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Langdon Ingredients is a 150-year-old food company that offers spices and other food preparation ingredients, services, and niche food products to customers in Australia, New Zealand, and Asia Pacific.

But when a legacy payroll system, and the vendor that supplied it, became a burden to the company, executives at Landgon Ingredients knew it was time to find more than "just a vendor." The Victoria, Australia, food company needed a true outsourcing provider.

"The system we had just wasn't giving us the type of reports we needed to manage our many cost centers," says Amanda Brennan, corporate services manager. "It didn't give us the necessary information to easily fill out our general ledger and demanded that someone in house manage it almost full time."

Langdon, which offers its Asia-Pacific customers spices and niche food products, has plants in Australia and New Zealand. Its payroll process experienced great difficulty incorporating Australian taxation levels including annual leave and termination payments. It could not efficiently create management reports for the company's cost center. Nor was it swift at incorporating recent Australian Federal "WorkChoices" tax legislation.

This incumbent vendor was slow to respond to changing conditions and, when it did, an onslaught of cobbled-together and largely untested application updates was the result. This convoluted process required the payroll manager to retrieve, test, and implement the modifications with little vendor support. "It demanded our almost full-time attention," lamented Brennan. "We needed a system that would allow us to relinquish that responsibility."

"Easy-to-adopt, automated services are making many aspects of HRO 'easier to digest,' especially among mid-sized businesses," according to Gartner principal analyst Robert Hoyle Brown. He adds, "Even though payroll outsourcing is mature, there's room for evolution and growth even with an established buyer clientele."

The company initially considered bringing payroll in house or retaining a third-party hosting supplier, but thought the better of it. Instead, the company approached traditional vendors and outsourcing service providers in 4Q 2005. As Langdon learned more, it drifted toward the outsourcing option of offloading workload and support responsibility to a provider that could also host the entire solution.

In early 2006 Langdon selected Aussiepay's hosted ASP model ePayroll, Employee Self Service, and eWorkflow (payroll maintenance) services to take responsibility for employee payments, support, and management reports. In less than a month, Langdon was up and running.

Taking back fiscal control with an outsourcing partner

"Brennan says Langdon chose both ePayroll and eWorkflow because "all our management and employees can access the Web service anywhere to apply for leave, check pay slips, and expenses." She says one nice feature of eWorkflow is its management of annual leave and automatic updates of time sheets.

The new services also meant that no staff training was required past that necessary for Langdon's people to use the Web interface. "When we implemented the previous vendor's payroll system, it took months to set up and weeks to train everyone," says Brennan. "It was a very pleasant surprise to find ePayroll required none of that."

"The problem with payroll software," according to Dean Morelli, longtime CEO of Aussiepay, "is that it requires the end user to stay up to date with every tax table change, guideline, legislation, and a whole host of other regulations that, quite frankly, only a payroll professional needs to know."

He adds that the recent overhaul of Australia's tax codes does offer more benefit to the labor force in the form of credits and other rewards for long and faithful service. "But workers have to properly manage them. That's a risk you run without either having in-house specialists who are up to speed, or an outsourcing provider that specializes in this area and takes out all the guesswork."

ePayroll now manages over 20,000 individual employees, processing well over AUS$1 billion in annual payroll. But the firm's support is the reason for its success with Brennan. "The ePayroll team is extremely responsive. When needed, our account manager acts on our request or gets the answer we need quickly. There's no waiting around for days."

As to why the engagement feels like a partnership to Brennan, she notes, "While we wanted to retain control of payroll internally, we didn't really want complete responsibility. So it's really nice to be able to phone our service provider and say, 'I want to be able to do this, but I'm not quite sure how,' then get the answer we need quickly."

And the benefits just keep on coming

Brennan notes that Aussiepay facilitates different taxes and regulations for the company's five centers across the Australian mainland and creates individual management reports for each in video dashboard fashion. "It quickly and accurately works out what the deduction is for each state and also the company's total deductible amount. It solves one of our biggest payroll pains," beams Brennan.

"The older system couldn't handle that. It didn't handle payroll reporting either and that let the general ledger down," she said.

Langdon Ingredients has cut previous weekly payroll time of 24 hours in half. It's also reduced administration tasks with self-service facilities, e-mail distribution of pay slips, and automatic group certificate generation in addition to liaising directly with government tax offices.

Another benefit of the service is an eWorkflow feature surrounding employee self-service leave management. Managers can easily see who is on leave and when, and employees can check how much leave they have accrued. It's one example of how both combined services make everyone's lives much easier, save a lot of paperwork, and eliminate general hassle."

In observing why payroll doesn't need to be so hard, Morelli notes that, "Some people still want to maintain control over their payroll process, and who can blame them? After all, people work hard to make their business successful, so it's understandable that they would want to control the payroll themselves."

Lessons from the Outsourcing Journal:

• Changing government tax laws and regulations can play havoc with payroll vendors offerings their solution in an SaaS (Software-as-a-Service) model. Outsourcing providers that utilize dashboard, remote hosted services to their buyers typically don't have that problem.
• There is less "transition time" in converting to an automated/ASP outsourced payroll partnership than with a software vendor, including the time to instruct all employees how to interface with their portion's dashboard database access.
• An engagement with the proper outsourcing provider can not only cut payroll administration time in half but shift more responsibility for managing their accounts into the hands of employees themselves.

Publish Date: September 2008

Copyright © 2008 - Everest Partners, L.P.

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