Payroll is the business process and applications used to calculate the components of pay, support the distribution of funds and maintain regulatory compliance

Companies generally outsource their payroll process to reduce cost and administrative tasks

Payroll outsourcing services have really evolved from basic services such as payroll processing and fund disbursement to value-added services such as payroll advisory

Key question: - What are the leading practices in outsourcing of payroll activities? Do companies really outsource

the entire operation or keep a select set of core service with themselves?- What are the trends in payroll outsourcing industry?- What kinds of pricing models are prevalent in payroll outsourcing contracts?

Format: 4-5 slides in PPT format Evaluation: Insights, structure and content for validation

Background and Scope

Buyers Perspective

Evaluation of decision of payroll outsourcing

Defining the payroll outsourcing scope

Vendor analysis

Documentation of payroll outsourcing scope

Selection of payroll outsourcing provider

Analyzing service level agreement

Implemntation of technology

Evaluation of return on investment

Vendors Perspective

Offering a unified platform

Statutory and regulatory compliance across

national borders

Lowering the IT and development expense of

buyers

Taxes evaluation, earing/deduction auditing,

employee self-service portal, and help-desk

Return on investment and impovising cash

forcasting

Offer national and multi-country payroll strucutre

“The payroll processing is the most outsourced process of the HR process and is on a maturity stage”

Leading Practices in Payroll Outsourcing

Note : The performance benchmarks considered in assessing “Best Practices” include cost, productivity, process quality, head count, technology and structure

The organization with payroll process choose one of the three option: in-house payroll activity, partial

outsource and rest in-house, and fully outsoruce.

Organization evalute the decision of outsourcing the payroll on the basis of three major factors:

minimization of operational cost, best outcome of internal and extenal competencies, and meeting

organizational objectives.

According to National Small Business Association (NSBA) 2013 Small Business Taxation Survey, 40% of

organizations reported outsourcing their payroll function; 60% reported handling it internally. While

large organization outsource their partial payroll process and rest handling internally.

Additionally, according to Ernst and Young Global Payroll Surevey in 2013, out of 161 repondents

approximately 60% responded to have a hybrid payroll process; both partial outsourced and in-house.

Thus it is difficult for an organization of decide which payroll process to be outsourced and which to keep

in-house considering the factors such as expense, quality, dependability on service, authority over

system, internal employee satisfaction ration, and return on investment.

“Cost, competencies and organizational objectives are the major factors analyzed during outsourcing the payroll activity”

Defining Payroll Outsourcing Scope

The major targeted market by the payroll outsourcing service provider are the small and mid-size

organizations.

Since the market has promising potential within itself, many venture capital and equity firms are

strategizing to venture the market.

Global payroll service organization are strategically focusing on the organic and inorganic activity;

specially for new product development and industry partnership.

For catering the multi-country payroll requirement the principle suppliers are partnering with the regional

organization having payroll management platform to deliver the service.

Country specific statutory compliance and filling is the major driving for multi-national organization to

adopt the multi-country payroll outsourcing service

Cost and compliance will remain fundamentally important requirements of payroll outsourcing.

Retail, manufacturing, and financial services will continue to be the largest purchasers of payroll services

EMEA and APAC are the leading region for serving most of the payroll outsourced projects.

Trends In Payroll Outsourcing Industry 1/2

From techology point of view the cloud based offering will boost the need of new applications and

integration of payroll system with other HCM systems over a common platform.

The major depending factor for the payroll outsourcing would be the increasing demand for multi-country

service and integrated HCM platform.

Of all payroll service the major payroll services outsourced by the organizationz are year-end tax form

printing, payroll tax preparation and filing, year-end tax form distribution, check printing, and

garnishment administration.

Compliance and controls, process and technology integration, cost savings and productivity

improvements, and payroll accuracy would the four major focus areas in future by the leading vendors

for enhancing their product efficiency.

Trends In Payroll Outsourcing Industry 2/2

“The transaction based pricing model is the widely used in payroll outsourcing contract”

Payroll Outsourcing Pricing Models

Input Based Pricing Model• The payment to service provider is based on an estimated amount of

input provided by the company.• FTE-based pricing model is commonly used input based pricing

model.

Transaction Based Pricing Model• Where payment to service provider is based upon the number of

transactions processed by the service provider.• Here transactions are referred to ‘per payslip’ for payroll processing .

Outcomes Based Pricing Model• The service provider is paid on the basis of business result achieved

by the customer through service provider’s contribution• The result could be the reduction operating expenses or return on

investment.