We all know in West this concept has existed for a while where payroll management is a tedious accounting function and is generally preffered by enterprises to be outsourced. I know lot of firms as small as 10 people outsourcing their payroll function. In india we have recently seen spurt of lot of service providers taking on similar function sitting in india for companies in US. But none of them are targeting companies based in india. Reason lets look at the payroll development function in india.
Lets identify person responsible for payroll in india
Company Size : Scenario 2
Company Size : 50-100 employees
function executed by : HR Executive
Cost : 10000-15000 per month
Now as most of the companies fall under the above 2 categories. Its important lets concentrate on this segment.
Time spent every month on payroll related activities
10 days by accounts executive
- payslip generation
- PF management
- loan management
- Income Tax and other employee tax management
- Attendance and Leave Management
- temporary worker wages assignment
Tasks (other than one defined and carried out in scenario)
- Employee Perfomance Metrics
- New Employee Hiring and responsibilities assignment
- employees training
- secondary conflict resolution
For the first scenario the task can easily be outsourced as if starting of the yeay pay register has been created with account details and balances. Then on monthly basis only notification in increment has be adviced by enterprise to payroll company. Rest all the functions like accessiability of Payslips, PF Details, Loan details can be made online. Removing the burden on accounts department. The whole idea of carrying forward with these all excercise for making any organization more leaner and efficent.
For the scenario 2 tasks. With introduction of new performance and 360 HR System its possible for executing these tasks.But cost factor in implementing such systems is a big detterent.
Lets look at cost if any of the 2 scenario enterprise was to engage Payroll service provider
Cost for doing it inhouse every year = INR 130,000 (software cost,man power cost)
Per employee per year cost = INR 2600
Example if they engage outside service provider
Cost per employee per month charged = INR 100
Cost per year per employee = INR 1200
Savings per year = 2600-1200 = INR 1400 per employee
Saving organization wide = 1400 * 50 = 70,000 INR
As you can see saving starts to get reflected from first year itself.As organization size grows cost saving increases.
But biggest issue with indian organizations is they feel its something internal to organization which cannot be outsourced. Secondly this will make 60% of accounting task in an organization go away.
importantly i will get back with Part-II which talk more on objections/restrictions faced in enterprises.