Professional Documents
Culture Documents
Payroll Assessment
Final Report
July 2009
Table of Contents
Executive Summary Project Objectives and Approach Findings Opportunities Options Analysis and Recommendations
Executive Summary
Findings Current annual payroll operating cost of $4.7 million offers significant opportunity for improvement Time & Labor process is completely manual HR/Payroll system is 30 years old and presents considerable risk of failure Recommendations Continue to run payroll as an insourced function Implement a Time & Labor solution Transition payroll into a true Service Center model and optimize payroll operations Reengineer key aspects of HR transaction processing to improve speed and efficiency of transactions which affect payroll Financial impact Reduce steady state run cost by $2.1 million, a 45% reduction Payback: 2.3 years with an NPV of $18 million
Executive Summary
The to-be Payroll environment at NYU will have the following characteristics:
Run cost reduced by approximately 50% Automation of all payroll-related processes Elimination of the risk associated with an obsolete HR/Payroll system Payroll department optimized for maximum efficiency
Analyze payroll service delivery alternatives (in-source/outsource) and supporting technology Define a high-level roadmap and go-forward recommendation Develop a financial analysis of options including one-time and ongoing costs aligned with the proposed roadmap and recommendation The assessment focused on NYUs US payroll operation including Time & Labor (T&L) as a key input/component to payroll processing; the scope of the assessment also included: Payroll transaction and exception processing Supporting payroll related technology Payroll processing procedures & documentation Overall payroll process compliance (payroll operations and input dependencies) Processing of HR transactions which affect payroll
Note: see Appendix for more details on Project Approach Copyright 2009 Accenture All Rights Reserved.
Building a fact base of current state data: operating costs, third party services and costs, transaction types and volumes, service delivery structure, pay processing calendars, technology applications, etc.
Conducting a total of 18 interviews, involving 48 NYU personnel, to understand the roles, procedures, issues, opportunities, and challenges with the current payroll process Schools/Units Time data collection, review, and submission; HR transaction preparation and entry Central Areas Time data entry and payroll processing; Academic Appointments; HR, Benefits, and IT Support
Note: see Appendix for the detailed inventory of interviews/interviewees Copyright 2009 Accenture All Rights Reserved.
A majority of the complexity and issues within the Schools/Units is with the cost accounting associated with Pay and HR transactions, not the payroll transaction per se
End users want better access to information about employee data and about payrollrelated processes and procedures There is no standard tracking mechanism for Sick/Vacation time (some schools use shadow systems, others do it manually); this information is very frequently not accurate While overall customer service from the central Payroll department is viewed favorably, there is considerable reliance on individual contacts/relationships to resolve issues there is no service center model for customer service There are fundamental limitations with the Integral system, and fundamental risk of failure with the Integral Payroll module
Not replacing the Integral Payroll system carries substantial business risk
The universitys HR and Payroll system is called Integral. This system has the following characteristics:
Was originally developed in the 1970s Runs on a mainframe computer, which is expensive and nearing obsolescence Integral is obsolete software with many structural limitations; very difficult to modify and maintain For example: No effective dating, limit of 7 jobs per employee Only a handful of organizations are still running Integral Number of IT professionals with Integral expertise is small, and getting smaller There is substantial business risk associated with continuing to run the 30 year old Integral Payroll system Payroll failure with no real contingency plan Inability to implement regulatory changes
Dependence on two specific NYU support individuals, both of whom are nearing retirement
Dependence on a relatively small third party support firm, JAT ($6 million annual sales, <100 employees) Business requirements that will require significant additional effort and cost in the absence of a PeopleSoft implementation: Support for Abu Dhabi and any other global sites Position Management HR/Payroll historical data conversion in the Data Warehouse Additional PASS/HRIS enhancements
Copyright 2009 Accenture All Rights Reserved. 7
Common Payroll-Related Characteristics Within Higher Education Shared Services model for Payroll and Employee Service Usage of an ERP system (most often PeopleSoft) Existence/adoption of online self service tools Existence/adoption of an Employee Portal for online content and communications Relatively complex pay calendar Complex processing around Grants and funding of academic and research appointments Systematic tracking of Time & Labor data and Sick/Vacation balances Usage of Outsourcing for Payroll-related services
How NYU Compares Does not have today Does not have today Have some Have very basic capability Yes Yes Almost entirely manual today For W2 processing
Assessment of NYU relative to peers On par Lagging some Lagging significantly Copyright 2009 Accenture All Rights Reserved. 8
Office Supply Cost 2.8% Shipping & Handling Cost 4.3% Other Third Party Fees 3.0%
Almost 50% of total cost is dedicated to supporting a manual time and attendance system
IT Labor 15.5% Field Support (Schools & Units) Labor 42.9%
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* Payments Processed metric is skewed by the fact that a large portion of NYUs population is paid monthly. If this population were paid semi-monthly, the NYU average would be about 7,700 per FTE (about 1/3 as efficient as benchmark)
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External Benchmark
Late HR 28%
1.2% 6.3%
NYU Average
Lowest % of late HR transactions: Courant, VP Public Affairs, Silver, General Counsel, FAS, School of Law, Tisch, Stern Highest % of late HR transactions: Gallatin, ISAW, Vice Provost Academic Affairs, Vice Provost Faculty Affairs Copyright 2009 Accenture All Rights Reserved. 12
NYU Operations
Where does Payroll Operations spend time? Manual processes cause NYU Payroll personnel to spend more time than average managing key processes than average.
Payroll FTE Time Distribution
NYU
Processing Payroll
8.0%
Benchmark 5.8%
28.0%
NYU
Customer Service
30.0% 22.5%
Benchmark
0.0% Training
NYU
2.0% Benchmark
NYU is spending the majority of Customer Service time resolving errors and not in true, proactive customer service 13
Tier 0 Service
Portal
Knowledge Management Case Management (REMEDY) Document Management Automated Call Distribution Computer Telephony Integration Other
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Opportunities HR Reengineering
Description: Reengineer HR transaction processes with the Schools and Units Improve end user access to information both employee data and process/procedure documentation Look to more broadly distribute PASS within the Schools, down to the department level Look to reduce the number of approvals on a transaction Implement better controls/audits on Academic and Student onboarding, to reduce missed payrolls
Supporting Data Average percentage of late HR actions (PASS) is 74% Currently, only one of the schools interviewed has PASS distributed down to the department level, but they are in the top quartile (internal benchmark) of timely PASS submissions and they perform their duties with less personnel than average (1:134 ratio vs 1:88)
Impact Reduce percentage of late HR actions from 74% to 25% Reduce off-cycle paychecks by approximately 50-70% for an estimated annual savings of $100-200K Reduce Payroll FTE by 1 for an estimated annual savings of $50K
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Outsourcer takes responsibility for the data processing associated with payroll, such as Gross to Net, Garnishments, Check printing and distribution, and Tax reporting and processing Client retains the responsibility for employee service, transmission of data to the outsourcer, error resolution, overall financial management and control, payroll accounting, etc. Market price of this service typically ranges from $50-80 per employee per year This is a well established and proven service model; historically more popular with smaller organizations, although a growing number of large organizations are opting for this service Market leaders are ADP and Ceridian
Copyright 2009 Accenture All Rights Reserved.
Outsourcer takes responsibility all aspects of payroll operation, including employee service; this model is more of a true Business Process Outsourcing (BPO) model; it is frequently marketed as an integrated Payroll/HR/Benefits BPO model Client only retains responsibility for Vendor Management Market price of this service typically ranges from $150-200 per employee per year This is a relatively new service offering without a strong track record of service Market leaders are ADP and Ceridian
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Options Overview
Option 1 Maintain insourced payroll, automate and reengineer key processes Option 2 Outsource payroll (data processing model), automate T&L, reengineer key processes
Time & Labor solution (presumably Workforce) Payroll "Service Center" and Operations Optimization HR Reengineering Time & Labor solution (presumably Workforce) Payroll "Service Center" and Operations Optimization HR Reengineering Payroll Outsourcing of GTN, Tax, W2, Garnishments
Option 3 Outsource payroll and T&L (data processing model), reengineer key processes
Time & Labor Outsourcing Payroll "Service Center" and Operations Optimization HR Reengineering Payroll Outsourcing of GTN, Tax, W2, Garnishments
Payroll Outsourcing with full Managed Service model; includes Time & Labor capability HR Reengineering
Option 4 Outsource payroll and T&L (managed service model), reengineer key processes
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NOTE: the Payroll Assessment team has validated the Time & Labor implementation estimate with the NYU PMO team
Note: see Appendix for detailed financial models of all 4 options Copyright 2009 Accenture All Rights Reserved. 21
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Metric Cost per check Cost per employee Employees per Payroll FTE Checks per Payroll FTE % of Payroll time spent on time entry % Off Cycle Checks
NOTE: given the inherent complexities in some aspects of Higher Education Payroll, NYU should not expect to get to the level of the APA Benchmarks, which includes all companies across all industry segments
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Contractor: external expert in software, relevant processes, and large scale project/program management
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Project Components
Business process and roles design System configuration and customization Interfaces and Reports design and development
Duration (mths) 14
Design and implement Service Center model Reengineer Pay Calendars Eliminate hand delivery of checks Implement payment/chargeback mechanism for exceptions (e.g. Off Cycle checks: $30)
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1100
1.5
1.5
1.5
4.5
HR Reengineering
Improve end user access to information Distribute PASS more broadly Reduce the number of approvals Implement better controls/audits on Onboarding processes
600
1.3
0.7
1.3
3.3
Note: see Appendix for more details on projects Copyright 2009 Accenture All Rights Reserved.
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Next Steps
Confirm recommendations and going-forward Roadmap with key stakeholders Proceed with procurement of Workforce Time & Labor solution Begin to plan for startup of projects, for Fall 2009
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Appendix
Project Approach Inventory of Interviews Detailed Financial Analysis of Options Project Descriptions
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Pre-Assessment
Work Products
Activities
Define Data Requirements Collect and Distribute Data Plan and Prep for Assessment
Conduct interviews across payroll, business and IT Analyze current data Inventory and prioritize opportunity areas
Conduct follow-up interviews (as needed) Continue analyzing data Update inventory and priority (as needed)
Compare to benchmarks and leading practices Socialize findings and (where applicable) incorporate feedback Conduct an options analysis including costing Summarize
Develop roadmap and financial analysis of options Define next steps Present final assessment
Roadmap and financial analysis of options Next Steps Final Assessment Summary
Status
Findings/Q&A
Findings
Final Report 29
Approach
The project approach consisted of three main phases of work
Analyze current data that will aid in obtaining a deeper understanding of NYUs current Payroll environment including systems, processes, issues, level of complexity, volumes, metrics and current operating costs Conduct interviews across Payroll and areas that touch payroll and across business and IT to obtain a further understanding of the current environment, issues and opportunities for improvement Inventory and prioritize opportunity areas
Analyze prioritized opportunities and compare to benchmarks and leading practices where applicable Conduct a sourcing options analysis (including costing) leveraging Accentures Global Estimating Models and experience in working with 3rd party payroll providers Summarize findings, opportunities, options analysis and recommendations
Interactively present findings and incorporate feedback Create a roadmap to address recommended changes Develop a financial analysis of options Define next steps
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Inventory of Interviews
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Scope
Key Benefits
Key Benefits
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