In her quarterly Compliance Corner column,
Celergo, Michele Honomichl looks at vetting
your new payroll partner.
Many people have pets that they probably like better than their co-workers and maybe even some family members. Pets make you feel happy, foster trust (at least the ones that don’t bite), and perpetuate a mutually beneficial partnership. But any good pet owner knows that when adopting that adorable puppy, or meowing kitten, the first stop is to the vet to ensure you understand your new companion’s current health situation and potential future needs.
The scenario should be no different when selecting a payroll partner. There are key health and service indicators that you should feel comfortable with prior to embarking on a long-term relationship. As a result, it is important to review the following areas: scope of service offering, legal and compliance issues, financial strength, IT infrastructure and business continuity planning.
Scope of service offering
Your company’s needs should already have been analysed and the scope of services offered by your selected partner reviewed to see how well the two align. Ask about the depth of each kind of service provided and for references from clients using those services.
Often companies that provide payroll
processing also offer accounting, entity set-up, employment services etc. Therefore it is good to ask what percentage of your potential partner’s business is payroll processing? How many people on the team are payroll professionals? How many international clients do they have? How many of their staff speak English? The goal is to ensure the provider has enough bench strength to support your needs if they experience staff turnover.
Legal and compliance
As part of due diligence, you should review your prospective partner to determine if there are any legal issues with other clients, internal shareholders, or other entities.
Are they up-to-date with their government filings? Do they have an internal risk/ compliance team? Are they following proper protocols in relation not only to local regulation, but also international laws such as data privacy, anti-bribery, and data security? Can they prove they have ISO or SOC certification?
It is best to ask open-ended questions regarding compliance and employ local country government agencies to determine if they are in good standing.
Financial strength
When evaluating potential partners, it is best to review several years of finances to determine stability. The goal is to ensure your provider will be around at payroll processing time. This can be tricky as many payroll processing companies are privately held, but most will provide you with balance sheets basics and statements of access to capital.
Additionally it is important for you to understand their insurance levels and what type of liability they are willing to accept. This will enable you to assess the level of risk you are willing to take on yourself in that particular location. Local country norms will dictate some of the levels of insurance, liability and access to capital, so it will not be consistent globally. Often these items are negotiable.
So it never hurts to ask if a partner can increase their insurance or liability coverage, or seek additional capital support if your business is large enough to warrant the request.
IT infrastructure
Each country is going to have differing levels of IT infrastructure available. In many countries, payroll technology is run locally on a server in the office with limited redundancy. But in just as many other countries, payroll partners have Tier 3 data centres, full redundancy, and sophisticated monitoring systems.
Typically companies have lengthy IT checklists for payroll providers to complete. Even if a prospective partner is small in a remote location, you have a low number of employees, it is important to have this checklist filled in to help you improve your risk profile over time. It is completely acceptable to ask your partner to slowly improve their infrastructure to bring them up to global standards.
Business continuity planning (BCP)
Ask your partner a series of what-if questions. What if the power goes out? What if there is a local crisis? What if the banks are closed? What if there are technology glitches? What if your turnover increases dramatically? Assessing your potential partner’s answers to these questions will help determine your local risk factors and build own BCP programme in case of trouble.
Just like pets, payroll partnerships should be viewed as long-term relationships, and be given a checkup on an annual basis. Ask your partner to review the documentation they sent you at the beginning of the relationship to see if anything has changed.
This process will help alert you to any looming issues and give you time to assess whether there is any change in your risk profile.
Finally, be careful to ensure the relationship stays healthy and mutually beneficial. If you treat each other with mutual respect, there’s no reason why it shouldn’t be as fruitful and happy a partnership as it would be with your favourite pet.
In her quarterly Compliance Corner column,
Celergo, Michele Honomichl looks at vetting
your new payroll partner.
Many people have pets that they probably like better than their co-workers and maybe even some family members. Pets make you feel happy, foster trust (at least the ones that don’t bite), and perpetuate a mutually beneficial partnership. But any good pet owner knows that when adopting that adorable puppy, or meowing kitten, the first stop is to the vet to ensure you understand your new companion’s current health situation and potential future needs.
The scenario should be no different when selecting a payroll partner. There are key health and service indicators that you should feel comfortable with prior to embarking on a long-term relationship. As a result, it is important to review the following areas: scope of service offering, legal and compliance issues, financial strength, IT infrastructure and business continuity planning.
Scope of service offering
Your company’s needs should already have been analysed and the scope of services offered by your selected partner reviewed to see how well the two align. Ask about the depth of each kind of service provided and for references from clients using those services.
Often companies that provide payroll
processing also offer accounting, entity set-up, employment services etc. Therefore it is good to ask what percentage of your potential partner’s business is payroll processing? How many people on the team are payroll professionals? How many international clients do they have? How many of their staff speak English? The goal is to ensure the provider has enough bench strength to support your needs if they experience staff turnover.
Legal and compliance
As part of due diligence, you should review your prospective partner to determine if there are any legal issues with other clients, internal shareholders, or other entities.
Are they up-to-date with their government filings? Do they have an internal risk/ compliance team? Are they following proper protocols in relation not only to local regulation, but also international laws such as data privacy, anti-bribery, and data security? Can they prove they have ISO or SOC certification?
It is best to ask open-ended questions regarding compliance and employ local country government agencies to determine if they are in good standing.
Financial strength
When evaluating potential partners, it is best to review several years of finances to determine stability. The goal is to ensure your provider will be around at payroll processing time. This can be tricky as many payroll processing companies are privately held, but most will provide you with balance sheets basics and statements of access to capital.
Additionally it is important for you to understand their insurance levels and what type of liability they are willing to accept. This will enable you to assess the level of risk you are willing to take on yourself in that particular location. Local country norms will dictate some of the levels of insurance, liability and access to capital, so it will not be consistent globally. Often these items are negotiable.
So it never hurts to ask if a partner can increase their insurance or liability coverage, or seek additional capital support if your business is large enough to warrant the request.
IT infrastructure
Each country is going to have differing levels of IT infrastructure available. In many countries, payroll technology is run locally on a server in the office with limited redundancy. But in just as many other countries, payroll partners have Tier 3 data centres, full redundancy, and sophisticated monitoring systems.
Typically companies have lengthy IT checklists for payroll providers to complete. Even if a prospective partner is small in a remote location, you have a low number of employees, it is important to have this checklist filled in to help you improve your risk profile over time. It is completely acceptable to ask your partner to slowly improve their infrastructure to bring them up to global standards.
Business continuity planning (BCP)
Ask your partner a series of what-if questions. What if the power goes out? What if there is a local crisis? What if the banks are closed? What if there are technology glitches? What if your turnover increases dramatically? Assessing your potential partner’s answers to these questions will help determine your local risk factors and build own BCP programme in case of trouble.
Just like pets, payroll partnerships should be viewed as long-term relationships, and be given a checkup on an annual basis. Ask your partner to review the documentation they sent you at the beginning of the relationship to see if anything has changed.
This process will help alert you to any looming issues and give you time to assess whether there is any change in your risk profile.
Finally, be careful to ensure the relationship stays healthy and mutually beneficial. If you treat each other with mutual respect, there’s no reason why it shouldn’t be as fruitful and happy a partnership as it would be with your favourite pet.
