BenefitsEmployee Engagement

When Outsourced Payroll Isn’t Enough

Grill Concepts needed a payroll department without putting one on the payroll. A partnership of two providers became the perfect solution.

by Andy Teng

For small organizations, being able to rely on a service provider to accurately deliver payroll on time is critical. But even when they do outsource, they might not get all the services they need from a single payroll bureau.

That was the case for Christopher Gehrke, the VP of HR for Grill Concepts, a 24-year-old, Los Angeles-based operator of 27 Daily Grill restaurants around the country. With 2,200 employees, the fast-growing chain needed a full-service payroll provider that could not just take on the processing aspect but also serve as the company’s internal payroll department, responsible for all ancillary services. And considering that it operates in an industry with a turnover rate of more than 100 percent—Grill Concepts said it averages a rate in the 60s—processing payroll was made even more difficult.

When the company initially contracted services from another provider, it found breadth of scope lacking. Realizing that it didn’t have the same resources that a larger employer might but still facing the same service requirements, the company faced a difficult situation. “We’re kind of challenged being a smaller organization with our corporate overhead,” Gehrke said.

The company turned to ADP, but even the payroll giant didn’t offer a service that took the place of an internal payroll department, despite the fact that it has grown its service offering during the past several years. What Grill Concepts really needed was a payroll department without investing in one. That’s when it turned to IQ Backoffice, an Encino, CA-based manager of business processes for clients with $50 million to $4 billion in revenues.

Because IQ Backoffice was already processing accounts payable for the restaurant operator, taking over payroll hardly required a leap of faith by Grill Concepts. But processing payables—while similar to payroll in some ways—has significantly different repercussions when mistakes are made. Missing an invoice due date may result in minor troubles with vendors; not paying employees on time can lead to near-riots.

If one word can be used to describe HRO, eclectic might be a good fit. Through thousands of contracts, employers have embraced outsourcing in many forms, and for Grill Concepts, employing IQ Backoffice was yet another unique engagement. That’s because IQ Backoffice doesn’t actually process payroll; it helps clients validate it, coordinate terminations and new hires, resolve time and attendance issues, and address I-9 and Work Opportunity Tax Credit issues. In fact, ADP performs the payroll processing; IQ Backoffice simply manages it.

But why use two vendors to perform a task when many companies can simply get by with just one? In Gehrke’s eyes, even outsourcing directly to ADP would have required headcount in the payroll department, with no guarantee of better results. Through IQ Backoffice, Grill Concepts’ payroll headaches are handled by one point of contact. More importantly, he said, payroll accuracy is extremely high.

David Schnitt, president of IQ Backoffice, explained that his clients usually don’t want to invest in a payroll department and are looking for external solutions to remedy myriad pain points. While some already use a payroll service, they nevertheless experience difficulties with the internal responsibilities associated with getting payroll done. So while relying on just one provider such as a payroll bureau might be more cost effective, these clients are looking for more service and support.

“They’re not coming to us to save money. They are coming to us because their process is broken,” he said, adding that most do not want end-to-end HRO service that might include HR administration, HRIS, recruitment, or others. Instead, because the outsourcing champion often hails from the F&A side, clients are focusing on a very narrow point solution addressing specific problems, Schnitt noted.

That was indeed the case at Grill Concepts, where Gehrke said a former CFO was responsible for overseeing payroll outsourcing. Today, HR is responsible for providing the data to IQ Backoffice, which continues to handle the restaurant chain’s AP process as well.

Gehrke said as the company grows—it has plans to open four to seven eateries this year—it will continuously evaluate whether an outsourced solution is its best option. For now, however, he credits its providers for the high accuracy with which payroll is delivered. He added that because the engagement has since expanded to include time and attendance, I-9, and tax credits, IQ Backoffice has essentially become the payroll department.

“Five years ago I wouldn’t have envisioned the relationship we have now. It’s interesting to see what the service providers have put on the plate,” he added. “It is definitely meeting our needs for where we are.”

Tags: Benefits, Engaged Workforce, HRO Today Global

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