Free Essay

Outsourcing Payroll and Tax Services

In: Business and Management

Submitted By jss1
Words 1830
Pages 8
Pro Staffing Research for Outsourcing Payroll and Tax Services

03/15/2014

Table of Contents Project Scope 4 Requirements 4 Procurement Advantages 5 Savings Analysis 5 Procurement Disadvantages 6 Risks 6 Scoring Matrix for Procurement Proposals 8 Contractual Analysis 12 Considerations 12 Proposal Information 12 Legal Compliance Subjects 12 Proposal Questionnaire 12 Instructions to Proposers 13

Project Scope

Pro Staffing research of outsourcing payroll and tax responsibilities versus in-house or new software package to evaluate which process will better meet the needs of corporation in both cost and quality of services.
The analysis shows the cost savings for the procurement average 31% less than in-house management either by current processes or new software. Risk/ liability for Federal Tax withholding and reports is moved to the vendor.
Requirements
The solution needs to provide minimal 1. Direct deposit or mail for employees and contractual workers regular payroll, bonus pay, and expense checks 2. Handle workers compensation payment 3. Payroll withholding 4. Payroll tax management 5. Knowledge of international payments to employees or contractors 6. Online payroll management by Pro Staffing 7. Web access with required registration access for previous W2 and payroll check information for up to five years 8. Documents should be printable or delivery by mail 9. Strict documented protocol for access to personnel information either by web or mail 10. Provide a help support line 11. IRS form 941 filing (Quarterly Federal Tax Return) Testing plan 12. Transition plan

Procurement Advantages

* Outsourcing saves you time * Taxes and other deductions can be calculated accurately * Professional services include best practices regarding compliance with payroll laws * Cheaper than the cost of an in-house payroll specialist * Direct deposit of paychecks * Time-clock features to calculate the hours each employee worked during each pay period * Refocus current employees on other tasks and projects * Access to experts in taxes and other employee payroll deductions changes * Ensure that taxes will be paid on time

Savings Analysis

The study is based on data collected from large organizations (each respondent having 1,000 or more employees) utilizing ADP’s HR BPO services. 29% were “all-service” ADP clients, meaning they outsourced payroll, time and attendance, workforce administration, and health and welfare benefits administration.

* 67% utilized ADP time and attendance services; * 42% used an ADP-hosted system as their HR system of record; and * 38% outsourced their benefits administration to ADP

The size of the client companies that participated in the study are as follows: * 10,000+ employees (25%) * 5,000 to 9,999 employees (37%) * 2,500 to 4,999 employees (17%) * 1,000 to 2,499 employees (21%).

Data from businesses perform payroll internally, “nearly one in four report spending more than six hours per month on payroll. That's at least 72 hours per year—nearly two full workweeks. If we use 2012 data from the Bureau of Labor Statistics to assume the hourly cost for internal payroll staff to be $36, these 72 hours translate into $2,592 per year.” (Jones, Marshall, 2013).
Procurement Disadvantages

* Less control including but not limited to late employee disbursements * Security threats (see risks below for more detail) * Some data may be less accessible

Risks

Risk of government reporting and employee withholding taxes are move to the vendor.

Major security risk by having another company having access to information such as employee social security numbers and bank account numbers associated with them as well as those associated with the business. It is very important to investigate how this information is protected.

The company may consider other business areas for procurement in the future. There are risks to outsourcing which can include but not limited to lower levels of service, inferior quality outputs loss of control and adversely affecting deadlines, cultural misalignment and exposure to other economic and environmental factors. (Carlos Sanchez, 2010).

Starting outsourcing with an American company for payroll and tax services which has been one of oldest and most outsourced functions by companies will allow an introduce to create protocols and gain experience in what is becoming a popular alternative to in-house responsibilities. Companies have taken over an estimated 40% or more of companies both large and small in managing company’s payroll and tax services. (Marshall, Jones, 2013).

Scoring Matrix for Procurement Proposals

Criteria | Criteria Weight Percentage | Standards | Standard Weight Percentage | Measurement | Basic Requirements | | Mandatory reasons for exclusion | N/A | Pass/Fail | | | Discretionary reasons for exclusion | N/A | Pass/Fail | | | Insurance | N/A | Pass/Fail | Quality and Capability with existing systems | 40% | Delivery of Corporate Objectives | 5% | Quality | | | Completeness, robustness and systems interfacing approach | 5% | Quality | | | Compatibility with existing environment | 10% | Quality | | | Overall assessment | 10% | Quality | | | Assessment of data protection and security | 10% | Quality | Delivery | 20% | Quality, thoroughness and timeliness of implantation plan | 5% | Quality | | | Quality and comprehensiveness of acceptance schedule | 5% | Quality | | | Quality and comprehensiveness of training schedule | 5% | Quality | | | Assessment of short and long term risked associated with delivery | 5% | Quality | Lifetime Costs | | Cost associated with ownership including enhancements, upgrades and support | 40% | Price | Total | 100% | | 100% | |

Scoring Definitions | Pass/Fail | If the RFP fails to qualify corporate criteria the bid is eliminated. | Quality | The scoring will be in relevance to the specified criteria evaluation using a 0 to 5 scheme. | Price | The scoring will be based on price with the lowest bid be given 40% the rest will be in direct proportion of the price range of bids being evaluated. |

| The 0 - 5 Scoring Scheme | 0 | Either no response was given or it was not relevant | 1 | The response significantly fails to meet the standard requirement | 2 | The response fails to meet the standard requirement in a number of identifiable | 3 | The response meets the standard requirement but has some irregularities | 4 | The response meets the standard requirement but is lacking in some minor respects | 5 | The response meets the requirements and has a high probability to deliver the desired output and outcome. |

Contractual Analysis
Considerations
* Fixed monthly cost * Cost per employee * Cost per transaction * Length of time period of the contract * Each party's renewal rights (Halvey) * What type of notice is required for renewal (Halvey)

Proposal Information
Bidders need to address the questions below along with any additional information that may be relevant and include a cover in submitting a Proposal.
Automatic Data Processing (ADP), Paychex, and Ceridian are being considered for procurement companies.

Legal Compliance Subjects 1. List which countries the vendor bidder has worked with 2. Identify governmental requirements for transactions and due dates 3. Identify licenses or legal documents require and who will be responsible for the costs 4. Identify how varying currency are handled 5. Auditing requirements 6. Proposal Questionnaire

1. Cover letter of introduction.
2. Firm/professional history including how long you have been in business
3. Professional qualifications and certifications 4. Strong customer portfolio 5. Financially stability
6. Technical Proposal in detail including the Proposer’s proposed method of accomplishing tasks
7. Cost proposal
8. Detail documentation of how and where Pro Staff data is held and the type of encryption used
9. Customer portfolio with client references with similar projects
10. Exceptions to Terms and Condition
11. Additional comments or final summary
12. Signed Proposal Certification
13. Pilot period

Instructions to Proposers

Proposals shall deliver a copy in Word and addressed and delivered electronically to:

Pro Staffing
Attn:
123 Anywhere Drive
Somewhere, US 76242

1. Proposals received after the time for closing shall be returned to the Proposer unopened.

2. Proposals shall be submitted in one hard copy produced using Word and one electronic copy clearly labeled with the vendors name to

3. Proposer may withdraw Proposals at any time during this process.

4. Pro Staffing will reserve the right to conduct discussions including negotiations with vendors. Pro Staffing shall not disclose any information including discussions from other vendors with other bidders.

5. Proposers submitting Proposals may be requested to give an oral presentation by the selection committee.

6. Proposals shall need to response to all items in the questionnaire and signed or they may be rejected.

7. Pro Staffing reserves the right to reject any or all Proposals or any part thereof, or to accept any Proposal, and to waive or decline to waive irregularities in any Proposal. Pro Staffing also reserves the right to hold all Proposals for a period of ninety (90) days after the opening date.

8. The successful Proposer shall be expected to enter into a standard form of contract approved by both parties. 9. Prospective Proposers may submit requests for any changes to Pro Staffing terms and conditions. 10. However, if Pro Staffing chooses not to accept the alternate terms and conditions, GII may reject such Proposals as non-responsive.

11. Confidential information may include, but is not limited to, trade secrets, business plans, copyrights, logos, trademarks, financial and operational information and membership lists. Both parties expressly agree not to use or disclose such information in any manner or for any purpose at any time during or after the effective term of this Agreement, except as required by law or as required during the course of the other’s work, unless authorized in writing by the other.

12. Contractor represents and warrants that it has no business, professional, personal or other interest, including but not limited to the representation of other clients, that would conflict in any manner with the performance of its obligations under this Agreement.

13. Either party may terminate this Agreement, with or without cause, upon thirty (30) days written notice to the other. Pro Staffing shall pay the Contractor a pro rata share for services rendered up to the period at which termination occurs but Pro Staffing not be obligated to make any additional payment. Upon termination, the Contractor shall return all unearned prepayments or deposits and deliver to Pro Staffing all Pro Staffing information or materials that is in the Contractor’s possession or control.

14. In addition, if the Contractor is convicted of any crime or offense, fails or refuses to comply with the written terms of this Agreement, and/or the policies or reasonable directive(s) of Pro Staffing, is guilty of serious misconduct in connection with performance hereunder, or materially breaches provisions of this Agreement, GII at any time may terminate the engagement of the Contractor immediately and without prior written notice to the Contractor.

15. During the term of this Agreement neither party will use or disclose any confidential information.

References
Sourcing Analytics Inc. (2103) “The Hidden Benefits of Human Resource Business Process Outsourcing”
Retrieved from: www.sourcinganalytics.com/resources_hiddenbenefit.php

Sanchez, Carlos. (June 2010) “The Benefits and Risks of Knowledge Process Outsourcing”. Strategy
Retrieved from: http://iveybusinessjournal.com/topics/strategy/the-benefits-and-risks-of-knowledge-process-outsourcing#.Uy_Wz41OVD8

Jones, Marshall (June 10, 2013). “Should You Keep Your Payroll In-house or Outsource It”. The New Talent Times
Retrieved from: http://new-talent-times.softwareadvice.com/where-should-payroll-live-0613
Halvey, John K. Business Process Outsourcing: Process, Strategies and Contracts, (2nd Ed). (p. 164) John Wiley & Sons P&T.…...

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