How does Russian IKEA use payroll outsourcing?

Interview with Elena Miklyaeva, Compensation and Benefits Leading Specialist at IKEA

The concept of outsourcing in the field of HR, which is very popular in most Western countries, is still relatively uncommon in Russia: domestic organizations prefer to use this service only when recruiting personnel. According to a number of analysts, companies are simply afraid to trust third-party firms with personnel processes related to legislative regulation. Elena Miklyaeva, Compensation and Benefits Leading Specialist at IKEA, tells about why HR outsourcing should not be feared and why it can be profitable.

How it all began

The extensive expansion of IKEA in the Russian market began in 2000, and initially it was decided to outsource HR processes, primarily payroll. At first, alternative options were not even considered, since it was required to establish the operation of the enterprise in the domestic market as quickly and efficiently as possible. The organization of its own calculation would inevitably lead the company to the need of searching for specialists and debugging business processes, which means additional financial and time costs.

Elena Miklyaeva (EM – further): “During preparation for entering the Russian market, serious work was done to select a provider that would deal with PA calculation over the next three years. However, in 2003, as IKEA expanded its presence in Russia, we were no longer satisfied with the quality of the services provided, and we decided to switch to another outsourcer – UCMS Group, which is still calculating our salaries. At first, we used the outsourcing service for objective reasons, and then we simply had no reason to abandon this model. Currently, it is implemented in all subsidiaries of the IKEA group (7 legal entities), where about 5 thousand employees work ”.

Choosing an outsourcer, IKEA specialists pursued two main goals. First, a service company with high growth potential was required, ready to meet the growing needs of the customer. And secondly, IKEA was interested in a trusted partner. Since the processes of HR management in Russia are strictly regulated by the Labor Code, any delays and mistakes of the outsourcer can lead to very negative consequences.

E. M .: “At the same time, our company is always very careful about allocating budgets, and therefore we needed a provider who was ready to calculate payroll at a price that was acceptable to us. On the other hand, the practice of working with our current outsourcer shows that the cost of these services is actually not too high to think about performing these functions independently. If a decision is now made to make the calculations ourselves, we will have to hire new workers, monitor them, and pay for their work. Having decided to outsource once, customers rarely abandon this model in the future. ”

The key to success

It must have been easier for IKEA to outsource payroll because it never did it on its own. However, the experience of changing the provider in 2003 shows what pitfalls can be encountered at the first stages of an outsourcing project.

E. M .: “After the decision was made to change the service provider, it was necessary to find a new outsourcer. The process of finding a partner is quite clear and transparent, but the right choice at this stage becomes the key to the success of the entire outsourcing project. “

Indeed, if the wrong decision is made at the stage of choosing a supplier, then the rest of the efforts may be in vain. In the case of IKEA, this did not happen, and the transition to a new provider was smooth and imperceptible.

E. M.: “Further work on the project can be divided into two parts: on the one hand – the coordination of legal and financial terms of cooperation, on the other – the coordination of the technical part of business processes, development of the most effective format for interaction and data exchange. In our case, all these actions were completed in a few months. “

When implementing any outsourcing project, it is important to understand that it does not end after debugging and start of the outsourced processes. It would be naive to believe that everything can be agreed at the preliminary stage and build on this base for many years. In practice, the situation changes rapidly, new requirements often arise, and the outsourcer must be ready to fulfill them. That is why IKEA is constantly striving to improve communication.

E. M .: “For several years of cooperation with our current provider, a lot has really changed. The number of employees for whom the salary is calculated has increased several times, and the organizational structure of our group has become significantly more complex. In addition, the personnel management policy at IKEA has its own specifics – employees often move from one division of the company to another, and this requires flexibility and prompt decision-making from the outsourcer. “

The working process

To understand exactly how outsourcing is implemented at IKEA, you need to know the structure of this company in Russia. In our country, seven subsidiaries (separate legal entities) of the IKEA group have been opened, which operate in different regions. Thus, the calculation of payroll of employees requires preliminary consolidation (merging) of the data of all seven organizations.

E. M .: “At present, the calculation is made as follows. Each manager transmits data to the outsourcer once a month. Information about time off, vacations, sickness and layoffs is entered during this period into our internal HR management system, and then uploaded from it to the provider through secure channels, and the specialists of the outsourcing company process them. I would like to note that the data transfer format was initially determined by ourselves, and the partners adjusted their processes to our requirements. “

Further, all the necessary reports in the prescribed form are transmitted to IKEA, as well as payslips for each employee. In addition, the HR department constantly needs urgent and additional calculations, which must be carried out extremely quickly. For example, according to the provisions of the Labor Code of the Russian Federation, the employer is obliged to provide the employee with the calculation on the day of his/her dismissal.

We add that all the processes of interaction between IKEA and the outsourcer are regulated in the project documentation. Before each billing period, all operations are planned and the time for submitting reports is indicated with an accuracy of one hour.

Outsourcing privacy

The opinion is often expressed that outsourcing is unsafe – when transferring personal data to a third-party company, there is a risk of violation of their confidentiality. In the worst case, this information can get to competitors who will start poaching employees by offering them higher salaries.

E. M .: “I am often asked questions about the security of outsourcing. There are three main points in this topic. Firstly, information security is an important component of the contracts that we conclude with the provider. They clearly indicate what economic responsibility the outsourcing company bears in the event of a data breach. Secondly, it is extremely unprofitable for the provider itself to allow it, since every incident of this kind is a black spot on its reputation. That is why our outsourcer – UCMS Group – independently implements various security systems, ISO 9001:2000 quality control methodologies, and also actively trains its employees. And thirdly, even if we skip the first two arguments, I see no reason why internal payroll accounting could be called a safer process than outsourcing. ”

Indeed, in both cases, certain employees get access to confidential information, but only with the provider they sit in another office. Both of them can make mistakes or leaks with about the same probability. Own specialists, of course, are “dearer”, but it is not a fact that they will be more ethical and professional.

E. M .: “In general, I am convinced that concerns regarding data confidentiality in outsourcing are not always justified. Often a competent choice of a partner leads to a higher level of security than the implementation of business processes on your own. “

The IKEA company has never been engaged in self-calculation, so it has nothing to compare the existing costs with. And, as noted above, they are not large enough to think about moving to another model.

E. M .: “At the moment, we pay an average of 225 rubles per month for calculating the salary of one employee, and even simple arithmetic shows that the total amount, most likely, will not be enough even for the payroll of those specialists whom we could hire for internal payments “.

Outsourcing requires courage first and foremost – new business models and technologies are designed to be used, not feared. As competition grows, companies will have to focus on core processes and actively apply outsourcing in all areas of their activities. And in the field of HR management as well.