By: Jason Barnes

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December 12th, 2016

Top 10 Reasons for Changing Payroll Providers

HR Best Practices | HR Technology

Considering a new payroll provider? Here are our top 10 reasons why employers are biting the bullet and shifting payroll companies.

1. Service is terrible

If you are going to wait on hold or take a ticket when you call your payroll company service line, you at least expect to get competent answers to your questions. Unfortunately, the biggest complaint that people have regarding their payroll provider is poor customer service. Excessive time witing on hold, inconsistent service reps, and poor payroll competency among reps are some of the most common complaints.

2. Lacks Integrations

Payroll might fit well as a siloed business process in small businesses (under 20 people), but siloing payroll can be a nightmare for mid-market employers. More complex businesses require a payroll solution that has full time and attendance and HRIS integrations with customizable reporting.

3. Wonky Reporting

Payroll companies may boast of integrations, but often encounter eroded functionality when it comes to generating reports. An integrated solution is often a piecemealed or “quilted” solution, meaning it was sewn together from separately developed systems. While these systems maintain functionality for routine processes, they often reveal their shortcomings when it comes to delivering reports that cross-examine data from different systems. When this happens, users often have to pay extra for custom reports.

4. Overly manual processing

If you are still using paper timesheets, studies have shown that your payroll cost can be inflated by nearly 7%. Ouch! Contributing factors are rounded-numbers, dishonesty or buddy-punching (75% of employers say they have had some issue with buddy-punching), and errors transposing timesheets. For one employer of roughly 200 employees, manual data transfer was costing payroll 5 hours each week (12.5% of a single employee).

5. Overpaying

The longer you have been with a payroll provider, the more time they have been able to slowly increase your rates. Perhaps this is jaded, but it’s not without evidence. One case showed an employer with a longstanding relationship with their payroll provider was overpaying by nearly 50% of the current market competitors.

6. Excessive Processing Cost

If you want an honest look on the efficiency of your current payroll process, scribble it out on a quick flow chart. Identify all the players involved, and assign time values to each step. If you’re managing a manual payroll process, you’ve likely got a high payroll costs. A 2012 study revealed that the best performing companies maintained a payroll cost at $67 per employee, where the worst performers shouldered a whopping payroll cost at $398 per employee—a nearly 600% difference.

7. Lack of Mobile Technology

Employee self-service platforms are the new expectation in a mobile world. Both employees and HR alike would prefer having quick mobile access to items such as pay information, work schedules, and time-off requests. If there is a mobile app for it, there’s a much higher likelihood of employee utilization.

8. Prone to Human Error

Walk the dog through the typical payroll process, and there are a ton of opportunities to human error. Even with the sharpest and most neurotic processors, human error accounts for the majority of pay calculation errors. A recent study showed that nearly 1/3 of businesses under 1000 employees still leverage paper timesheets as part of their payroll process. Yikes!

9. Overly Paper-Intensive

Studies show that it can cost up to 31 times the original cost to send information via paper. Be green. Why pay for someone else to mail out your W2s when your employees can download them online?

10. Poor employee self-service

At the heart of reducing administrative burdens on SMBs is employee self-service. When employees can update data, like addresses and dependent information, access their own pay statements, and self-enroll in health benefits, HR realizes a huge return on time previously spent managing paper and making manual data entries.  

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Before you leave...

Mistakes are expensive, especially when building benefit plans.

We've outlined the 3 most common mistakes employers make when offering benefits in a quick ebook. Get your copy free when you subscribe to our blog.