HR and Payroll outsourcing – step by step

HR and payroll outsourcing refers to the transfer of the so-called hard HR processes to an external company. The aim of the service is to streamline operations in this area and reduce operating costs. How to prepare for HR and payroll outsourcing and what should be taken into account?

HR and payroll outsourcing - where to start?

Outsourcing (outside-resource-using) involves entrusting business process management to a specialized external company. For HR and payroll outsourcing, these are broadly understood operations related to the current HR and payroll service of employees of a given entity, e.g.:

• Payroll calculation
• Drafting of HR and payroll documentation for employees (e.g. pay slips, PIT returns and pay certificates)
• Drafting of declarations for the Tax Office, ZUS and PFRON
• Keeping personal records of employees
• Administration of the PPK
• Working time settlement

The most important benefits for entrepreneurs using HR and payroll outsourcing are access to the knowledge, know-how and resources of the service provider, ensuring data security and continuity of processes, optimization of HR and payroll service costs and the possibility to use the latest technologies supporting process optimization.

The decision to outsource HR and payroll should be preceded by:

• an in-depth financial analysis of the costs of internal HR and payroll departments, whose tasks the company plans to outsource,
• preparing a list of actions and operations that can potentially be outsourced,
• identification of benefits and threats resulting from HR and payroll outsourcing, i.e. SWOT analysis,
• audit of current HR and payroll structures in the company.

The key step is to choose a service provider who will provide not only a range of services tailored to the needs of the company, but also high quality and adequate level of process security.

Selection of a supplier and signing a contract

The selection of an outsourcing company should be the result of a multidimensional analysis of potential partners. Outsourcing of human resources and payroll is most often of a long-term nature, therefore the wrong decision may prove to be expensive for the company, not only in financial terms.

Outsourcing of human resources and payroll - what to consider when choosing a supplier?

• High quality of provided services (it is easy to verify the diligence of the offer at the stage RFP),
• Great experience in the industry and good references (it is also worth checking other sources of information about the company than the website),
• Efficient communication - fast and convenient contact with the outsourcer, regular contact persons and high standard of customer service,
• Appropriate human resources and technological potential of an external company,
• Certificates and awards,
• Scope of services - does the provider offer comprehensive support in the area of human resources and payroll, will there be an opportunity to develop cooperation in case of new requirements in this area?

After sending and analysing the requests for proposals and drawing up the so-called short list of suppliers, the moment comes when the outsourcing partner is finally selected and a long-term contract for the provision of HR and payroll services is signed with him.

Signing a contract - what should be specially taken into account?

Signing a contract with a supplier is a key moment in the whole process. The success of cooperation and enforcement of mutual arrangements depends on the provisions of the document.

These elements should be included in a human resources and payroll outsourcing contract:

• Scope of services provided - it is important to define as precisely as possible the package of services provided under the contract,
• Scope of liability of the parties - it is extremely important to determine the liability of the outsourcer, as in the case of any official controls, the ordering party is liable for irregularities,
• Confidentiality of data and information and security of processing - it is important to comply with current regulations, clearly defined rules and monitor the supplier in this respect,
• Additional services, i.e. services subject to an additional charge; they can significantly increase costs, so it is crucial to precisely define the subject matter of the contract and draw up a list of accompanying services,
• The place of supply of services and the precise date of commencement of cooperation,
• Schedule for delivery of services provided,
• The amount of the outsourcer's remuneration and a provision on contractual penalties,
• The duration of the contract and costs and the date of its termination, i.e. the notice period and the cost of exit from the project,
• A clause prohibiting the employment of employees of the other party,
• Clause on the resolution of possible disputes and conflicts,
• Principles of annexation of the agreement - important in case of necessity to introduce changes and renegotiate its terms.

Signing a contract with an outsourcer requires the identification and clarification of many issues, therefore it is usually preceded by negotiations involving persons responsible for individual processes, and often also the representatives of the legal department.

Cooperation with the supplier - win-win situation and further development

Good communication and mutual cooperation are the basis for the success of the outsourcing model. There is no difference in the case of HR and payroll outsourcing. This is where mutual trust and knowledge sharing is particularly important. In building lasting relations, precise definition of requirements and high flexibility of both entities play an important role.

However, high quality of services and effective cooperation depend above all on constant monitoring of processes and adapting to the customer's needs, as well as quick reaction to both existing and upcoming changes. The key is also to develop an efficient communication system. This will facilitate the development of an optimal cooperation model and the achievement of the assumed business objectives by both parties to the agreement.

Learn more about our services: Payroll outsourcing, Personnel outsourcing