The Rise of Managed Payroll in Australia: A Q&A with Datacom Director Mark McWilliams Part II

Here’s Part II in our Q&A with Datacom Director Mark McWilliams on the managed payroll market in Australia and how SaaS and cloud are becoming game-changers in the industry.

Q: Cloud seems to be an increasingly viable option for running payroll —what benefits does a cloud model provide?

A: Cloud is really about the commercial model. Running a system like payroll in the cloud commercial model is very powerful— as long as the provider embodies cloud principles in its contract. These characteristics and benefits include:

  • On-demand self-service: The client can unilaterally provision new capabilities as needed without human intervention.
  • Broad network access: Capabilities are available over the network and accessed through standard mechanisms that promote use by heterogeneous thin- or thick-client platforms (e.g., mobile phones, laptops, and PDAs).
  • Resource pooling: The provider’s system resources are pooled to serve multiple clients using a multi-tenant model, with different physical and virtual resources dynamically assigned and reassigned according to client demand.
  • Rapid elasticity: Capabilities can be rapidly and elastically provisioned, in some cases automatically, to quickly scale out and rapidly released to quickly scale in. To the consumer, the capabilities available for provisioning often appear to be unlimited and can be purchased in any quantity at any time.
  • Measured service: Cloud systems automatically control and optimise resource use by leveraging a metering capability at some level of abstraction appropriate to the type of service (e.g., number of employees, reports generated, pay slips produced). Resource usage can be monitored, controlled and reported, providing transparency for both the provider and client of the utilised service.

Q: What factors should organisations consider when deciding whether to enter into a fully-managed or partially-managed (SaaS) BPO agreement?

A: There are essentially four key factors to consider when it comes to outsourcing payroll. The first is the organisation’s size and complexity. Does your organisation do the same type of pays, or is it varied? If the answer is the latter, it might reduce your risk and overall costs to fully outsource due to the multiple award configurations, employee types, shifts and so on.

The second factor centres on the knowledge of your internal payroll team. If you have a strong internal team with ingrained knowledge, it may be better to retain that team in-house and opt for a partially-managed, SaaS solution. The third factor, which is also related to your payroll staff, is whether or not you are legally able to migrate your payroll to a service provider at all.

The fourth, and likely most important factor, is which outsourcing option will truly accelerate optimisation of human capital management in your organisation. For instance, if you have an internal team that’s highly motivated and they want to run with it, let them run your payroll through the SaaS option.

Q: What are some of the key traits organisations should look for in a managed payroll provider?

A: Stability is No. 1. Don’t choose a fly-by-night organisation. Clients need to know that the organisation is robust and will continue to pay your people without risk of downtime. The provider needs to be a specialist in the area with sufficient local critical mass to understand what’s happening in the market, both nationally and locally. For instance, in the Victorian public health system, which Datacom Business Services has served for the last 40 years, an understanding of federal and local laws and what’s going on reduces the risk that people will get paid late or incorrectly.

The other key consideration is whether the provider has a robust system with a solid future development roadmap. Basically, is the platform going to reach a point in the near future where support ends? SAP, the technology DBS will use to run payroll and human capital management, has a roadmap out to 2020, for instance.

Q: In terms of a forecast for the industry, where do you see payroll heading in the next five years? Will organisations continue to keep payroll in-house or move to a business process outsourcing model or an as-a-service model?

A: Between 2010 and 2015, the human resource outsourcing market (fully-managed) will grow in Australia and New Zealand from $1.3 billion to $1.9 billion in revenue, according to IDC figures. Human Resources Outsourcing (HRO) is one of the fastest-growing outsourcing segments, due to grow around 13 to 14 per cent for the next three to five years. So, it’s fair to say that the industry is going in the direction of outsourcing, in both the fully- and partially-managed capacity.

Learn more about managed payroll and human capital management.

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