THE EMPLOYER-PAYROLL PROVIDER RELATIONSHIP, FROM DATING TO MARRIAGE AND DIVORCE

NZPPA is neutral, and we do not promote or sell payroll providers’ software. However, every week I am asked if I can recommend a compliant payroll provider as the business has become unhappy with its present payroll system for numerous reasons. My answer is “No”, as I consider all payroll systems are non-compliant until proven otherwise as the liability sits with the business.

So why is there so much dissatisfaction with payroll providers? I believe, and I have raised this before in other articles, that this is because we do not have any legislative consequences to make payroll providers liable for ensuring their software is compliant. The very uneven playing field where a payroll provider can sell a product, impacting one of the largest business costs (labour), and which also deducts PAYE and other government-required payments (major sources of government revenue) does not have the same level of scrutiny or consequence that a business has if they got it wrong.?

The scary thing is anyone can create a payroll system or provide a payroll service in New Zealand (they don’t even have to be a company or seek and get approval from any government agency – except if they want to be a payroll intermediary). As I have stated in other articles, this is why I consider we have the Wild West regarding what payroll providers can do and get away with, and this really needs to stop. I doubt this will happen as the present government has shown an unwillingness to listen unless it is to their own voice.

So back to the topic of this article. Firstly, I need to acknowledge that there are some wonderful payroll providers that, as a business and a payroll practitioner, are a joy to have as a tool in processing pay and working and interacting with. You are lucky if you have that type of payroll system and relationship. Like all good long-term relationships, keep working on it and do not take anything for granted. However, do make them accountable for providing a base payroll system that allows payroll to be compliant.?

This post is written from the business (payroll) perspective. Soon, I will write from a payroll provider perspective to highlight some of the things that providers face from their clients.

I have been in payroll for many years (a dinosaur but not yet a fossil) and have worked for over half that time as a consultant, so I have had the opportunity to see why employer and payroll provider relationships unravel. To explain this, I thought I would express the business (employer)-payroll provider relationship in the following three phases:

• All shiny and new (Dating)
• Niggles (Marriage)
• Can’t stand the sight of each other (Divorce)

All shiny and new (Dating)

Payroll can be seen as boring (by non-payroll) and not as colourful as other parts of a business, but it is a business-critical activity. For a payroll practitioner, a payroll system that does what is needed and is understood and trusted is a miracle to behold, and they want to hold on to it as much as possible. BUT here comes “the all shiny and new” where something else is seen (catches the eye of management or HR), and payroll is forced to move on from a relationship that worked to the great unknown (dating). Reasons to move include the following:

• An employee app on their phone where they can access all their payroll information. It does not matter to management or HR that all the information is wrong or that the payroll is non-compliant as long as employees can access it on their phones!
• It’s the latest management or HR fad (not sure if that is the correct term to use, sorry, as I was not cool when cool was cool). Management or HR talks to management or HR, and this is by far the best payroll in their view, but where is payroll in all this? (They are crying in the background that they are moving from a payroll that works and is compliant all on the whim of management and HR).
• All the calculations are fully automated with more time for payroll. But payroll then finds there is no way to check or confirm what the automated calculations are actually doing, and they are unable to explain to internal or external parties what the payroll system is doing to ensure legislative requirements.
• Dating is a time when mistakes can be seen as just learning about each other and are not viewed as serious. But when related to payroll, this should be seen as a major red light. For example, having been sold on the system is fully automated to then find the new provider includes manual workarounds as part of payroll processing with the response that it is on the development list. More work needs to be done to ensure this is not a surprise during dating (it should be known well before and assessed regarding its impact on payroll, which may mean the marriage never happens). What the provider says should be fact, not fiction. So, everything they stated the payroll could do, the business should follow it up with “show me” to prove it can actually do it.
• Dating can also test the boundaries of both payroll and payroll provider (who does what, what can be asked for, what can I expect when a request is made and are there additional costs involved). For payroll, this is about timeframes, urgency and the wider business needs. This is when the business finds that its needs are not met, only the needs of the payroll provider.

So, all shiny and new is dangerous for payroll. Never be the first off the block with a new payroll system. Payroll needs certainty based on time-proven development and application, not keeping up with the Joneses and their latest toy!

Niggles (Marriage)

It starts! It’s the little things that count, and the annoyance from these can begin to undermine the relationship bit by bit until that is the only thing you think about.

In payroll, these are the things that impact the payroll practitioner and payroll in terms of time (manual workarounds, bugs, no transparency to see what the payroll system is actually doing, payroll process steps that don’t relate to how payroll is processed, payroll making legislative decisions that are up to the business and not the payroll provider and of course lots of rework). So, explaining just a few of these, they become the niggles in the relationship, such as:

• Why does the payroll practitioner have to do manual workarounds as part of payroll processing? Is that not what a payroll system is designed to do and what was paid for? The more payroll activities are done outside of the payroll system, the more risk to payroll of non-compliance.
• Why can’t payroll calculations and what is included in them be seen fully? This includes what calculation is being used, what period and for what payments, and how that relates to legislative requirements. It is more than a risk. It is a legislative requirement that a payroll practitioner can explain the “method of calculation” when asked. This also erodes trust and confidence in the payroll system because it’s not transparent.
• It is quite typical to find in a payroll system that there are fields with quirks, error codes or even a known bug. They get raised with the provider, and the standard response would be it is on their list to be resolved. What undermines that is when nothing has been done 12 to 18 months later, and you start to feel that every time the issue is again raised, they are just paying lip service to you.

The niggles become very important for payroll and wear the relationship down over time. It's one area payroll providers are poor at, and more focus would keep the relationship strong. In payroll provider terms, it would be more cost-effective to keep a client than lose one based on not resolving the niggles (so take the hint).

Can’t stand the sight of each other (Divorce)

So, it’s getting bad. The payroll provider is not talking, and when they do, nothing is resolved. Trust is gone, and you’re starting to look at the future and if this relationship is for you. This can be one of the messiest areas for payroll because you’re exiting one payroll provider and their system and moving to another.?

All of this impacts a business-critical activity, and here are a few examples:

• Issues are found in payroll with calculations. When raised with the current payroll provider, instead of providing support and assistance, the payroll provider retreats backwards into the blame game, admitting no liability. If there are issues, they say it was based on the business’s (payroll’s) instructions on how the payroll system has been set up. I have raised this many times in other articles, but this is the power imbalance payroll providers have over the business.
• Payroll is a very profitable business model and, in some ways, can be seen as a cash cow. This is from the purchase of the system and the annual subscription fees (updates, support, helpdesk, etc.). This can also be seen by changes in ownership with payroll systems moving from one organisation to another and with a current trend that sees financial equity companies owning a number of them. For payroll, this is a real risk, especially when another company purchases your payroll system because it could mean the product won’t be supported in the future or there is a clean out of all the people that know your system. Overnight, they are gone, and a payroll risk has been created.
• It is also very common that as soon as you inform your present payroll provider that you plan to leave for a new provider, they don’t want to know you. So, have your exit plan fully worked out and ready to action (not still on the drawing board). Only make a move from your present provider when you are 100% certain based on proof and evidence the new system will meet the needs of the business and ensure compliance. You do not want to create a new NOVOPAY payroll disaster!

In conclusion, I hope you never get to the point of divorce in your relationship with your payroll provider. There needs to be work done on both sides, like any relationship. For the business (payroll), it is essential effort goes into ensuring your payroll provider is accountable and delivers on what was promised. Watch out for signs that the relationship is not working and not achieving payroll outcomes. That should trigger the business (payroll) to act proactively (when more options are available) rather than reactively when the risk to payroll is just one inferno away from the disaster that payroll cannot afford to have happen.

NZPPA supporting NZ payroll since 2007!