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Duty of care involving outsourced payroll

Richard Mou (Department of Management, College of Business and Economics, California State University, Fullerton, California, USA)
Brian Kleiner (Department of Management, College of Business and Economics, California State University, Fullerton, California, USA)

Information Management & Computer Security

ISSN: 0968-5227

Article publication date: 1 May 2006

2073

Abstract

Purpose

To review the issues surrounding the outsourcing of payroll.

Design/methodology/approach

Literature review covering: the benefits of outsourcing payroll; duty of care from employer's perspective; how employers could maintain sufficient expertise and control to effectively oversee the outsourcing payroll processor; and essential tips to a successful outsourcing relationship.

Findings

Many employers are aware that payroll administration is very complex and tedious; therefore, it has become one of the most common outsourced functions. In addition, outsourcing payroll offers several benefits, such as avoiding internal revenue service (IRS) penalties, reducing costs, and enabling direct deposits. However, employers should keep in mind that outsourcing payroll is not the end of their responsibility regarding payroll related issues. The IRS makes clear that employers are the ultimate responsible party even though they outsource their payroll.

Practical implications

In order to succeed in outsourcing payroll, employers must select a right vendor, come up with a clear and straight‐forward contract, and maintain sufficient control and effective oversight of the outsourcing vendor. Fulfilling these key factors will guarantee that the payroll vendor will take care of their payroll needs for years to come. The payroll outsourcing vendor can be viewed as a long‐term partner. Therefore, it is essential for employers to maintain a positive relationship with the vendor. In other words, they need to develop a win‐win relationship with the outsourcing partner by following the seven important tips that are identified and discussed.

Originality/value

Illustrates the seven essential tips to a successful outsourcing relationship: identify a key staff liaison to the outsourced provider; let the outsource provider meet the staff; inform your staff of the outsource arrangement; view the outsource company as an extension of staff; communicate effectively; learn and take advantage of all services the outsourced provider offers; and be clear and realistic regarding expectations.

Keywords

Citation

Mou, R. and Kleiner, B. (2006), "Duty of care involving outsourced payroll", Information Management & Computer Security, Vol. 14 No. 3, pp. 284-293. https://doi.org/10.1108/09685220610670422

Publisher

:

Emerald Group Publishing Limited

Copyright © 2006, Emerald Group Publishing Limited

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