Let's talk about Payroll: Are You Paying Someone to Do Your Job?
by Reimund Schlosser
It's a familiar scene in countless finance and HR departments at the end of every month: the frantic rush to close payroll. Spreadsheets are flying, reports are being manually checked, and last-minute changes are causing headaches. Many of these companies have what they think is a solution: an external payroll provider. They signed a contract believing they were offloading this complex, mission-critical task.
The reality? They're still drowning in payroll administration.
After years of working with various companies, I've seen a pattern that is as inefficient as it is expensive. It's the "half-outsourced" model, and I believe it's one of the biggest wastes of resources in business operations today. Companies are stuck in a costly middle ground, and it's time we called it out.
The All-or-Nothing Principle of Payroll
When it comes to payroll administration, there are two models that make sense:
- Fully In-House: You have a dedicated team with the expertise and software to manage everything from data entry to final payment and compliance. You have complete control, visibility, and accountability. It's a significant responsibility, but it's clear who owns it.
- Truly Outsourced: You partner with a provider who takes on the entire administrative burden. They integrate with your systems, manage the data flow, handle calculations, ensure compliance, and resolve queries. Your team's role becomes one of oversight, not execution.
The problem is that most companies are operating in a third category: the hybrid mess. They pay a premium for an external provider but still dedicate significant internal resources to preparing data, running reports from their HRIS, manually adjusting files, and sending countless emails back and forth.
This is the worst of both worlds. You're paying for a service you're not fully receiving, and your team is still bogged down by the very administrative tasks you sought to eliminate. You haven't outsourced payroll; you've just created a more complicated, expensive, and error-prone workflow.
The Broken Promise of Global Payroll and "Seamless" Integration
This problem becomes exponentially worse for multinational companies. Global payroll providers appear with a slick sales pitch, promising to solve the "everlasting problem" of managing payroll across different countries, currencies, and regulations. They showcase fancy dashboards and talk a big game about their unified platform.
Too often, this is an illusion.
Many of these providers are simply aggregators, subcontracting to local providers in each country. You, the client, end up as the project manager, stuck in the middle, trying to synchronise data between your central HRIS and a dozen different payroll systems you can't even see.
And let's talk about "integration." The ultimate test of a true payroll partnership is the technology. In today's world, there is no excuse for manual data handoffs.
Here is my litmus test for any company evaluating their provider. And let me be crystal clear: what I'm about to describe isn't the "gold standard" or a great solution. It is the absolute, rock-bottom minimum you should accept. Anything worse than this is a provider taking advantage of you.
The absolute minimum acceptable process is this: your team runs a single, automated integration report from your HRIS, and it is sent directly to the provider without any further manual intervention.
That’s it. That’s the baseline.
If your process involves anything more, you are being ripped off. You should not have to:
- Manually add comments to a file to explain a new hire's prorated salary.
- Send a separate spreadsheet detailing bonus payments or commissions.
- Manually convert or reformat data because their system can't read your report.
- Answer basic questions that the data in your HRIS already answers.
If your team is doing any of this, you don't have a real integration. You have a glorified email service where you are performing the data validation and prep work that you are paying your provider to do.
It's Time to Challenge Your Provider
Companies have become too accepting of this broken model. We've been conditioned to believe that payroll is just "supposed to be" complicated and manual. It's not. The technology exists to automate it.
You are not just paying for a calculation engine; you are paying for a service. It's time to hold your provider accountable for the service they promised.
Start asking tough questions:
- "Walk me through the exact, step-by-step process my team needs to follow each pay cycle. Where are the manual touchpoints?"
- "Why do we need to send explanatory files? Shouldn't your system be able to handle these scenarios based on the data from our HRIS?"
- "What is your roadmap for improving the integration to eliminate these manual steps?"
- "Can you demonstrate a true, end-to-end automated data transfer from our HRIS to your platform?"
If their answers are full of excuses about "system limitations" or "unique client needs," it's a red flag. They are simply not investing in the technology required to deliver a modern payroll service.
The Path Forward
Stop settling for the half-outsourced trap. The path forward requires a decisive choice:
- Commit to In-House: If you want total control and your payroll isn't overly complex, invest in a modern, user-friendly payroll software and build the expertise internally.
- Demand True Outsourcing: If you want to offload the work, find a provider that is a genuine technology partner. Scrutinise their integration capabilities and their service-level agreements (SLAs). Make it clear that you expect them to do the administrative work, not just the final math.
You outsourced payroll to focus on your people and your strategy, not to become a data clerk for a vendor. It's time to demand the service you're paying for.
Does this sound familiar? Have questions or want to share your own payroll nightmares? I'd love to hear from you. Get in touch via the contact form on my website or send me an email directly at hey@reimundschlosser.com.