Case Study: International Baccalaureate Organisation
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The public sector could save a staggering £20bn if it took a more "joined-up approach to human resources and back office functions", according to the 2004 government-commissioned report Releasing resources for the front line: independent review of public sector efficiency.
In light of this report authored by Sir Peter Gershon, it’s not surprising all manner of organisations are considering how to improve the efficiency of their own HR and payroll departments. If you are one of those thinking of combining them, the message seems to be clear: do it, but don’t expect the shift to be without its challenges.
There has been a trend towards integration for several years. Industry experts point towards technological developments, particularly advances in software programmes. Yvette Lamidey, an adviser to the Institute for Payroll and Pensions Management, explains: "These advances have created the opportunity for payroll and HR to be integrated and integrated seamlessly."
This can lead to potentially huge bottom line benefits. Savings are possible because data entry is minimised. Dramatically.
Most integrated systems usually support self-service arrangements. Therefore some of the work that payroll and HR departments would normally do can be handed out to employees. They can directly key in their own personal information and revise it when required, whether it be to change their address, next of kin or bank account details.
Typically, the work that remains only has to be entered once and what is updated on one system is automatically updated on another. HR can, for example, process the details of a new employee or refresh those of an existing staff member – everything from increasing their pay to reducing their hours – and this will automatically be seen in payroll.
In addition, because there are fewer individuals involved in the admin process, there are fewer mistakes. So the time spent on checking for errors and making corrections is reduced.
This approach does not, in any way, compromise the sort of benefits offering an organisation can provide. But it certainly does cut back on the energy, and thus the wages spent on data entry across both payroll and HR departments.The most that experts will reveal is that the man-hours dedicated to data entry on staff could be reduced by at least a third.
Quantifying the exact return on investing in a programme to do all this can be tricky. Employers are typically told it depends on variable factors like the software programme chosen and whether they install and run it themselves or outsource. If the latter route is taken, employers need to consider how much they want the third party to do. Some will offer to take on a full range of responsibilities such as manage benefits, run exit interviews and monitor absence.
Efficiency gains are not the only advantage of integrating payroll and HR systems. Another benefit, which may appear less spectacular on the balance sheet but is still useful, is that HR can deliver a better service. By having all the records at its finger tips it can offer more comprehensive information and advice to employees, effectively serving as a one-stop shop for all enquiries.
So what options are available to bring about integration. "There’s an awful lot of them," says Lamidey. Most of the big software companies and benefits consultancies have produced integration programmes. They all vary. Some are quite basic. Others sophisticated. Some are designed especially for small firms. Others for blue chips. Finally, some can be set up and run in-house, while others really do require outside assistance. "Ultimately, you pay your money and take your choice," adds Lamidey.
Clearly, identifying what you need and ensuring that what you buy meets those needs is a challenge. It is the first of three associated with integrating payroll and HR. The second could be said to relate to politics and the third to processes. Tim Tobin, commercial director of Snowdrop, a human resources outsourcing provider, has come across the last two.
Where the politics are concerned, he believes employers can expect a showdown between the heads of payroll and HR. "People can be very territorial. They will want to protect their jurisdiction. They will not easily surrender their power to another. If there is the possibility of job losses people can become even more defensive. It doesn’t have to be this way. But often it is."
As for processes, he believes an integrated system creates the impetus for greater security. "If everything is available to everyone and what happens in payroll automatically carries through to HR, and vice versa, you do come up against the question of how do you protect against abuses. That’s not to say there will be abuses, but it is only fair to employees to limit against the possibility."
Of course, there are solutions. An audit of requirements will help determine which programme to go with. A series of honest, open and tactful conversations will help bring two opposing factions together. And a number of security measures will help maintain the integrity of an integrated system.
Integrating payroll and HR does pose challenges. But while there is a view that substantial bottom line benefits can be realised, employers will continue to face and overcome those challenges
Case Study: The International Baccalaureate Organisation
The International Baccalaureate Organization, which offers a university-entry qualification in 116 countries, has created a single repository of employee data that helps streamline the organisation.
The integration of payroll and HR first took place at the IBO’s office in Cardiff in 2002. It was then rolled out to its other offices in New York and Geneva. This was done with the help of consultants Arinso, using a software package from Oracle.
Carol James, IBO’s human resources director, says: "Each office held data on its own staff [500 in total], but we did not have consolidated, centralised records. Generating personnel reports and accessing information was time consuming.
"Following organisational growth of up to 18% per annum, we finally decided to replace our manual, paper-based HR processes with a web-enabled solution."
IBO now hold all staff data in a consistent format and in a database which all offices can tap in to. As a result, admin costs have been cut and staff productivity has been maximised, with managers more able to focus on strategic activities. James adds that the organisation is also planning self-service functionality in order to further maximise efficiency gains.