Consolidating multiple HR systems can save: Study

Choosing to switch from multiple payroll and HR systems to one could mean cost, time savings

Before Jodi Lant’s company consolidated to one payroll and HR system, data entry was a pain.

The manager of HR services at Standard Machine in Saskatoon had to enter many pieces of data into three separate systems.
The decision to switch to a single system wasn’t about saving the company money, it was about saving time.

“It wasn’t a cost savings in what we were paying out, it was a cost savings in peoples’ time which… equates to cost savings,” said Lant. “Instead of entering something in three places, you enter it one. Instead of having to log in to three different locations to get the information, you log into one location.”

Results

Now, Lant can come up with stats easily.

If she wants to know which workers have completed a certain kind of training, a quick search will find that.

If she’s curious to see who needs to be recertified to use a forklift, that information is at her fingertips.

“I put in a report with the parameters I’m looking for, whether it’s in the next three months or in the year, and it comes up,” she said.

The time savings for Lant, the sole HR person at a company with 140 employees in Canada and 30 in the United States, have been significant.

Her experience is echoed in the findings of a recent report from PwC commissioned by ADP Canada. It found costs such as indirect labour and system maintenance are often overlooked when companies examine the cost of their systems.

These hidden costs can represent more than 50 per cent of the total cost of processing and managing payroll, time and attendance, HR data administration and health and benefits, according to the study, which is based on data collected from 125 participating organizations, ranging in size from 50 employees to more than 5,000.

The study, released in March, also found many businesses could reap cost savings by consolidating to one system.  It said businesses can save up to 43 per cent by using one service provider for payroll and time and attendance.

“The easiest way to… accelerate and facilitate growth is to have the right tools and processes in place so that, if the company does need to move quicker or react faster, that the HR organization doesn’t get bogged down in a lot of administrivia,” said David McIninch, vice-president of marketing at ADP Canada.

Manual systems also allow more areas where there could be points of failure or human error, he said.

As soon as the time and attendance process is automated it eliminates the need to chase time sheets and have the data keyed in by a payroll employee, he said.

“Smaller businesses, in particular mid-size businesses, have the perception that ‘I’m paying that person to sit in payroll anyway, I don’t really care how much time they’re spending on payroll,’” he said. “Whereas the attitude we take, which I think is the correct one and I think is a best practice amongst some of the higher performing businesses is: That person sitting in payroll has the capability to really add value to the business and instead you’d like to overwhelm them with administrivia. That doesn’t seem to be the best use of anyone’s time.”

Payroll professionals McIninch often works with spend their time completing labour-cost analysis and performing other functions, instead of wasting time with data entry, he said.

Why some companies don’t consolidate

Since the recession HR departments have been busy with job duties such as employee engagement and recruitment and staffing, the sort of elements that drive the day-to-day business at companies, said McIninch.

“As a result they don’t necessarily have time to allot resources to doing an overhaul of their HRIS system or policy and procedure audits or looking at processes to see how they can make them better, they’re just trying to keep their heads above water,” he said.

And some companies have an “if it ain’t broke don’t fix it” attitude, said McIninch.

Fortunately for Lant, this was not the case.

Her company was using an HR system that had been developed in-house years ago. They were using it  with a separate payroll system and Excel spreadsheets to store some data. The HR system wasn’t very user friendly and the company knew it was time to switch, she said.

“It wasn’t difficult at all (to convince the company),” she said. “We knew we had to do it.”


Payroll systems by the numbers

Here are some of the numbers from the PwC study, which surveyed 125 Canadian businesses :

•Canadian businesses that take a do-it-yourself approach to managing their administrative business tasks, like payroll and HR, are underestimating those costs by more than 40 per cent.

•37 per cent of the costs to perform business processing were accounted for by business owners, with the balance hidden within their organization

•Businesses can save up to 43 per cent by using one service provider for payroll and time and attendance.

•Costs such as indirect labour and system maintenance are often overlooked. These hidden costs can represent more than 50 per cent of total cost of ownership.

•Organizations that outsource the management of four functions (payroll, time and attendance, HR data administration and health and benefits) spend, on average, 27 per cent less than those that deliver these functions using a manual approach.

•When all costs associated with the four functions listed above are taken into consideration, large organizations (more than 700 employees) spend on average $722.46 per employee per year and mid-size organizations (50-700 employees) spend $1165.63 per employee per year.

•Companies that outsource payroll, while employing other methods to deliver time and attendance and HR data administration, spend on average 21 per cent more than companies that outsource all three processes to a single vendor.

•All of the 125 participating organizations were Canadian companies or subsidiaries within 18 industry categories.

•The most prevalent industries surveyed were manufacturing (21 per cent), health care and social assistance (10 per cent) and wholesale trade (eight per cent).

Source: PwC study commissioned by ADP Canada

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