcing payroll involves a profound organizational transformation for the payroll function of a company. It also affects its “culture” and it alters what stakeholders used to “believe” in up to that point in terms of professional standards. All of this can generate concerns and deadlocks.

Doing change management means allowing everyone to understand the purpose of the project and to identify the often implicit collective and individual “weak signals”. Their detection and remedial at an early stage will facilitate the project deployment by accelerating its ROI.

I do not know of any business leader who is not eager to obtain the employees’ support for his “vision”. Even if he senses some resistance intuitively, he might not know how exactly to approach the issue. Who supports the project and why? Conversely, who opposes it, and on which grounds? There are only good reasons to be a priori open or resistant to change. The challenge is to identify them, in order to establish or re-establish a sustainable “contract of trust” regarding the project.

R.G.: In concrete terms, once the decision to outsource is taken, how does the project unfold?

X.T.: In the case of Rue de la Paye, the process is simple. Once the manager takes the decision to outsource to us, we start collecting the necessary information: pay-slips, social declarations and employment contracts. We often go on site to collect informal or specific elements from the person previously in charge of payroll.

These documents are analyzed, after which one of our specialists presents the client with a report of possible errors, so they can decide together upon corrective actions. Consequently, our set-up team parameterizes the interface accordingly and issues a first set of test pay-slips.

We are then training the client teams in charge of entering the payroll variables into our payroll software program. This can be done on-site, but its simplicity also allows us to do it by phone.

Our clients benefit from the experience of our payroll managers, who stay attuned to their needs and are reachable at any time by email or by phone. We provide particularly intensive monitoring during the first three months of service, in order to ensure the quality of the transition.

X.T.: On the client side, change management dynamics may seem disconnected from the daily operational routine. How do we go about this, specifically?

R.G.: First of all, departing from the leader’s take on the current situation, it is important to clearly define the client’s short-term priority objectives to be achieved through the outsourcing process; tailored change management patterns will then naturally result from this discussion.

The leader needs to act fast, the organization and its stakeholders must adapt themselves to impending transformations. The change management project is a unique opportunity to set up an agile organization, with aligned processes and procedures. This is the time to work closely with operational business managers and staff and to involve them in the construction of the new organization and the new processes.

It may also be the time to consider establishing an efficient project governance structure. This can start, for example, by designating a representative within the management team, assisted by a project manager who ensures the key roles of the process (management, facilitation, training, communication…). The project manager himself will be supported by expert advisors; among other project stakeholders, they are mobilized during the outsourcing process within an ad-hoc team. The role of management is therefore essential in managing the stressful environment resulting from juggling all the short-term project requirements on top of the normal day-by-day urgencies continuing to arrive at their regular pace.

The choice of people will be detrimental for the success of the project. The ad-hoc team is censed to dissolve once the process reaches the routine phase. It’s in the best interest of the new organization to capitalize not only on the project participants, but also on the methods and good practice resulting from it. These have positive effects on the company’s general operational patterns: transversal, connected, open to innovation… And thus, also on the daily operational tasks.

X.T.: Finally, what are the real benefits of change management? Rises the added-value to the height of the investment?

R.G.: In terms of “people”, a project that is well understood, accepted and carried out by dedicated teams can only stimulate their energies and create the necessary synergies. It constitutes a powerful leverage for adhering to the strategic vision of the leader, for improving the internal social climate and for the company’s performance. This can only happen on the premises of a pivotal choice towards change, made by consensus. Therein lies the whole point of using an external “facilitator”.

In terms of “numbers”, we should compare the valorization of the time spent on the project by committed, full-time employees with the hidden costs incurred by a lack of ownership from the internal “social body” when it comes to the new organization: absenteeism, meetings mania, unexpected/”extra” training, additive functional evolutions, turnover, decrease in performance… Therefore, the expected economic benefits of outsourcing might seem lower than expected early on, but they will become evident in the mid and long-run.

RG.: I want to ask you the same question. What are the benefits of payroll outsourcing in your opinion?

X.T.: It is not uncommon to find that outsourcing generates a decrease of more than 20% in payroll management costs. Certainly, beyond the salary payroll managers, we must consider the cost of software, training and monitoring regulations.

But lack of quality has a cost too. We identify more or less benign errors in 80% of companies we audit before outsourcing.

Payroll is often considered daunting by the HR staff. Redirecting these tasks away from HR allows them to focus on more rewarding, higher-value missions. This is a social policy element that should not be neglected by the business leader before launching the project.

R.G.: Ultimately, payroll outsourcing confirms Francis Blanche’s well known adage, which paraphrased in English would give something like this: “In a changing world, a stich in time saves nine.”

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