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?

1.  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

2. 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

3. 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

4. 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

5. 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

6. “The transaction based pricing model is the widely used in payroll outsourcing contract”
Payroll Outsourcing Pricing Models
• 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.
Input 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 .
Transaction 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.
Outcomes Based Pricing
Model