‘Payroll services’ is actually a misnomer to an extent. Payroll services, contrary to popular belief, is not just having a third party print cheques for you or set up a payroll system, it’s about having pre-identified workers put on someone else’s payroll - as employees. A more accurate name would be “employment services,” as the payrollee is really an employee of the outsourced payroll services provider, not the company where they are working.
Why would a company want their employees to be payrolled by another company?In many industries, there are groups of workers who have worked for a company before, have specific skill sets the company already knows about, or are groups like interns or retirees. The bottom line is, these are people known to the company or pre-identified, who can perform work, but for certain reasons, are not going to be hired as permanent workers.
So, why would a company use payrolled workers?
The permanent employees who are hired (or need to be hired) should be a priority for existing HR resources, not to mention those already working for the company.
Taking a part of HR’s focus away for freelance workers or short-term workers is not the most effective use of their time. There is no separate process that has to be developed and no confusion with their role or employment status. Payroll services can help alleviate the drain.
It can be exceedingly frustrating for managers to know who they want then have to wait for them to go through a lengthy onboarding process. Payrolled employees are certainly still screened and managers can’t hire whomever they want whenever in this situation, but having a payroll management partner makes the process simple and timely from a manager’s perspective.
If you calculate the cost to hire a new employee, pay for benefits, administer those benefits and the processing involved over the initial weeks of an employee’s employment, the cost effectiveness of payrolling becomes evident quite quickly. The hourly rate provided by the agency is the only cost involved, and when the assignment ends, there are no trailing benefits costs like unemployment. This makes it much more simple to budget for a payrolled employee rather than sort out headcount for a project.
Payroll services have been around for a long time. Most HR Services agencies provide it, and for many companies, it makes sense to have it rolled into their existing contingent labor programs. Even outside of larger programs, payrolling can greatly enhance HR capacity and can lead to a positive impact on a company’s bottom line.
HR Services can also be scaled to accommodate a company’s needs - whether it’s simple payroll and benefits administration or large scale employee leasing, there are flexible HR options across the board. To learn more, contact the TPD team to find out which solutions make sense for your organization.