Rearranging Payroll Duties Saves Township Thousands Monthly

The township is saving $14,000 a month after dropping its contract for payroll administration and deciding instead to have township staff take on the task.

Administrator Paul Shives said the costs of administrating the township’s payroll nearly took a dramatic hike, which lead staff to shop around for a better deal. And the better deal would be to rearrange the accounting department to handle payroll administration itself.

Shives said the previous contract was with TD Bank, which had handled the township’s payroll services for $150,000 a year.

“We had a long-standing arrangement with TD Bank that they would include the costs for the township payroll services, at a cost of $150,000 year,” Shives said. “They would honor that as long as the township had kept enough funds in their bank. It was that way for several years.”

However in early 2010, TD Bank notified Toms River administration that it was changing the agreement, turning the flat $150,000 fee into a recalculated formula. Now, to administer the township's approximate $40 million in payroll, it would cost $1.2 million annually, Shives said.

He said the cost of a month's payroll was nearly equal to the previous cost of paying for a year's payroll administration. Shives said the cost would have come to about $110,000 per month. It would have been a jump from $150,000 annually to $1.2 million annually.

“That’s a huge expense. It was unacceptable,” Shives said. The township tried to negotiate with TD Bank, and researched other banks such as Ocean First, he said. The hope was to return to a flat fee for handling the payroll administration.

“Neither would pay for it,” Shives said. “We started to look at alternatives.”

Instead of having a bank tend to payroll, the township looked at buying software programs.

“We found that Edmund’s — a software company specializing in municipal software in New Jersey — had payroll software programs,” Shives said.

Mayor Thomas Kelaher urged Shives to investigate having township employees administer the township payroll, using the software.

“The Mayor made it clear, maybe we could to this in house,” Shives said. The one-time cost to acquire the software would be $20,000. That's a big difference from paying $14,000 a month to TD Bank under the original contract, Shives said.

Isn’t the cost savings offset by instead paying township staff to do payroll tasks?

Shives said there isn’t an in-house cost. Existing personnel agreed to add their responsibilities.

“We’re doing it with existing staff, not adding man-hours or overtime,” said the township administrator. He said the township finance department is actually down two staffers due to attrition but that current staff has been reconfigured to make it work.

“We consolidated two office spaces. Payroll, finance and purchasing moved around, making it easier,” Shives said. “It worked out extremely well.”

The new system is now in use, administering paychecks to the 450 regular employees and to 420 more who are hired seasonally, Shives said.