Problem
Dawn McWhirter, CHRP, is the HR manager at Texas Instruments (TI) Canada. TI Canada outsourced its payroll function to a national provider but, faced with a large number of transaction errors, Dawn is crunching the numbers to determine whether it makes more sense to have payroll provided by staff internal to Texas Instruments. The current external provider is paid $30 000 annually to prepare biweekly payroll inputs/changes, additions/terminations, ad hoc payments (such as commissions and bonuses), car allowances, mileage reimbursements, and so on, plus pay-slip printouts, tax remittances, and T 4s. However, so many errors are made that Dawn has to pay an administrator $37 440 annually to correct mistakes and liaise with the provider. As well, the employees at headquarters in Dallas are also spending time correcting these errors for an additional cost of $12 000 annually. Dawn estimates that she is spending about 100 hours a year overseeing the errors and auditing quarterly reports for a cost of about $3400. To provide these same services internally, Dawn prepared the following estimates:
1) New national provider: $4000 annually for partial in-house-all biweekly payroll changes/ additions would be input on-site using a secure web portal provided by the carrier; the new provider would be responsible only for printing pay slips, remitting taxes to government agencies, and preparing year-end filings such as T 4 remittances.
2) Administrator: $37 440.
3) Auditing: $3400. Correspondence with Dawn McWhirter, HR Manager, Texas Instruments Canada, October 2008.
Task
• If you were Dawn, what decision would you make and why?
• What are the advantages and disadvantages of the decision that you made?