The global outsourcing industry is currently valued at $92.5 billion, with an expected growth of 8% year on year. With 44% of businesses stating that they are more likely to outsource compared to 5 years ago.
But, did you know that Payroll Outsourcing is now the most commonly outsourced service? 52% of companies stated that cost benefits, resource optimisation, compliance and risk management being the primary drivers for this move. In fact, companies that outsource their payroll save 18% over businesses that manage the function in-house.
With statistics like these, outsourcing your payroll should be a no-brainer. But, you may still not be convinced. Take a look at these to understand if it is in fact time you should be outsourcing your payroll.
1. What is the real cost of running your payroll in-house?
The common misconception is that managing your payroll in-house is much more cost-effective than outsourcing the function. The two key factors here is – the cost of risk to your businesses and the cost of your resources not focusing on impactful, strategic initiatives.
Yes, outsourcing companies charge fees, but have you considered the impact to your bottom line when it comes to fines and penalties related to non-compliance, manual processes and human error? Over and above this, the leading concern here is probably compliance, and the burden it places on in-house payroll teams. Not just because of its complexity, but because it’s forever changing. For an inexperienced payroll team member, the time and effort spent on this accounts for a minimum of 10 days a month – with no guarantee it’s been applied correctly. An outsourced payroll provider’s primary responsibility is to keep up to date with the latest compliance requirements and have in-depth experience in how to apply this for businesses to ensure their compliance.
Other bigger risks come from outdated software systems and processes that don’t protect you from payroll fraud – which impacts more than 27% of businesses. We recently did a video on the impact of payroll fraud on businesses if you want to find out more.
Besides the peace of mind and cost reduction when it comes to risk management, your team spends a minimum of 6 days a month on just payroll admin. This excludes the time required to keep up to date with the latest compliance requirements. Simply put – this is time your resources are not spending on revenue-generating opportunities to grow your business.
2. Technology advancements and data security
The reality is that the last two years has meant that there is a strong focus on cost savings and stringent processes to justify the budget for internal business investments.
Outsourcing payroll to a reputable provider that invests in the latest technology does not only secure you from the compliance and related payroll risks mentioned above, but it also guarantees your payroll is delivered accurately and on time, every time.
The biggest drivers from a technology standpoint are the improvements in security and the safeguarding of your confidential data, business continuity and the opportunity to integrate your data.
Integrating your payroll & HR solution with other business applications improves efficiencies by eliminating manual inputs – improving data accuracy and allowing access to up-to-date information in one place. It also allows for additional add-ons like employee self-service functionality for a single people management solution.
3. Doing More With Less is Not a Business Strategy
Now this, is a scenario we see too often. Businesses simply choose to ignore overtime and add lower-level resources in the hopes to manage the growing complexities and demands effective payroll management comes with.
But at what cost?
We have already discussed the risk, compliance and technology considerations. As well as the fact that resources could be spending their time more strategically and not on low-impact, non-core business activities.
Another important factor to consider here, is that it’s not just payroll, it’s your people. The following business maxim sums it up brilliantly and puts the importance of payroll and people in perspective.
“Payroll management is the lifeblood of a company’s relationship with employees. Keeping and sustaining a workforce depends on it. But mistakes in that process can jeopardise that relationship.”
In closing, 2 out of 5 businesses are choosing to outsource to improve their competitive advantage – with that number growing rapidly considering the current trends and statistics. Just for this reason, outsourcing should be part of your business strategy.
If you are still in any doubt as to whether outsourcing is the right fit for your business perhaps check out our video busting some of the payroll outsourcing myths that exist