07 Jul Understanding the Total Cost of Engagement for Payroll Services

Whether you use a large number of contingent workers or just a few, chances are some of them have come to you through referrals, alumni of the company, former colleagues or other means besides staffing agencies.  Managing these workers presents numerous legal and financial challenges. As a result, many companies that have sophisticated contingent labor programs use the services of a payroll provider to engage these workers instead of handing them to their staffing suppliers.

So, how much do these payroll services cost?  First, naturally, there is a markup charge.  Typically, payroll providers will use a ‘flat pay’ plus ‘statutory’ plus ‘markup’ model to determine the bill rate.  However, estimates of statutory cost vary widely between companies.  You will want to drill into where the figure for statutory came from to be sure you are getting a fair price.  Next, what is included in the markup?  An employer’s legal obligations vary from one location to another. If your payroll provider is rolling in the cost of, for example, mandatory sick leave for all locations, they may be getting a windfall.

As important as the markup is, however, there are other considerations that may be even more important.  Is your payroll provider a true expert in employment law?  Do they understand the importance of compliance with a host of laws that can have hundreds of variations across the country including FLSA, FCRA, Sick Leave, Parental Leave, and so on?  Unfortunately, not all payroll providers stay up to speed on this vital area.  One misstep by your provider in employee classification or conducting background checks can leave you on the wrong side of a very expensive lawsuit.  You must select your partner carefully to make sure that providing efficient, compliant payroll services is truly their core competency and not a sideline.

Finally, service.  If your contingent workers have a poor experience with your payroll provider, that reflects badly on you, the client.  Poor service can lead to higher attrition, lost productivity, and reduced chances of re-engaging valuable talent.  All of this has a price tag that isn’t captured in a simple markup.

PrideOne combines low cost, high levels of expertise, and total dedication to stakeholder satisfaction to deliver excellent programs for our clients. We have created a free payroll savings calculator where you can benchmark your current program. We will assess the total cost and provide you with a report on how you can improve your program.

Author

Kate Goss
Managing Director, PrideOne

Kate Goss is the Managing Director of PrideOne, leading the Managed Service Provider (MSP) division of Pride Global. With over 20 years of experience in contingent workforce management and staffing, Kate is a trusted advisor to clients who seek IT and non-IT contingent labor vendor management solutions, including payroll and passthrough programs.