Introduction
Payroll is a process that by definition has a direct and meaningful impact on every company employee. For an employee, getting paid timely and accurately, without worry or concern, is understandably high on the priority list. However, unlike other back-office processes where the underlying nature of work activities may include many industry or company-specific differences, Payroll differences are shaped more by country or local regulatory compliance issues, which can make the process an ideal candidate for an Outsource Service Provider that is positioned to provide specific expertise in this complex environment.
Even though Payroll is often less integrated than other processes in a Company and thus more easily outsourced, some large global companies are reevaluating outsourcing decisions and moving a large percentage of their Payroll processing [1] back in-house. This allows them to better leverage their ERP systems and gives them better control of the innovation pipeline.
Company Experience
A recent Peeriosity PeercastTM featured a large global company with over $50B in annual revenue discussing their experience with transitioning from fully outsourced Payroll processes to a model where over 70% of employees have their payroll processed in-house using the company’s predominate ERP [2] system, SAP. For the 30% of the employee base where Payroll is processed by an Outsourced Service Provider [3], they are typically located in smaller markets and countries where the predominant ERP is something other than SAP. One of the major reasons to bring 70% of Payroll back in-house [4] was to leverage existing capabilities in the service center using an SAP-based system. Other factors cited in the decision included greater sustainability, reduced cost of operations, and a greater emphasis on future innovations where there is a full line of sight to innovation opportunities, priority setting, and scheduling.
For details, Peeriosity members are encouraged to sign into the member’s area to view the complete presentation and listen to the recorded Peercast.
iPollingTM Results Review
The results from a recent Peeriosity poll created using the iPollingTM technology explore approaches Peeriosity member companies are taking to outsourcing Payroll, and for those that have experience, examining if they have either brought Payroll back in-house, or if they are considering doing so. Regarding the approaches taken, 27% of Peeriosity members have outsourced either the entire Payroll process or complete process areas. An additional 40% have outsourced partial process areas, and the remaining 33% have either no outsourcing of the Payroll process or an amount that is considered to be insignificant. Here are the details:
The second poll question asked about whether or not Payroll processes have ever been brought back in-house. For these results, 11% indicated that they experienced a significant shift to bring Payroll processes back in-house, and an additional 22% are considering doing so. The balance of 67% of member companies with outsourcing experience has no plans to change their outsourcing arrangements for Payroll.
Closing Summary
Payroll Outsourcing is a market that is increasingly stable, with large service providers like ADP able to meet the needs of companies in many markets and locations around the globe. The move to bring Payroll back in-house does still happen, but it’s not because the Service Providers can’t perform. Reasons cited by companies who have made the change include being able to better leverage their ERP systems and having better control of the innovation pipeline.
What is your long-term objective for your Payroll with regards to outsourcing? Do you have untapped opportunities to better leverage your ERP and manage the innovation pipeline?
Who are your peers and how are you collaborating with them?
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PeercastsTM” are private, professionally facilitated webcasts that feature leading member company experiences on specific topics as a catalyst for broader discussion. Access is available exclusively to Peeriosity member company employees, with consultants or vendors prohibited from attending or accessing discussion content. Members can see who is registered to attend in advance, with discussion recordings, supporting polls, and presentation materials online and available whenever convenient for the member. Using Peeriosity’s integrated email system, Peer MailTM, attendees can easily communicate at any time with other attending peers by selecting them from the list of registered attendees.
“iPollingTM” is available exclusively to Peeriosity member company employees, with consultants or vendors prohibited from participating or accessing content. Members have full visibility of all respondents and their comments. Using Peeriosity’s integrated email system, Peer MailTM, members can easily communicate at any time with others who participated in iPollingTM.
Peeriosity members are invited to log into www.peeriosity.com [5] to join the discussion and connect with Peers. Membership is for practitioners only, with no consultants or vendors permitted. To learn more about Peeriosity, click here [6].