Outsourced to in-house

01 November 2019

This article was featured in the November 2019 issue of the magazine. 

In this the third and final article, Jason Davenport MCIPP MIoD, CIPP chair, discusses some of the issues to bring payroll processing successfully back in-house

There are so many considerations to ensure you successfully bring your payroll service arrangement back in-house. The subject is much broader than a short article.

Although I will not go into the transfer of undertakings (protection of employment) rules as these would typically apply for those wholly involved in the delivery of service, at the least they need to be reviewed. For the purpose of this article I am concentrating on the principles of what you may need if you find yourself planning for an exit from the outsource arrangement and needing to build capability within your organisation.

The actual reason for bringing back could be many and varied. For example, the arrangement may have reached a contractual review period and the reasons for the original outsourcing may no longer be prevalent in your business. 

The time to write an exit plan within a contract is before it is live. Whilst this may seem very pre-emptive and may not contain all the details of the future, it will be possible to set out at a high level what would be required for the transfer back and what reports or access to the database (or likely a mix of both) would be needed as part of release. It is also to identify, ahead of time, who the key stakeholders will be and to establish a typical transfer duration for your industry. Another reason for putting detail into an exit plan, prior to commencement of service, is to take the emotion out of the situation, so that when the time comes having an agreed template, with responsibilities clearly articulated, leaves little room for ambiguity, which otherwise can create anxiety.

It is essential to do your homework and establish the fundamentals in the current delivery model. Are all processes documented; is housekeeping regularly performed; and do the current team perform multiple tasks outside of the core system in order to deliver the pay/pensions cycle? 

If knowledge of the system processes sits mainly in the ‘grey-matter’ of key individuals it is crucial that time is taken to support them in documenting what they know. This should be considered as a key objective of succession planning and business continuity planning in the current delivery model.


...previous audit reports will give a good measure of where weaknesses exist... 


Reviewing the service with the audit team and understanding the level of assurance provided by previous audit reports will give a good measure of where weaknesses exist and may help to split any areas of concern between people, process and technology.

Considering the effectiveness of current delivery will allow you to ascertain how much resource and the mix of skills/experience that will be needed for the future delivery model. Do remember that if weaknesses existed in an area, then rather than thinking you can achieve more with the same resource, do look to secure additional budget to shore up those areas.

If needing to recruit and train a new team, then allow for a much broader window within the project for bringing new staff into the business, providing full induction, and training them in the responsibilities and accountabilities of the service model. New eyes bring new ideas and different experiences. Look to embrace ideas that may help to engage new staff more quickly and may ultimately lead to improvements in the service delivery.

Planning is a key element to ensure everything is listed and owned as part of the project to return service. No doubt the original migration will have taken many months to complete. Don’t think the exit can be achieved any quicker if establishing a new team, with a new infrastructure, as the same diligence must be applied. Test all routines; an example of one often missed, is not testing that you are able to submit your own BACS transfers. It is often the small items to one side which get missed, such as new physical addresses for post or electronic addresses for delivery.

If moving to a new team, then unit testing and parallel runs are important for assurance that the routines have been documented, tested and understood. Stress testing for volumes is also important if creating a new infrastructure and ensuring reporting expectations can still be delivered.

From a relationship management perspective, whilst losing a client may not be welcome, the outsourcer should look to work at achieving a successful transfer for two reasons: many tender opportunities require detail on recent exits; and you never know when you may meet again. 

I hope the above is informative. I’d be pleased to hear any additional comments.