3 Reasons Why Payroll Outsourcing is One of 2020’s Fastest-Growing HR Industries
Exploring the key drivers behind this year's popularity boom in payroll outsourcing
National Payroll Week took place last week in the US against a backdrop of considerable growth in the payroll outsourcing industry. This wave of organisations moving towards support from external payroll providers has been boosted in part by reactions to the COVID pandemic.
Outsourcing of payroll duties to trusted third-party suppliers has been on the increase for some years now – a recent report predicted the market to reach $22.8 billion by 2027, and cited substantial growth in the LATAM and APAC markets beyond the current key locations of the United States and Europe. But why is the industry seeing this considerable uptick in popularity as early as 2020?
1. Businesses are turning to payroll providers to navigate COVID payroll changes
Governments around the world have responded to the COVID pandemic by bringing in financial relief measures for organisations and their workers. There have been stimulus loans to companies to ensure they can continue to pay staff, as well as solutions such as payroll tax payment deferrals in Australia and new allowances impacting COVID-related leave and absences, such as those covered in the United States’ CARES Act.
Payroll-responsible staff have been required to quickly digest and learn a large amount of new information for calculations and processing – particularly those running payrolls in multiple countries. Add to that the other resource constraints of the pandemic, such as lower staff numbers, more remote or dispersed workers and increased workloads. As a result, many are looking to professional third-party suppliers to take over the responsibility and handle the new COVID requirements to ensure accurate payrolls.
2. Using a payroll provider enables remote work
Numbers of remote workers remain high for organisations round the world, and many are turning to payroll outsourcing to help support this new de-centralisation from main office locations. In countries where payroll rules differ by state or territory, staff working from home can lead to variations from usual calculations and processing- an added complication for already stretched teams. Some organisations have staff displaced due to the pandemic now living in completely different countries and requiring local funds. Provided they have a compliant local entity set up, payroll providers can remove the administrative burden from payrolling through this entity. If you do not have your own local entity, there are still mechanisms available that will allow you to payroll staff in that location – see Employer of Record solutions.
There may also be certain home working allowances now due to remote employees that need to be worked into the payroll, such as internet contributions and so on. A payroll provider has expert knowledge when it comes to remote staff – and their platforms and processes are built for decentralised staff to easily obtain their personal payroll information.
3. Outsourcing payroll saves time, money & risk
Utilising a payroll provider reduces timescales – particularly where cross-border transactions are taking place. With an understanding of the operational elements of your business, your provider can suggest the communication chain that works best for you and ensures the shortest possible remittance of funds. A balance of automation and human expertise is the ideal recipe for a stress-free, timely and cost-efficient process.
In payroll outsourcing, fees for trained payroll staff and associated tools are consolidated into a single administrative fee, and larger numbers of workers can equal a greater long-term saving. However, payroll support is not only beneficial financially for organisations with large workforces. When transferring funds across borders, payroll providers also have the best, bulk deals on foreign exchange which can save companies unnecessary expenditure on bank charges and currency losses.
Bringing onboard the right provider with local expert knowledge can also circumvent the risks attached to incorrect processing and payment of taxes, which can be heavily penalised by local authorities. A compliant provider on top of the latest developments and attuned to the specific needs of your company is key to preventing compliance headaches.
Has this blog piqued your interest on how a payroll provider could support your organisation during COVID and beyond? Looking for personalised advice? For more information about Mauve Group’s Global Payroll solutions, contact us here for a free no-obligation proposal.