Lorraine Boyd felt she had to act after staff began recouping their expenses from Dunfermline Building Society’s petty cash box before their claims had been authorised. As senior manager for financial systems, she discovered that the technology existed to contract out what had traditionally been a lengthy manual process.

The building society handled £100,000 worth of small-value expenses claims every year and workers were frustrated by delays in getting their money back. It has now outsourced this function to GlobalExpense (GE), a specialist expenses provider whose clients include J Sainsbury and Renault. GE believes lax in-house management of staff expenses is costing British firms £1.3 billion a year. In fact, the company claims that while 15% of claims processed in-house should be rejected, only 1% are actually thrown out.

GE’s internet-based hosted system allows clients to log on to its website and fill in an online expenses form. Receipts must be posted to GE, which checks that claims are genuine, before line managers approve them. Online validation reports accounting for every receipt are produced, and at Dunfermline Building Society the time from claim to payment has been cut from two weeks to four days.

“As well as the cost and time savings, any changes in UK and European tax compliance are automatically updated on to the system so we do not have to worry about keeping pace with new regulations,” says Boyd.

The technology being developed by third-party suppliers is easing the pressure on HR departments that need to cut costs and manage an increasingly fragmented workforce. Expenses management is just one task being off-loaded as systems evolve that make the contracting out of payroll, pensions and even the administration of employee benefits schemes more appealing.

The Institute of Payroll Professionals (IPP) claims there are financial savings to be made. The cost of payroll administration, which is about 5% of all payroll costs, can be cut by 5%-20% if it is outsourced.

However, the IPP’s director, Alison Ward, warns companies not to make the mistake of outsourcing simply to avoid purchasing expensive technology themselves to be used in-house.

“Companies can become dependent on a third party that has the technology to handle a particular function. They will invest their information and functionality to them, but not have a contingency plan in case something goes wrong. What if a provider goes out of business?” says Ward.

She also urges companies to avoid the temptation to remove any expertise within the retained HR department once a function is outsourced. Ward says it is essential to keep someone in-house who has knowledge of the provider’s technology so compliance checks can be made. “You cannot wash your hands completely just because something has been outsourced and the technology seems complicated,” she says.

The supplier’s technology must be able to integrate with equipment running any functions that remain in-house. Glasgow-based telecoms company THUS, an offshoot of Scottish Power, decided to contract out its payroll and expenses processing but needed to ensure that Northgate HR’s software would link with its SAP system.

Catriona Gemmill, head of HR corporate services at THUS, also wanted to speed up the reporting process and have quicker access to the payroll data that would be handled by Northgate HR using its modular technology, ResourceLink Enterprise. HR staff use passwords to access information on employees stored in databases held in-house or externally.

A tool called OrgPlus, from workforce modelling business HumanConcepts, takes information from SAP and displays it in simple charts, using a web browser, for clients’ nonHR staff, such as line managers, who regularly need to access the information but are not proficient with SAP.

HR management software and services provider MidlandHR manages payroll and HR for large clients such as Northern Rock, but this month the company launches a web-based HR service for SMEs (small and medium-sized enterprises) called TrackHR. It is designed to reassure companies that their HR procedures are in line with all government legislation, while employees can access advice on subjects such as maternity leave. The system can integrate payroll with work-flow management and analyse employee data. It can even help SMEs prepare for employment tribunals.

Business finance company Wageroller provides a self-managed system that ensures all PAYE and tax requirements are paid by BACS on the day a company chooses. Its clients have two months to repay the money, which accrues daily interest.

HR models

Shared services: back-office functions such as HR, plus accounts and IT, are combined to create economies of scale and improve performance

In-house: keeping all HR activity in-house, with staff handling every aspect; common in small businesses of fewer than 1,000 staff, but relatively costly

Full outsourcing: an outsourcing company handles almost every aspect of a firm’s HR work; the reduced in-house HR team focuses on strategy

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