Recommendation for Selection of Payroll Processing Activities
©2001 Lisa Marie McCauley, CPA

edited 1/24/09


During the past several years the Finance Division of Community College Z has been reviewing its activities involving various components of the current computerized administrative system (CCAS). Processing procedures and reports have been changed or adapted to meet the need of the users, both internal and external. The last remaining area to be considered is the Payroll Processing Function.

Payroll processing, although not a highly complex area, is one that requires complete accuracy in reporting and also its final product - the payroll check. The bottom line is there is no excuse (or very limited excuses) for a late payroll check. Due to upgrades in the administrative system, the current version of the payroll application will no longer be supported as of December 31, 2001. The alternatives include transferring to the new module for Payroll and Human Resources, which is now available on the CCAS administrative systems or switch the processing to an outside servicer.

Institutional Background

The institution has maintained a very limited computerized module of the payroll processing application. The majority of the work is manual and maintained on numerous spreadsheets. The informational database is not integrated with the Human Resources Department; therefore all personnel data must be re-keyed by each department. Both departments have limited staff personnel and during heavy processing periods such as quarterly and yearly reporting and semester adjunct hiring's, the activities can become burdensome. In addition, one full -time supervisor, with 20 years experience, and a part time clerk, handles the activities currently performed in the payroll area; one additional clerk is available but the position has not been filled. The current payroll processes are extensively manual intensive. Payroll is processed on a bi-weekly period for all employees, without category distinction, which therefore requires a considerable, but consistent workload every two weeks. During holidays and shortened summer schedules this becomes even tighter for a processing timeframe, leaving minimal room for errors and re-runs. Even with this responsibility, the department has had minimal penalties assessed for missed reports or correction of errors - greatly due to the effort and experience of the payroll manager.

The institution has grown significantly over the past ten years, not only in its student base but also the number of staff, both administrative and faculty. This year alone recognized a 10% increase in the number of W-2's processed at year-end (more than 2,000 in total). However, the realization of the activities performed by the payroll department has rarely been questioned since no 'problems' have been noted. In all actuality, the department has functioned in a time warp. As an example, senior management 'thought' they had direct deposit because they never received their paychecks - only a stub. In reality, Community College Z had what I would refer to as 'sneaker deposit'. The payroll supervisor would deposit the individual's paycheck to their bank account, by personally completing the deposit form and hand delivering it to the bank each period, this bank deposit run encompassed 7 financial institutions and required a half day to complete. The activity had been performed for so long that senior management were informing new hires that - yes, we had direct deposit!
Payroll Recommendation P. 4

Another component of this scenario includes the fact that the payroll supervisor, although very good at here responsibilities, has controlled the amount of activities that others could perform; in essence, she was a necessity to get the checks out! Few staff wanted to learn to procedures, and was satisfied that she would handle every aspect (within proper control areas).

The institution also maintains, three separate labor unions within its staffing as well as work- study students and numerous special payroll arrangements.

One of the final aspects that need to be addressed is current senior managements impression of outsourcing services of any type. Approximately 15 years ago the computer center's activities were outsourced - the result was disastrous and has left a black eye on any function that is even recommended for outsourcing.

The Opportunity

The opportunity, due to the change in system application, has provided the impetuous for selecting a system that will not only decrease the manual procedures but also increase the integration of the Payroll and Human Resources Department as well as increase the reporting controls and functionality of the system.

During the past year, a Request for Proposal (RFP) was forwarded to four companies that could possibly be able to accommodate the institutional needs. One company is CCAS, the current administrative system, which has a new module for Payroll and Human Resources. The remaining three companies were available for full and partial processing services on various levels, using their software applications; however, after the initial review it was determined that one company could not handle the extensive sub-groupings and reporting required by the institution and was eliminated.

The RFP's requested each vendor to submit a functional requirements checklist indicating the level of support, such as standard with the package, future release, customer modification required or unavailable at the current time. A comprehensive pricing schedule was also required which detailed optional and required components of their services.

An extract of the vendor functionality requirements is shown for comparative purposes



Company X
Company Y
Headcount, Turnover, Manpower Planning   X X X
Training and Development
  X X X
Employee Tracking Basic Limited X X
Employment History Tracking Basic Limited X Limited
Pension Tracking & reporting Basic Basic X X
EEO Reporting   Basic X Limited
Benefits Administration   Basic X X
Flexible Benefits Administration     Limited Basic
Applicant Tracking   Basic X X
Paid time off - Monitor/Report   Basic X X
COBRA Monitor/Reporting   Basic X X
Salary & Wage Administration Basic Limited X Limited
Payroll Administration Basic Limited X X
Earnings Monitor/Reporting Basic Limited X X
Taxes Basic Limited X X
Deductions Basic Limited X X
Check Management   Basic X X
Labor Distribution   Basic X Limited
Health and Safety Monitor/Report   Basic X Limited
Report Writer   Basic X X
Weighted Scoring
Basic - 1, Limited - 3, X - 5 (max 100)
8 41 95 70

The above information was used in reviewing the RFP's to determine if they will meet the needs of the institution, currently and in the future. The technology is available to perform numerous tasks that are currently completed manually; additionally the accuracy and efficiency of the procedures are significantly enhanced.

Advantages and Disadvantages

The following table outlines the advantages and disadvantages that each vendor's product will bring to the institution. The specific list was based on Community College Z personnel reviewing the proposal documents attending the presentations given by each vendor. It should be noted that both Company X and Company Y prepared on-site presentations with active screen usage and detailed implementation schedules and training, CCAS used a telephone conference call to address our issues and concerns. - Their concept is we already have the product because it is built in to the system upgrade, the institution would be required to attend training to be able to access the module, but no further implementation other than the one week training session is provided.

Advantages/Disadvantages CCAS Company X
Company Y
Direct integration to administrative system X    
Integrated HR,/Payroll data transfer   X X
Significant HR/payroll experience   X X
Automatic salary encumbrance & reduction   X X
Provide one check from all sources   X X
Integrated time-off reporting   X X
Full service tax prep and reporting   X X
Accept voluntary employee deductions   X X
Standardized new hire reporting   X  
Wage & garnishment service reporting   X  
User screen customization   X  
Automatic user time-card reporting   X  
One point service contact   X X

This table further illustrates the significant product deficiencies of the various vendors. Although Company X looks like the 'Cadillac' of the group, the underlying premise is that their significant experience in the field allows them to consistently make improvements that increase efficiency and control, and assist the institutions in managing their payroll and HR departments effectively.


The following chart outlines the approximate cost or savings, anticipated with the applicable application:

Current CCAS Company X Company Y
Personnel 105,000 105,000 75,000 95,000
Supplies 35,000 35,000 -0- -0-
One-time Installation -0- -0- 27,000 25,000
Hardware -0- -0- 5,000 -0-
Annual Fees -0- 2,500 71,000 56,000
Other Training -0- 25,000 -0- 5,000
TOTALS (1st year)
(2nd year - w/% increases)
(3rd year - w/% increases)
(4th year - w/% increases)
(5th year - w/% increases)

The costs for each year include a 4% salary increase, 2,3,4,5% increase in supplies and overall 2% increase in other areas. The personnel costs do not recognize the increases associated with the currently escalating benefits costs. Personnel costs are for direct support in payroll and human resources, it does not reflect the costs associated with computer staff programming or the purchase of the interface. There are potential hidden costs that would be associated with each vendor. Selecting the revised CCAS product would eliminate the need for the interface programming, but will (based on experience) require the institution to use the software version 'as- is". Our experience with new CCASs products has shown that their listed features made still be in development (beta testing) or on the wish list. The additional cost associated with Company X and Company Y would entail the programming or purchase of an interface product. Internal programming would be dependent on current computer staff and their priority projects workload. External programming would be the most costly with consulting and travel ranging from $500 - $2000 per hour. The purchase of pre-programmed interface, which has already been proven, is the most realistic approach at

Reference Verification on Vendors

All three vendors provided references from which the Community College Z made numerous inquiries from areas such as payroll, human resources, accounting and computer services. The information gleamed from this outside perspective was consistent with a ma ority of Community College Z concerns for each system, however the most significant item repeatedly discussed was the CCAS' vendor's 'promise' to include or incorporate changes that never materialized. The CCAS system is an educational directed system, and therefore one of the lowest priorities is the I-MJPayroll area. Those institutions using the CCAS application have only been successful because they have the staff to reprogram the necessary changes to the system rather than waiting for the vendor to initiate. Institutions that used Company X as their payrolVHR provider had excellent reviews for the service, support and system. Several institutions offered their interface program to use to transfer data. This is a major concern that would reduce the dependence and time constraint on the computer center activities for the implementation of the system. These users also indicated increased saving not originally calculated in their selections; as functional job responsibilities changed from clerical to managerial, the individuals were able to make significant recommendations for greater efficiencies in processing and control, while reducing costs. The comments received form the Company Y users were positive but on a lesser scale than Company X. Additionally, no institution was using the CCAS system, and therefore, Community College Z's computer department would be responsible for programming the interface between for file information transfer.

Literature Review

Since this program review involves the use of specialized contract documents, specific information is pertinent to each vendors RFP submission. However, several additional articles reviewed indicate the need to keep technology current while involving the stakeholders or employees. According to Gregory Smith (undated), "employees need to experience a sense of ownership". These individuals should be provided with information on new products to assist them in the improved performance of their jobs, which ultimately leads to greater satisfaction in the work environment.

According to a recent survey conducted by Educause, and released by The Chronicle of Higher Education, -administrative systems are one of the highest concerns with educational institutions. The increasing advancements in technology, both hardware and software, are expanding the opportunities available to the institutions to promote, present and monitor all their requirements. However, the administrative systems, that previously were 'packaged', now have developed into add-ons. Institutions require Web registration, on-line access and agency reporting interfaces that current administrative systems may not be able to handle without significant programming changes. Therefore, they are turning to a multitude of products available on the market and interfacing them to their current systems.


The staff is currently dividend in their recommendation to senior management. While the Payroll Department, Finance Division and Human Resources Department recommend the selection of Company X, the Computer Center had been standing firm on their recommendation to use the newly revised CCAS module.

The actual users, Payroll-Finance-HP, feel that the Company X vendor will provide the level of integration required for our institution to move forward in today's technological environment. The Computer Center however, feels that the additional informational data bridge that would have to be programmed (but yet available through another institution), would cause problems, and the overall fact that it is different from the current administrative system would imply 'problems'.


Company X, Business Solutions. (2000). Response to request for proposal.

CCAS (Jenzebar). (2000). Response to request for proposal.

Company Y, employer services. (2000). Response to request for proposal.

Smith, G.P. (undated). Baby boomer versus generation x: Managing the new workforce. [On- line]'e/yenx.htm.

Young, JR. (2001). New Educause survey finds that administrative-computing systems are top concern. The Chronicle:Daily News. [On-line]. http:Hchronicle.con- i/free/2001/06/200060801t.htm [2001, June 8].