Centralized Payroll System

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Research Questions
1. What is the effect of a centralized payroll service to the operations of a holding company?
2. What effect does a decentralized payroll service have to the operations of a holding company?
3. What recommendations can be drawn from this study?
Literature Review
Reed (2013) conducted a general study on the different approaches of managing employees’ payroll by holding companies. In the study, Reed (2013) recognized the fact that a bad choice between a centralized and a decentralized payroll service is one of the challenges facing holding business. Though companies have to choose only between two alternatives, whether to use a decentralized or a centralized payroll service, the decision-making process is very challenging
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This saves on costs and makes the operations faster and easier as data regarding employees’ payroll does not need to be taken through different departments.
• Avoidance of duplication— a centralized payroll service prevents occurrence of errors that are brought about as a result of use of data by many people. A centralization system allows a company to use a single version of a selected system, hence preventing inconsistency of data and tampering of information.
• Learning and control—a centralized approach to payroll provides an organizational focus for learning.
Nevertheless, the centralized payroll service has some disadvantages such as high consumption of time as information is moved up to the topmost level of the organization from various departments and companies. The flow of the information is both time consuming and costly. Moreover, the processing of data from the senior level of the holding company has to go back down the organization making the process more time
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However, unlike Reed (2013), Lander sought to find out the benefits associated with a decentralized payroll service. Lander’s study was also a general study which was not limited to any specific organization or country but focused on different companies which were picked randomly. Lander (nd) found out that centralized payroll system is more popular amongst businesses with at least 60 percent of global companies being centralized and only 15 percent of global companies being decentralized. Some of the benefits that attribute to the high usage of a centralized payroll service approach by companies include saving on costs and time and reduction of errors in the processing of data related to employees unlike in a decentralized system.
Lander (nd) further found out that though a decentralized payroll service is less popular to the centralized payroll approach, the decentralized approach has some benefits that account for its continued use by some companies such as reduced impact of failure, fewer resources required and the consequent low costs incurred, better responsiveness since the management is close to employees and better management of
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