Modern Payroll Outsourcing: A Success Story
We have a very complex payroll,” says Bridget Gibson. As controller for Augustana Care Corporation in Minneapolis, she is responsible for 17 different payrolls, all with different pay dates and benefit packages. Complicating matters further, the nonprofit care provider for older adults has grown over the years by acquiring a number of other senior care facilities. As those companies joined the Augustana family, the new employees received benefits from Augustana, besides many benefits that were carried over from their previous employers.
Payroll is also Augustana’s biggest expense. In 2006, approximately $35 million was paid to more than 1,500 employees in 13 owned-and-operated locations. Augustana also manages and/or provides services to four other facilities. All of the company’s locations are in Minnesota.
Celebrating its 111th year, Augustana’s roots extend throughout the Twin Cities metro area and central region of the state. It began in response to the growing needs of the Swedish immigrant community, serving children, older adults, and others. Today the organization serves more than 1,900 seniors on average every day. It owns and manages 800 skilled nursing home beds and 1,100 senior housing units, along with rehabilitation therapy programs, senior daycare, assisted living options, and 24-hour nursing care services. Augustana is supported by nearly 30 congregations in the metro area, mostly Lutheran, but also including Assembly of God, Baptist, Catholic, Methodist, and Presbyterian churches.
Before Gibson arrived at Augustana nearly four years ago, she knew that all payroll and related operations were processed in-house. But she was not aware of how complex and laborious the process had become over the years. “When I joined Augustana, nothing was imported into the general ledger package,” she remembers. “They manually keyed everything.” Her staff was triple-entering payroll: keyboarding it first into time clock, then into payroll software, and finally into their general ledger software. “Quite a few people on the general ledger side were needed to do all this,” she continues. “It was tedious, cumbersome, and simply took too much time. It also caused the staff to get pretty frazzled, and the whole thing was prone to human error because everything was done manually.”
She discovered that her department had tried for about three years to streamline payroll by integrating it into the in-house accounting software, but had gotten nowhere. “The setup wasn’t working and staff were discouraged,” she says.
It didn’t take long for Gibson to realize that something had to be done, and she began to look at outsourcing payroll and related services. That led her to a company called Payroll Control Systems (PCS) in Minneapolis in 2004. The firm now handles all of Augustana’s payroll processing, including direct deposits, time clock, W2s, tax filing, routine and custom reporting, using integrated human resources (HR) software that eliminates redundant data entry.
Gibson has since streamlined her staff for payroll and general ledger. “I also have more time to oversee our biggest and most difficult responsibility, namely billing for insurance, Medicare, and Medicaid. We have 10 people in Accounts Receivables who handle all of this and provide consolidated billing. Outsourcing also lets us focus on other important matters, such as getting quality reports to our caregivers. And I don’t have to worry about changing tax laws or maintaining the software.”
Doing Due Diligence
During her search, Gibson invited PCS Founder, President, and CEO Joe Reilly and General Manager Bob Wessel to visit Augustana and submit a proposal. Although Gibson was impressed with their honesty, determination, and track record, she was an experienced CPA and business professional, and felt obligated to talk with three other firms, all of which were nationally owned and operated. Her own professional background includes working for the nationally recognized accounting firm of Larson Allen Weisher & Company, the St. Paul Port Authority, and other organizations.
Selection made, Gibson, her colleagues, and PCS all knew that the conversion, which actually began in the spring of 2004, would be tedious and time consuming, and involve some risk. But “start-up actually went very well,” Gibson says. “We all took it slow, piece by piece. Augustana has six campuses, five with a healthcare center and senior housing, and one with assisted living, which account for 11 payrolls right there.
“We also provide management services to four other companies, which is another four payrolls,” she adds. “Then there’s Augustana Lutheran Church in downtown Minneapolis, a physical therapy company, and an adult daycare center, all of which have payrolls that we handle. Finally, we do payroll for Augustana Care Services, which is the management company for its own sites.
“Were there glitches in converting all these complicated payrolls, bringing them online and running smoothly? Of course. But the company got things up and running by customizing our system to payroll software called Millennium, aka the Millennium Payroll Platform, which is robust, fast, customizable, and scalable.”
The company also tracks and automatically records time clock entries, which are integrated with payroll. Still another program integrates payroll with PCS’s HR services, including 401k information, accruals, deductions, direct deposits, insurance, pay history, and more, all integrated, without the need for redundant data entry.
All of Augustana’s payrolls are now handled by just two of Gibson’s staff, namely, Ann Li, who oversees that area, and Judy Le Count, who receives payroll data from each site and downloads it to Millennium on her computer. She then transmits everything to the service provider, who prints out payroll checks and sends them back to her for distribution to employees. In addition, Millennium sends back data for all payrolls, along with detailed information on withholdings, insurance, garnishments, and other deductions. Augustana then updates all its records accordingly.
Another example of how PCS adapted Millennium for Augustana was to help them quickly update their general ledger. Shortly after Gibson arrived at Augustana, she set up a process to import data to the general ledger using the in-house accounting software. As part of the conversion, PCS designed a process that used Millennium to configure all this data for the other software. All Gibson’s staff has to do is run the report out of Millennium, export it to the other software, and they’re done.
“That’s huge,” Gibson explains, “because we were able to reduce general ledger staff by one or two people. We were also able to reduce our payroll staff from three to two people.” The personnel reduction helped offset the outsourcing fees.
“In my view, the savings aren’t just in the dollars,” Gibson says. “It’s in the wear and tear on people hands and arms when they had to do all that keyboarding, not to mention all the migraines and other stress. We don’t have to worry about getting everybody paid on time or filing our tax reports on schedule. If we would miss any of those, the financial penalties would be significant.” Moreover the outsourcing firm is responsible for the accuracy of the reports.
So, thanks to modern information technology, the demanding, complicated, time- and staff-consuming work of payroll administration has become a reasonable duty for the long-term care organization.
Richard Parrish is President of MindShare Communication and can be reached at (952) 449-9997 or by e-mail at
PCS, based in Minneapolis, provides payroll services to clients in all 50 states and has a satellite office in Phoenix, Arizona. PCS offers a comprehensive line of payroll, human resource, time and attendance solutions, Web-based technologies and a No Questions Asked Guarantee. For more information, visit https://www.pcspayroll.com. For more information on Augustana, visit https://www.augustanacare.org. To send your comments to the author and editors, e-mail email@example.com.
Topics: Finance , Uncategorized