The Great
Transformation Guide
ADP has authored a series of thought-provoking articles exploring the relationship between organisations and payroll. From the HR
and payroll challenges of global expansion to the rich resources of payroll data; from the payroll skills shortage to the true cost of
inefficient processes; this series helps to identify and solve obstacles and appreciate and embrace the ever-greater asset payroll
can become to companies navigating a treacherous business landscape.
Supported by
Are you optimising your partnerships
with in-country payroll vendors?
Ever since the onset of the pandemic and the new working landscape, many companies have made huge leaps in their digitisation and digitalisation initatives. According to ADP's guide to choosing outsource partnerships, company leaders have had to reconsider the interplay of out sources tech solutions and how the complex business partnerships behind them can generate value.
Internal and external contributors
ADP's guide highlights that organisations have relied on the advantages of working with external partners to:
- Optimise productivity and achieve cost efficienices
- Gain access to new technologies and talent pools
- Help reposition themselves in response to economic cycles and emerging trends
Following the pandemic, business leaders in internationally expanding companies are taking a closer look at their outsourcing values networks as they look for ways to adapt to 'new normal' expectations and dynamics.
Firms are also reportedly experiencing blurred boundaries among categories of internal contributors. Full and part-time permanent staff, contingent workers and third parties, such as freelancers and consultants, are all vital parts of the workforce ecosystem, whether directly on the payroll or not.
Why companies outsource payroll
The reasons companies outsource their payroll operations have remained consistent. The decision might be prompted by 'final straw' situations such as finex for non-compliance, a data security breach or high staff turnover triggered by errors in calculating employees' wages. But ordinarily HR and finance leaders will outsource payroll when they face limited personnel or technological bandwidth in-house.
ADP research1 found that these motivations continue today, along with more strategic business aims surfacing at the top such as:
Enhancing operational efficiency, reducing costs and improving performance: 62 per cent of senior payroll professionals say they're reviewing how their company can run payroll with fewer payroll staff.
Access to greater reporting and analytics tools as part of payroll digital transformation: 45 per cent of senior payroll professionals see payroll information as a fundamental part of their commercial growth strategies.
Integrating payroll data with other HR applications and time & attendance systems: 35 per cent plan to increase integration between payroll and other business-critical systems.
The Pandemic and global payroll outsourcing
The global payroll outsourcing services market is predicted to accelerate at a compound annual growth rate (CAGR) of 5.72 per cent from 2021 to 20252. What is behind this growth?
Post-pandemic, firms have reportedly started to extend their ecosystem of vendors and suppliers and cooperate with a wider range of partners in response to several significant socio-economic changes, including supply chain disruptions, the shift to a more geographically dispersed workforce and increased consumer and employee focus on the merits of global cooperation.
The move to a more hybrid remote workforce reportedly remains the big change affecting organisations' payroll operations. For companies still processing payroll on-premises, the logistical difficulties of lockdown forced a rapid pivot to outsourced, cloud-based solutons. While firms whose payroll operations were already partially or fully outsourced looked to extend providers' coverage, due to pandemic-related drivers such as:
- The need to differentiate the employee experience
- Increasing complexity in types of employment contracts
- Mounting competitive pressures
- Focus on growth
When it comes to your global payroll function, how do you find the right balance between internal resources and outsourced expertise and what are the main considerations?
Orchestrating a payroll partner ecosystem
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Outsourcing is not solely a means to an end. Contemporary companies expect and need a true business partner. But it is important to establish what criteria are essential for selecting such a payroll partner and what the risks are. Consider how you can establish a mutually beneficial business relationship and ensure it has the staying power to weather restructuring, carve-outs and expansion.
Download ADP's guide to choosing a global payroll partner to discover the strategies behind selecting the right partner.
Sources: ADP
- The Potential of Payroll in 2024: Global payroll survey, ADP
- Technavio, 'Payroll Outsourcing Services Market by Product, Application, and Geography - Forecast and Analysis 2021-2025'