ADP conducted over 400 audits of companies of all sizes and sectors and presented the findings in a white paper called: ‘TCO Analysis by ADP 2021: ‘Faced with a business crisis, is payroll outsourcing the solution? Identifying the true cost of HR administration’.
This article focuses on the benefits to businesses of reducing costs from outsourcing payroll, as identified in this ADP white paper.
Welcome to the ‘new normal’
Choosing between outsourcing payroll or processing it in-house is a major strategic decision at any time. As your business adjusts to living with the COVID-19 pandemic, becoming more agile in response to crises is even more vital to company survival. This is particularly important as HR teams try to balance effective cost management and complying with the new responsibilities of protecting staff wellbeing.
Although the wider conditions continue to be challenging, HR teams must mobilise to ensure the continuity of payroll and HR administration. The question then becomes: to control costs, do you outsource payroll or keep it in-house?
Outsource or not?
According to the ADP white paper, questions to ask yourself when deciding whether to outsource or not should include:
- Is your HR function a business strategy that sets you apart from your competitors?
- Can you use internal resource rather than outsource?
- Is your company willing to carry the cost of keeping your HR function autonomous?
It can also help your team to identify which payroll and HR tasks would be covered by keeping everything in-house or outsourcing it. The ADP white paper highlighted the following task distribution:
While the white paper doesn’t entirely discount keeping payroll and HR functions on-premise, it does note that ongoing investment in automation is needed, while HR data administration requires a specialist level of competence that may not be available internally. Plus, configuring software is an ongoing expense, and in times of technical difficulty, who does the business rely on?
Productivity gains from outsourcing
Meanwhile, ADP’s research found that across France, Italy, Spain, the UK, the Netherlands and Germany, outsourcing payroll and HR administration increased productivity by 55 percent. This allowed HR teams to halve the resources needed for admin to focus on essential HR functions.
Why outsourcing lowers costs
The white paper highlights that service providers have the resources to respond to the numerous legal and technological developments in payroll and HR administration. Since clients can benefit from the service provider’s team of legal experts, they don’t have to bear the brunt of the costs themselves. Other cost-saving initiatives include regular product functionality updates by the service provider to improve efficiency, strengthen service continuity and ensure the confidentiality of client data. The service provider can also share best practices with their clients to help them save costs.
Reducing costs in three areas
By outsourcing as a business, you will optimise three areas: resources, people, and processes. Plus, by outsourcing HR admin first, companies like yours can realise savings across these three areas. Letting a service provider take care of the most repetitive processes, such as payroll management, sick leave management or HR administration, enables companies to lower costs. You can also improve your services and maintain this level of quality over time, while keeping operations compliant.
How outsourcing enhances agility
Outsourcing offers a robust, scalable solution, allowing HR teams to free up time and resources and improving their ability to respond quickly to unforeseen events. Companies that outsource their payroll and HR administration can focus on their core business, while increasing productivity by deploying resources more strategically.
Outsourcing can also help with:
- Reducing the need for investment, as buying software licences and updating payroll and HR administration software become a thing of the past
- Taking administration from a fixed to a variable cost, mirroring the needs of the business to adapt to market conditions
- Evolving your HR function to adapt to multi-site management without spending extra cash
- Delivering lower spend as service providers offer shared, state-of-the-art solutions without clients having to buy them
Outsourcing helps you focus on business
ADP’s research highlighted that HR teams in mid-sized companies spent 45 percent of their time on repetitive admin activities, including payroll (18 percent), leave management (13 percent) or HR administration (14 percent). Against this backdrop of overloaded teams and ever-increasing regulations, outsourcing gives teams time to focus on their strategic responsibilities, while benefitting from the guidance of legal or regulatory experts.
Choosing a long-term outsourcing partner
When you choose the right outsourced payroll provider, you’re partnering with a company who shares your vision and understand the needs of your business. It’s their job to set up processes that are efficient for all stakeholders, while passing on to your team insights and best practices.
In the meantime, whatever else the economy and global crises can throw at your business, outsourcing provides you with an opportunity to reduce costs, enhance productivity and improve the level of HR service your staff experience.