The COVID-19 pandemic has led to a massive impact on the revenues of many companies. While consideration needs to be given to all possible pivots that might rescue revenues, most CEOs and CFOs are very focused on managing and reducing costs. Unfortunately, this can be seen in the number of organisations terminating roles and staff in the past weeks.
The responses from many governments around the world to the pandemic have included wage subsidies and new leave types to try to keep workforces intact until the economy recovers. These subsidies complicate the role of the payroll department, and payroll vendors are supplying updates to its software to simplify compliance with the new rules surrounding these. With this being largely uncharted territory, governments do not always get these measures perfect first-time and so changes keep coming.
For companies using a legacy on-premise type payroll system, this is likely to mean significant extra work for both IT and payroll staff, on top of their regular workload. Teams will be busy applying, testing and going live with these updates. If your organisation is already using a cloud payroll system, then you would expect the software to be continuously updated to suit the new rules without a required cost as the functionality. If this is not occurring, then you should consider a change to a cloud payroll solution where this does occur — for instance, a multi-tenanted SaaS (Software as a Service) system.
If you have had to reduce the size of your workforce, you will no longer want to keep paying fixed licence and support fees for the payroll system previously required for the larger workforce. This will require you to negotiate with the supplier to get these fixed fees reduced. However, there are likely to be either a number of costs underpinning the previous system that cannot be reduced or an unwillingness from that supplier to enter into negotiations. Switching to a cloud payroll provider that offers consumption-based pricing, where you only pay for what you use, is recommended.
Many organisations experience ‘leave leakage’ (where employees take a day off without recording that leave) and this most likely occurs where paper-based leave forms are still used. With staff likely to continue working from home for the foreseeable future, this issue will be more prominent for a number of businesses. Implementing a modern system which allows leave requests and approvals to be processed by staff using mobile apps and portals, and then automatically processed by payroll, will lead to a reduction of leave leakage and at the same time deliver savings to the business. Only when a new payroll system, with mobile and automated leave application and processes, is Implemented, will the savings in this area be visible.
When looking at replacing your legacy system with a cloud-based payroll solution, companies can expect this to be significantly cheaper than on-premise systems because of its scale. Cloud provides a single large system that is shared by multiple clients, rather than managing individual systems implemented by each company. The costs of cloud-based payroll systems are easier to identify as they are typically a single charge based on either the number of employees or the number of pays processed, whereas the total cost of legacy systems need to include not just the licensing and support costs, but also frequent upgrade costs, and underpinning IT and staff costs.
If you have been placed in the unenviable position of reducing the size of your workforce, now might be an ideal time to consider outsourcing your payroll function. Payroll bureaus have the benefit of scale and processes – designed for efficiency – and are likely to be able to offer significant savings over maintaining an inhouse payroll team.