11th July 2016
I’m still flabbergasted at how generalist outsourcers continue to get awarded contracts and then deliver a terrible service. Serco’s £1million payroll debacle at Lincolnshire County Council is testament to why payroll should only ever be outsourced to payroll specialists.
The £1million of payroll errors reported by Lincolnshire County Council (LCC) highlight one of the major problems of these ‘mega’ contracts signed by organisations, bamboozled by multi million pound ‘savings’.
The black and white of the £71million contract, and the reason Lincolnshire signed, was a projected £14million saving.
I’ve worked in outsourcing for many years, for both small, medium and large companies. My experience of generalist outsourcers is that they package a complete service but often don’t know how to deliver all of it to the desired level. They’re great at the big picture. So bits of a contract invariably fall over.
What the figures don’t reveal, especially for payroll, is the amount of disruptive time getting it wrong actually creates. In one month alone 450 LCC workers were underpaid. That’s 450 calls to HR, to be investigated and resolved. The workers would obviously take time during office hours to make the calls, so there is a knock on effect on productivity. When you start building in the administrative time and hours lost it all adds up. The £14million hard saving is still there, but these soft losses could end up with Lincolnshire making no savings.
Build in other costs such as employee churn, recruitment costs and staff motivation (often affected by a poor payroll experience and poorly worked attempts to recover overpayments from staff) and they could end up paying more, rather than making savings.
On that basis I should never outsource then?
No. There is still a great argument for outsourcing, with hard research on relieving the administrative burden and time and cost savings, but organisations need to ensure that core strategic services such as payroll are not watered down as part of an overall package, and are outsourced to professional dedicated payroll outsourcers rather than outsourcing generalists.