CASE

STUDY 5

Outsourcing at Texas Instruments Canada

1 . If you were Dawn, what decision would you make and why?

Based on the information provided, it seems that outsourcing the payroll function to a

national provider is causing significant errors and additional costs. Therefore, if I were

Dawn, I would recommend bringing the payroll function in-house and utilizing a partial in-

house solution with a secure web portal for biweekly payroll changes/additions.

Reasoning:

a) Cost Comparison: The current external provider is paid $30,000 annually, but additional

costs of $37,440 for error correction and $12,000 for employees' time spent on error

correction bring the total cost to $79,440. On the other hand, the estimated cost for the

partial in-house solution is $44,840 ($4,000 for the provider + $37,440 for the administrator

+ $3,400 for auditing). The in-house solution appears to be more cost-effective.

b) Error Reduction: The high number of transaction errors indicates that the current

external provider is not delivering satisfactory accuracy. By bringing the payroll function in-

house, Dawn can have better control over the process, which may lead to a reduction in

errors. Using a secure web portal for inputting changes and additions can also streamline

the process.

c) Simplified Oversight: With an in-house solution, Dawn will have direct oversight of the

payroll function, reducing the time she currently spends overseeing errors and auditing

reports. This will allow her to focus on other strategic HR activities.



2. What are the advantages and disadvantages of the decision that you made?

Advantages:

• Cost Control: By bringing payroll in-house, the organization has more control over

costs. They can directly manage expenses related to payroll processing, software,

and personnel, potentially leading to cost savings compared to outsourcing.

• Improved Data Security: In-house payroll processing allows for better control and

protection of sensitive employee data. The organization can implement robust

security measures to safeguard confidential information.

• Flexibility and Customization: With an in-house solution, the organization can

customize the payroll process to meet its specific requirements. They have the

flexibility to incorporate unique pay structures, benefit plans, and company policies.

• Enhanced Data Integration: An in-house solution provides opportunities for seamless

integration with other internal systems such as HRIS (Human Resources Information

System) or accounting software. This integration can streamline processes, reduce

duplication of efforts, and provide more accurate reporting and analytics.

• Faster Issue Resolution: Having an internal team responsible for payroll allows for

quicker resolution of any errors, discrepancies, or employee inquiries. The HR team

can directly address issues, leading to improved employee satisfaction and reduced

disruption to operations.


• Better Compliance Management: In-house payroll processing enables the

organization to have more control and oversight of compliance with labor laws, tax

regulations, and government reporting requirements. This reduces the risk of non-

compliance penalties and potential legal issues.

Disadvantages:

• Increased Administrative Burden: Bringing payroll in-house means the HR team must

take on additional administrative responsibilities. This can include training staff,

staying updated on changing regulations, and managing day-to-day payroll

operations.

• Need for Expertise: Payroll processing requires specialized knowledge of tax laws,

labor regulations, and complex calculations. The organization needs to ensure it has

competent personnel or invest in training to handle these responsibilities effectively.

• Initial Setup Costs: Implementing an in-house payroll solution may involve upfront

costs for software, hardware, licenses, and training. These initial investments need

to be considered when evaluating the financial viability of an in-house solution.

• Technology Maintenance: The organization is responsible for maintaining payroll

software, hardware, and IT infrastructure. This includes regular updates, security

patches, and troubleshooting, which can require additional resources and technical

expertise.


• Risk of Errors and Non-Compliance: Without proper systems, processes, and checks

in place, there is a risk of errors in payroll calculations or non-compliance with legal

requirements. This could lead to financial penalties, employee dissatisfaction, and

damage to the organization's reputation.

• Time and Resource Constraints: Managing payroll in-house can be time-consuming,

particularly for small HR teams or organizations with complex pay structures. The HR

team's time and resources may be stretched, impacting their ability to focus on

other strategic HR initiatives.

It's important to note that the decision to bring the payroll function in-house should be

based on a comprehensive analysis of the specific needs and circumstances of Texas

Instruments Canada. It is recommended for Dawn to conduct a thorough cost-benefit

analysis, consider the capabilities and expertise of the internal team, assess potential risks,

and evaluate the long-term implications before making a final decision. Additionally,

consulting with relevant stakeholders, such as finance and IT departments, would be

beneficial in making an informed choice.

References

Belcourt, Monica and Podolsky, Mark. Strategic Human Resources Planning 7th

Canadian ed. Nelson, 2018.

Twin, A. (2022). Outsourcing: How It Works in Business, With Examples. Investopedia.

https://www.investopedia.com/terms/o/outsourcing.asp

Crail, C. (2023, May 17). Payroll Outsourcing In 2023: The Ultimate Guide. Forbes Advisor.

https://www.forbes.com/advisor/business/payroll-outsourcing/

Top 10 pros and cons of outsourcing payroll for your business. (2022).

www.theaccessgroup.com. https://www.theaccessgroup.com/en-au/blog/prl-pros-

and-cons-of-payroll-outsourcing/