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Understanding distributed payroll complexity

Upload Date: December 7, 2017

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Dr Greg Timbrell is a Senior Lecturer at the Queensland University of Technology, with a special interest in Information Systems. He sat down with the Tanda team to talk about distributed payroll systems.

Transcript

The sorts of area that I look at are many and varied. I did an accounting degree a long time ago and later built on an IT career with a PHD in Financial Systems. I have about 20-25 years in Financial Systems before, looking at things like payroll.

Franchisers are sort of an example of a distributed payroll. So you’ve got lots and lots of different smaller organisations except they’re all need to be paid separately. And a lot of the times, franchisers are setting up their own payrolls and trying to manage this. Because they’ve got a lot of younger workers particularly in the fast food industry and areas like this.

When you have lots and lots of younger workers and as each age provides a different pay point so they’ve got to be paid separately every time they have a birthday and if you got a fast food outlet and you’ve got let’s say about 40 students, or high school students, or university students, working all these times, then it could be quite complex. So these little sort of franchisers like Cold Rock or McDonald’s or whatever they are, they can be quite difficult to both roster, and they’re certainly difficult to roster, and also to pay, that’s a result of that. But when you’ve got larger franchisers, then you’ve got, you know like real estate agencies etc etc who are earning with more professional people, who were earning money on commissions etc etc then you’ve got another level of complexity coming through into it.

Until you get up to other distributed systems/environments, let’s take construction industry. With the construction industry you’ve got a big building on 1 Williams Street and they’ve got many many sub-contractors, companies sub-contracting to each of those areas. They have myriads of project managers. So a project manager might be responsible for floors, 3 to 9. And there, you’ve got a painter, they’re a particular subcontractor. All those particular floors, as they build walls, the subcontractors go up and further on. So you’ve got another. It’s like a franchise but it’s another distributed payroll situation.

So the CFMEU or other unions have agreements with the subcontractors and they say “Ok. If you want to work on this particular site, then you must have this particular Enterprise Bargaining Agreement put in place”. That means that, there are hundreds of subcontractors involved in these buildings. So to ensure that they’re getting paid correctly, and what happens is that the general contractor, the main builder, will send a stat dec to each of the subcontractors for them to sign and say, “We are paying our subcontractors in accordance with the Enterprise Agreement, and in accordance with the terms and condition that you set out in this, and they have to do that on a regular basis. So, it’s really really important that these subcontractors are paying their people correctly. Sometimes they are, sometimes they’re not. Sometimes it’s deliberate, sometimes it’s not deliberate.

There’s a couple of industries associations in Australia and that payroll association I think, and there’s a benchmarking report that they did want for 2015, and they said for all companies with employees over 200 dollars, then their average payment , or per payslip cost was around 11 dollars. So getting it down to five dollars, I haven’t seen those figures reported but that would be a pretty good rate. And it takes in account of all of those technical and human and training cost and payslip printing etc etc. But in terms of you know how many of those companies are outsourcing their payroll so in the smaller end, it’s around 20 percent but for companies with 10,000 and over it’s up to a third.

So that means that the big companies have figured it out because they’ve got the resources to do their due diligence and understand that it’s better for them to outsource their payroll. It’s not part of the company objective but are getting better services and better reporting and analytics and innovation in a way that they manage these internal processes and digitise their operations.

So essentially it’s probably that the small and medium enterprise areas need to have a look at and see that these larger enterprises are going this way and this figure is increasing year in year out. To the point where they might start to consider, perhaps we should to look at that as well. From the employer’s point of view, it’s a good idea from a business perspective and because it meets all of those, if you do the due diligence sometimes it might be cheaper for them to keep it in-house, or they want to control it or whatever reason, but you know, if they do their figures and their due diligence and they look at the types of what they are gonna get from an outsourced services versus an insource service. Then, they need to take all of these aspects into account.