The document summarizes a study on the total cost of ownership (TCO) of payroll and human resources administration for organizations. Some key findings include:
1) Organizations often underestimate the true costs of administering payroll, benefits, and other HR functions due to hidden costs.
2) Outsourcing multiple HR functions to a single vendor can reduce costs by an average of 32% compared to using multiple in-house systems.
3) Providing employee self-service reduces the TCO of workforce administration by 50% for large organizations compared to those without self-service.
This document summarizes the key findings of a study conducted by PwC on the total cost of ownership (TCO) of payroll, time & attendance, HR data administration, and health & benefits functions. The study found that outsourcing these functions leads to significantly lower costs compared to in-house administration. Organizations that outsource multiple functions to a single vendor see additional cost savings by avoiding "seams costs" associated with integrating different systems. Many organizations underestimate TCO by failing to account for "hidden costs" like indirect labor and system maintenance.
PwC_TCO whitepaper_Exposing the hidden cost of payroll and HR administration_...Karim Hachem
This document summarizes the key findings of a study conducted by PwC on the total cost of ownership (TCO) of payroll, time & attendance, HR data administration, and health & benefits functions. The study found that outsourcing these functions leads to significantly lower costs compared to in-house administration. Organizations that outsource multiple functions to a single vendor see additional cost savings by avoiding "seams costs" associated with integrating different systems. Many organizations underestimate TCO by failing to account for "hidden costs" like indirect labor and system maintenance.
1. The study found that the total cost of ownership for in-house administration of payroll, workforce administration, time & attendance, and health & welfare benefits is surprisingly high, averaging over $1,400 per employee per year for large organizations and nearly $2,000 per employee per year for mid-size organizations.
2. Contrary to expectations, administration costs have actually increased rather than decreased since 2003 despite technological advances, as organizations have focused more on technology transformation than process transformation.
3. Outsourcing these functions continues to provide overall cost advantages, reducing total cost of ownership by an average of 18% compared to in-house administration.
4. Utilizing a common vendor or solution to manage
The Hidden Reality of Payroll & HR Administration CostsAdrian Boucek
This document summarizes the findings of a study on the total cost of ownership (TCO) of payroll and HR administration functions. The study analyzed data from 279 organizations to determine key cost drivers and the most cost-effective strategies. It found that organizations tend to underestimate administration costs and can save 18-32% by outsourcing functions or using a common vendor over separate best-of-breed solutions. Providing self-service and integrating time & attendance with payroll also significantly reduce costs. Comprehensive process transformation, not just technology, leads to the greatest cost effectiveness.
The document summarizes a study on the total cost of ownership (TCO) of payroll and human resources (HR) administration for organizations. Three key findings are:
1. Administering payroll, workforce administration, time & attendance, and health & welfare benefits in-house requires a large commitment of resources, typically over $1,400 per employee per year for large organizations and nearly $2,000 per employee per year for mid-size organizations. Hidden costs account for over 50% of the TCO.
2. Contrary to expectations, the TCO of payroll is increasing despite technological advances as organizations focus more on technology than process transformation.
3. Outsourcing payroll and HR functions reduces
In-house vs. Outsourced Payroll Processing: Separating Fact from FictionAdrian Boucek
By linking payroll, HR, talent, benefits and time & labor management, an integrated HCM solution can deliver all the perceived benefits of in-house processing with significant added advantages — including superior economies of scale, improved visibility, real-time processing, world-class security and protection against compliance risk.
This document summarizes the hidden costs associated with managing HR processes internally. It finds that the average company spends over $2,000 per employee per year on payroll, benefits, and HR administration alone when managing these processes internally. Hidden costs, like system maintenance and indirect labor, account for 63% of total spending. Outsourcing individual HR processes fails to reduce total costs of ownership, as integration between systems introduces additional expenses. The document advocates taking a holistic approach to HR that considers processes, technology, and people in order to gain efficiencies and better control costs.
This document summarizes the key findings of a study conducted by PwC on the total cost of ownership (TCO) of payroll, time & attendance, HR data administration, and health & benefits functions. The study found that outsourcing these functions leads to significantly lower costs compared to in-house administration. Organizations that outsource multiple functions to a single vendor see additional cost savings by avoiding "seams costs" associated with integrating different systems. Many organizations underestimate TCO by failing to account for "hidden costs" like indirect labor and system maintenance.
PwC_TCO whitepaper_Exposing the hidden cost of payroll and HR administration_...Karim Hachem
This document summarizes the key findings of a study conducted by PwC on the total cost of ownership (TCO) of payroll, time & attendance, HR data administration, and health & benefits functions. The study found that outsourcing these functions leads to significantly lower costs compared to in-house administration. Organizations that outsource multiple functions to a single vendor see additional cost savings by avoiding "seams costs" associated with integrating different systems. Many organizations underestimate TCO by failing to account for "hidden costs" like indirect labor and system maintenance.
1. The study found that the total cost of ownership for in-house administration of payroll, workforce administration, time & attendance, and health & welfare benefits is surprisingly high, averaging over $1,400 per employee per year for large organizations and nearly $2,000 per employee per year for mid-size organizations.
2. Contrary to expectations, administration costs have actually increased rather than decreased since 2003 despite technological advances, as organizations have focused more on technology transformation than process transformation.
3. Outsourcing these functions continues to provide overall cost advantages, reducing total cost of ownership by an average of 18% compared to in-house administration.
4. Utilizing a common vendor or solution to manage
The Hidden Reality of Payroll & HR Administration CostsAdrian Boucek
This document summarizes the findings of a study on the total cost of ownership (TCO) of payroll and HR administration functions. The study analyzed data from 279 organizations to determine key cost drivers and the most cost-effective strategies. It found that organizations tend to underestimate administration costs and can save 18-32% by outsourcing functions or using a common vendor over separate best-of-breed solutions. Providing self-service and integrating time & attendance with payroll also significantly reduce costs. Comprehensive process transformation, not just technology, leads to the greatest cost effectiveness.
The document summarizes a study on the total cost of ownership (TCO) of payroll and human resources (HR) administration for organizations. Three key findings are:
1. Administering payroll, workforce administration, time & attendance, and health & welfare benefits in-house requires a large commitment of resources, typically over $1,400 per employee per year for large organizations and nearly $2,000 per employee per year for mid-size organizations. Hidden costs account for over 50% of the TCO.
2. Contrary to expectations, the TCO of payroll is increasing despite technological advances as organizations focus more on technology than process transformation.
3. Outsourcing payroll and HR functions reduces
In-house vs. Outsourced Payroll Processing: Separating Fact from FictionAdrian Boucek
By linking payroll, HR, talent, benefits and time & labor management, an integrated HCM solution can deliver all the perceived benefits of in-house processing with significant added advantages — including superior economies of scale, improved visibility, real-time processing, world-class security and protection against compliance risk.
This document summarizes the hidden costs associated with managing HR processes internally. It finds that the average company spends over $2,000 per employee per year on payroll, benefits, and HR administration alone when managing these processes internally. Hidden costs, like system maintenance and indirect labor, account for 63% of total spending. Outsourcing individual HR processes fails to reduce total costs of ownership, as integration between systems introduces additional expenses. The document advocates taking a holistic approach to HR that considers processes, technology, and people in order to gain efficiencies and better control costs.
The document discusses how outsourcing human resource functions, known as human resource outsourcing (HRO), is becoming a key trend that is reshaping the future of HR departments. HRO can help organizations reduce costs while improving HR's strategic impact by standardizing, centralizing, and automating administrative HR processes. The document outlines the benefits of HRO such as cost savings, increased efficiency, and allowing HR to focus on more strategic priorities. It also discusses challenges such as change management and the need for clear communication during the implementation of HRO.
Top Five HR Process Integrations That Drive Business ValueSumTotal
Integration is the new currency of HR. Empirical research reveals that improving HR process, technology, and data integration to eliminate silos and facilitate cross-functional reporting affords significant business benefits.
According to SumTotal’s 2010 State of Global People Management worldwide survey of human resources (HR) leaders, organizations with fully integrated HR and talent processes, systems, and data outperform those organizations that have not integrated by 41% across twelve key HR and business operating metrics.
There is little doubt that improving HR integration and eliminating silos affords significant benefits. Based on SumTotal’s global survey data, this whitepaper dives into the top five HR process integrations that provide organizations with the most business value: better internal, talent mobility, decreased voluntary turnover, better workforce alignment to overall business strategy, improved workforce productivity and faster on-boarding (time-to-productivity).
This document provides a quiz with 69 multiple choice questions about staffing processes, policies, metrics, and legal compliance. Some key topics covered include the centralization of staffing functions, integration of HRIS systems, outsourcing of HR activities, evaluation of staffing processes, and legal record keeping/reporting requirements.
This document summarizes a study conducted on employees of Infosys Ltd. to understand the relationship between job satisfaction, intent to quit, and other organizational behavior factors. A survey was administered to 26 Infosys employees, measuring variables like procedural justice, distributive justice, leader-member exchange, trust in organization, conscientiousness, organizational citizenship behavior, and ethical leadership. Regression analysis and hypothesis testing were used to analyze the data. The analysis found job satisfaction was positively related to the other factors, and up to 72% of variation in job satisfaction could be explained by these factors. Intent to quit was also positively related to the factors but up to 50% of its variation was explained. The study aims to help Inf
GESNA - Human Capital Insights Magazine - Volume 5Stacy Klein
This document discusses several strategies that large companies are using to increase employee happiness and productivity. It begins by explaining how happy employees are 12% more productive while unhappy employees are 10% less productive. It then provides examples of how some companies, like Intuitive Research and Technology Corporation, focus on bonuses and profit sharing, certification training, health programs, benefits for veterans, and general benefits allowances to boost employee satisfaction. The document concludes by advising HR leaders to focus on screening, recognition, work-life balance, workplace friendships, and playing to employee strengths in order to maximize happiness and retention while minimizing costs from lost productivity and turnover.
HR and workforce planning for the recovery guest960da8
HR managers are currently seeking solutions to the problems of the GFC. Argues that HR managers should learn from the mistakes of the 1990s and prepare for the recovery.
This document provides an overview of emerging trends in human resource management and human resource planning. It discusses topics like new conceptualizations of jobs, alternative work arrangements, balancing work and family, and retaining employees. It also explores outsourcing trends in human resources and provides examples of how companies are outsourcing HR functions. The document aims to explore current issues in HRM and how the field is changing.
This document summarizes key aspects of an article on alignment and compensation. It discusses reasons for high commitment management practices, including increased productivity and reduced costs. It outlines seven practices of successful organizations: extensive training, contingent compensation, self-managed teams, selective hiring, employment security, reduced status distinction, and information sharing. It discusses using compensation to achieve alignment with organizational goals and strategies. Various pay strategies are mentioned, including individual incentives, group bonuses, and creating an "ownership culture". The document advocates aligning compensation with behaviors that further the organization's success and strategic goals.
This document summarizes a research paper that analyzes the effectiveness of electronic human resource management (e-HRM) compared to traditional HRM. The study was conducted among 45 employees of public organizations in Moradabad, India. The study found that e-HRM is more effective and convenient than traditional HRM. It also found that employees were generally satisfied with e-HRM processes and felt it made their work easier. The paper concludes that e-HRM enhances workability for employees through different activities, policies and procedures compared to traditional HRM.
Shrm survey findings using competencies to achieve business unit success finalshrm
SHRM surveyed executives of business units other than HR (e.g., CEO, CFO, Vice President) to learn more about their views of what it takes for leaders to be successful across HR departments and different functional areas such as finance and accounting, sales and marketing, and IT. Specifically, this report focuses on the competencies needed now and in the future, including Business Acumen, Communication, Consultation, Critical Evaluation, Ethical Practice, Global and Cultural Effectiveness, Human Resource Expertise, Leadership and Navigation, and Relationship Management. The report also looks at which competencies are lacking in the labor pools of candidates for HR and other business units, and how to address those competency gaps.
The document discusses global performance management strategies and trends for HR in 2010. Key points include:
1. Employee engagement and retention of top performers will be priorities as economies recover from recession.
2. Organizations that have an integrated talent strategy aligned to business objectives, dedicated HR leadership, and integrated talent systems outperform those that do not.
3. Providing career development and a challenging work environment are most effective for retaining top performers. Leveraging HR technology can also increase retention and mobility.
The New Process Genome: Recoding Business Process Work to Thrive in the Moder...Cognizant
Work processes, including those in the banking, healthcare and insurance industries, are undergoing significant change -- making it hard for executives to maintain the status quo. Best practices and new research insights emphasize the new role of shared services,and how businesses can begin to re-code their business process architecutres to reduce costs, drive innovation and successfully compete in the digital economy.
This document provides an overview of recruitment and selection as discussed in chapter 9 of the book "Leading, Managing and Developing People". It begins by outlining the key learning outcomes of the chapter, which include understanding the importance of recruitment and selection for people management and organizational success. It then discusses recruitment and selection as pivotal activities that determine who can be led, managed and developed within an organization. The document emphasizes that recruitment and selection must be conducted professionally, fairly and ethically. It presents recruitment and selection as a topical area that organizations must approach mindfully given current social and economic trends.
This document provides an overview of a quarterly research eBook from the Human Capital Institute (HCI) called Talent Pulse. It explores trends and challenges in managing talent in areas like HR strategy and analytics, talent acquisition, learning and development, and management and leadership. Each quarterly issue focuses on one of these areas and includes statistically rigorous data analysis, expert interviews, and discussion of key topics determined by a survey of HR and business professionals. This particular issue focuses on the implications of the Affordable Care Act, use of HR data analytics, and workplace agility. It finds that while many organizations have addressed preparing for the Affordable Care Act, concerns remain regarding its unknown future impacts. It also reports that most
The document discusses several topics related to enterprise IT management including:
- Problems with payroll checks at ASU and potential problems with their student information system implementation.
- Mixed reactions to ASU's implementation approach and questions that could be asked to interview subjects.
- Whether ASU's approach should be recommended to other universities.
- Requirements for selecting an ERP system and how Hunter Manufacturing could have improved their evaluation and implementation process.
- The benefits and drawbacks of open source ERP software.
- Privacy and monitoring issues from a court case on employer monitoring.
- Ethical issues from a case against iiNet for copyright infringement by users.
- Reasons for resistance in enforcing SLAs between
Best Practices in Creating and Using Employee Survey Feedback Data as a Means...Ardavan Shahroodi
This document summarizes best practices for using employee survey feedback to improve retention and engagement. It discusses how competently designed surveys can provide valuable insight into organizational dynamics. Surveys should focus on questions that are essential to understanding how employees feel about their workplace. Proper design includes involving cross-functional teams, learning from past surveys, and communicating frequently with stakeholders before, during and after the survey process. The document also provides examples of how companies like Heinz and Astellas Pharma have successfully used survey data to implement policies to attract top talent and create dynamic work environments.
Hidden Reality of Payroll & HR Administration CostsRichelle Massé
1. The study found that the total cost of ownership for in-house administration of payroll, workforce administration, time & attendance, and health & welfare benefits is surprisingly high, averaging over $1,400 per employee per year for large organizations and nearly $2,000 per employee per year for mid-size organizations.
2. Contrary to expectations, administration costs have actually increased rather than decreased since 2003 despite technological advances, as organizations have focused more on technology transformation than process transformation.
3. Outsourcing these functions continues to provide overall cost advantages, reducing total cost of ownership by an average of 18% compared to in-house administration.
4. Utilizing a common vendor or solution to manage
This document discusses the financial opportunities of outsourcing human resources functions to a Professional Employer Organization (PEO). Key points include:
- Outsourcing HR to a PEO can save businesses significant time by consolidating transactional HR tasks and responsibilities with a single provider. Surveys found businesses saved an average of 23-48 hours per week depending on company size.
- This time savings provides opportunities to reduce operating costs by eliminating HR staff, or to generate additional revenue by redeploying staff to core business activities. One example found potential bottom line savings of $60,372 and top line gains of $112,320 annually for a company outsourcing to a PEO.
- PEO
This document discusses how professional employer organizations (PEOs) can help small and mid-sized companies with human resources needs. It finds that the top reasons companies work with or consider a PEO are to help control healthcare costs, allow key personnel to focus on core business functions rather than HR administration, and improve HR services. The ability to offer competitive healthcare benefits at a reasonable cost is the primary driver for many companies to outsource HR functions through a PEO. With rising regulation and healthcare costs, PEOs are becoming an increasingly attractive option especially for smaller businesses with limited HR resources.
An Overview of Human Resource Outsourcing.pdfKatie Robinson
This document provides an overview of human resource outsourcing. It defines human resources, outsourcing, and human resource outsourcing. It discusses the history of outsourcing and categories of human resource outsourcing such as professional employer organizations, business process outsourcing, and application service providers. Trends in human resource outsourcing are also examined, such as a growing focus on cost savings and expertise rather than just cost savings alone. Hybrid models that use a mix of in-house and outsourced human resource functions are becoming more common.
Cost management aims to plan and control project or business budgets through activities like planning, estimating, budgeting, financing, managing, and controlling costs. It covers the full project lifecycle from initial planning to measuring actual costs and completion.
Intangible costs like morale are difficult to measure, while tangible costs like materials are easy to quantify but management focuses more on tangible costs. One major tangible benefit is budgetary savings, as project managers control budgets and allocate resources to stay within or under budget. This impacts workforce productivity and determines if a project is under or over budget. Savings from project managers increase organizational returns and funds future projects.
The document discusses how outsourcing human resource functions, known as human resource outsourcing (HRO), is becoming a key trend that is reshaping the future of HR departments. HRO can help organizations reduce costs while improving HR's strategic impact by standardizing, centralizing, and automating administrative HR processes. The document outlines the benefits of HRO such as cost savings, increased efficiency, and allowing HR to focus on more strategic priorities. It also discusses challenges such as change management and the need for clear communication during the implementation of HRO.
Top Five HR Process Integrations That Drive Business ValueSumTotal
Integration is the new currency of HR. Empirical research reveals that improving HR process, technology, and data integration to eliminate silos and facilitate cross-functional reporting affords significant business benefits.
According to SumTotal’s 2010 State of Global People Management worldwide survey of human resources (HR) leaders, organizations with fully integrated HR and talent processes, systems, and data outperform those organizations that have not integrated by 41% across twelve key HR and business operating metrics.
There is little doubt that improving HR integration and eliminating silos affords significant benefits. Based on SumTotal’s global survey data, this whitepaper dives into the top five HR process integrations that provide organizations with the most business value: better internal, talent mobility, decreased voluntary turnover, better workforce alignment to overall business strategy, improved workforce productivity and faster on-boarding (time-to-productivity).
This document provides a quiz with 69 multiple choice questions about staffing processes, policies, metrics, and legal compliance. Some key topics covered include the centralization of staffing functions, integration of HRIS systems, outsourcing of HR activities, evaluation of staffing processes, and legal record keeping/reporting requirements.
This document summarizes a study conducted on employees of Infosys Ltd. to understand the relationship between job satisfaction, intent to quit, and other organizational behavior factors. A survey was administered to 26 Infosys employees, measuring variables like procedural justice, distributive justice, leader-member exchange, trust in organization, conscientiousness, organizational citizenship behavior, and ethical leadership. Regression analysis and hypothesis testing were used to analyze the data. The analysis found job satisfaction was positively related to the other factors, and up to 72% of variation in job satisfaction could be explained by these factors. Intent to quit was also positively related to the factors but up to 50% of its variation was explained. The study aims to help Inf
GESNA - Human Capital Insights Magazine - Volume 5Stacy Klein
This document discusses several strategies that large companies are using to increase employee happiness and productivity. It begins by explaining how happy employees are 12% more productive while unhappy employees are 10% less productive. It then provides examples of how some companies, like Intuitive Research and Technology Corporation, focus on bonuses and profit sharing, certification training, health programs, benefits for veterans, and general benefits allowances to boost employee satisfaction. The document concludes by advising HR leaders to focus on screening, recognition, work-life balance, workplace friendships, and playing to employee strengths in order to maximize happiness and retention while minimizing costs from lost productivity and turnover.
HR and workforce planning for the recovery guest960da8
HR managers are currently seeking solutions to the problems of the GFC. Argues that HR managers should learn from the mistakes of the 1990s and prepare for the recovery.
This document provides an overview of emerging trends in human resource management and human resource planning. It discusses topics like new conceptualizations of jobs, alternative work arrangements, balancing work and family, and retaining employees. It also explores outsourcing trends in human resources and provides examples of how companies are outsourcing HR functions. The document aims to explore current issues in HRM and how the field is changing.
This document summarizes key aspects of an article on alignment and compensation. It discusses reasons for high commitment management practices, including increased productivity and reduced costs. It outlines seven practices of successful organizations: extensive training, contingent compensation, self-managed teams, selective hiring, employment security, reduced status distinction, and information sharing. It discusses using compensation to achieve alignment with organizational goals and strategies. Various pay strategies are mentioned, including individual incentives, group bonuses, and creating an "ownership culture". The document advocates aligning compensation with behaviors that further the organization's success and strategic goals.
This document summarizes a research paper that analyzes the effectiveness of electronic human resource management (e-HRM) compared to traditional HRM. The study was conducted among 45 employees of public organizations in Moradabad, India. The study found that e-HRM is more effective and convenient than traditional HRM. It also found that employees were generally satisfied with e-HRM processes and felt it made their work easier. The paper concludes that e-HRM enhances workability for employees through different activities, policies and procedures compared to traditional HRM.
Shrm survey findings using competencies to achieve business unit success finalshrm
SHRM surveyed executives of business units other than HR (e.g., CEO, CFO, Vice President) to learn more about their views of what it takes for leaders to be successful across HR departments and different functional areas such as finance and accounting, sales and marketing, and IT. Specifically, this report focuses on the competencies needed now and in the future, including Business Acumen, Communication, Consultation, Critical Evaluation, Ethical Practice, Global and Cultural Effectiveness, Human Resource Expertise, Leadership and Navigation, and Relationship Management. The report also looks at which competencies are lacking in the labor pools of candidates for HR and other business units, and how to address those competency gaps.
The document discusses global performance management strategies and trends for HR in 2010. Key points include:
1. Employee engagement and retention of top performers will be priorities as economies recover from recession.
2. Organizations that have an integrated talent strategy aligned to business objectives, dedicated HR leadership, and integrated talent systems outperform those that do not.
3. Providing career development and a challenging work environment are most effective for retaining top performers. Leveraging HR technology can also increase retention and mobility.
The New Process Genome: Recoding Business Process Work to Thrive in the Moder...Cognizant
Work processes, including those in the banking, healthcare and insurance industries, are undergoing significant change -- making it hard for executives to maintain the status quo. Best practices and new research insights emphasize the new role of shared services,and how businesses can begin to re-code their business process architecutres to reduce costs, drive innovation and successfully compete in the digital economy.
This document provides an overview of recruitment and selection as discussed in chapter 9 of the book "Leading, Managing and Developing People". It begins by outlining the key learning outcomes of the chapter, which include understanding the importance of recruitment and selection for people management and organizational success. It then discusses recruitment and selection as pivotal activities that determine who can be led, managed and developed within an organization. The document emphasizes that recruitment and selection must be conducted professionally, fairly and ethically. It presents recruitment and selection as a topical area that organizations must approach mindfully given current social and economic trends.
This document provides an overview of a quarterly research eBook from the Human Capital Institute (HCI) called Talent Pulse. It explores trends and challenges in managing talent in areas like HR strategy and analytics, talent acquisition, learning and development, and management and leadership. Each quarterly issue focuses on one of these areas and includes statistically rigorous data analysis, expert interviews, and discussion of key topics determined by a survey of HR and business professionals. This particular issue focuses on the implications of the Affordable Care Act, use of HR data analytics, and workplace agility. It finds that while many organizations have addressed preparing for the Affordable Care Act, concerns remain regarding its unknown future impacts. It also reports that most
The document discusses several topics related to enterprise IT management including:
- Problems with payroll checks at ASU and potential problems with their student information system implementation.
- Mixed reactions to ASU's implementation approach and questions that could be asked to interview subjects.
- Whether ASU's approach should be recommended to other universities.
- Requirements for selecting an ERP system and how Hunter Manufacturing could have improved their evaluation and implementation process.
- The benefits and drawbacks of open source ERP software.
- Privacy and monitoring issues from a court case on employer monitoring.
- Ethical issues from a case against iiNet for copyright infringement by users.
- Reasons for resistance in enforcing SLAs between
Best Practices in Creating and Using Employee Survey Feedback Data as a Means...Ardavan Shahroodi
This document summarizes best practices for using employee survey feedback to improve retention and engagement. It discusses how competently designed surveys can provide valuable insight into organizational dynamics. Surveys should focus on questions that are essential to understanding how employees feel about their workplace. Proper design includes involving cross-functional teams, learning from past surveys, and communicating frequently with stakeholders before, during and after the survey process. The document also provides examples of how companies like Heinz and Astellas Pharma have successfully used survey data to implement policies to attract top talent and create dynamic work environments.
Hidden Reality of Payroll & HR Administration CostsRichelle Massé
1. The study found that the total cost of ownership for in-house administration of payroll, workforce administration, time & attendance, and health & welfare benefits is surprisingly high, averaging over $1,400 per employee per year for large organizations and nearly $2,000 per employee per year for mid-size organizations.
2. Contrary to expectations, administration costs have actually increased rather than decreased since 2003 despite technological advances, as organizations have focused more on technology transformation than process transformation.
3. Outsourcing these functions continues to provide overall cost advantages, reducing total cost of ownership by an average of 18% compared to in-house administration.
4. Utilizing a common vendor or solution to manage
This document discusses the financial opportunities of outsourcing human resources functions to a Professional Employer Organization (PEO). Key points include:
- Outsourcing HR to a PEO can save businesses significant time by consolidating transactional HR tasks and responsibilities with a single provider. Surveys found businesses saved an average of 23-48 hours per week depending on company size.
- This time savings provides opportunities to reduce operating costs by eliminating HR staff, or to generate additional revenue by redeploying staff to core business activities. One example found potential bottom line savings of $60,372 and top line gains of $112,320 annually for a company outsourcing to a PEO.
- PEO
This document discusses how professional employer organizations (PEOs) can help small and mid-sized companies with human resources needs. It finds that the top reasons companies work with or consider a PEO are to help control healthcare costs, allow key personnel to focus on core business functions rather than HR administration, and improve HR services. The ability to offer competitive healthcare benefits at a reasonable cost is the primary driver for many companies to outsource HR functions through a PEO. With rising regulation and healthcare costs, PEOs are becoming an increasingly attractive option especially for smaller businesses with limited HR resources.
An Overview of Human Resource Outsourcing.pdfKatie Robinson
This document provides an overview of human resource outsourcing. It defines human resources, outsourcing, and human resource outsourcing. It discusses the history of outsourcing and categories of human resource outsourcing such as professional employer organizations, business process outsourcing, and application service providers. Trends in human resource outsourcing are also examined, such as a growing focus on cost savings and expertise rather than just cost savings alone. Hybrid models that use a mix of in-house and outsourced human resource functions are becoming more common.
Cost management aims to plan and control project or business budgets through activities like planning, estimating, budgeting, financing, managing, and controlling costs. It covers the full project lifecycle from initial planning to measuring actual costs and completion.
Intangible costs like morale are difficult to measure, while tangible costs like materials are easy to quantify but management focuses more on tangible costs. One major tangible benefit is budgetary savings, as project managers control budgets and allocate resources to stay within or under budget. This impacts workforce productivity and determines if a project is under or over budget. Savings from project managers increase organizational returns and funds future projects.
Organizations need to focus on integrating business processes to obtain efficiencies of operation. While integrating one process to the other is important, it is also important to look inwardly to see if components of individual processes are integrated enough within themselves. An integrated Human Capital Management addresses the human resource issues facing organizations, especially performance and attrition. This paper proposes such an integrated system that is powered by the seamlessness offered by an enterprise application and the optimizing capabilities of an analysis engine.
HR Technology Competencies: New Roles for HR ProfessionalsValerieBez1
1) The development of HR technologies and workforce analytics is helping to transform HR into a decision science with a measurable impact on business results.
2) The expanded use of the Internet for the delivery of HR applications, especially on a service basis, is emphasizing the importance of HRIS for organizations of all sizes. This may drive the demand for simplicity as more non-HR professionals have access to these tools.
3) HR professionals must improve their knowledge of HR technology to take advantage of new opportunities and roles, as well as to demonstrate HR's strategic value through cost reductions and improved productivity enabled by technology.
The Importance of Total Cost of Ownership: How Midsized Companies Can Find Co...Adrian Boucek
One of the most important metrics that organizations need to think about is the total cost of their workforce. Referred to as Total Cost of Ownership (TCO), this measure enables an
organization to obtain a realistic picture of what they are actually spending on their employees and the management of them.
This document provides an overview of the impact of compensation on human resource management. It discusses compensation as the remuneration received by employees in return for their contributions. The literature review examines how strategic human resource management aims to accomplish business objectives through consistent HR policies and practices. Several studies are cited that look at how bundles of HR practices can enhance firm performance. The conclusions note that while higher pay levels are believed to attract better talent and improve perceived organizational performance, the present study did not find a link between pay level and return on assets. Pay for performance was also found to be negatively associated with subjective performance measures and return on assets.
HR is at a critical stage in its journey - from transactional back-office operator to true business partner. But the function has hit a roadblock. Recent research suggests that in many companies HR teams are still not adding as much value to the business as they could.
This document discusses the importance of human capital management for contractors. It states that managing human capital, including benefits, regulatory compliance, employee development, and knowledge transfer, is challenging but critical for contractors. It also outlines six key areas - benefits management, regulatory compliance, employee development, knowledge transfer, IT security and integration, and recruitment management - that any human capital management solution should address. Finally, it provides examples of how automation can help with benefits administration, personnel data maintenance, and employee self-service.
For some time, HR professionals have aspired to create a “paperless office” with automated technology to create, store, and manage all of the employee information necessary to run a business effectively. Today the technology exists to turn this goal into reality with a desirable Return on Investment (ROI). Current business trends toward environmental sustainability provide the additional impetus to make the business case for paperless HR today, to help support the workforce of tomorrow.
Increasingly, reducing the use of paper in business processes will become a necessary step toward corporate sustainability efforts. Some global and regional companies are pushing sustainability initiatives not only within their own operations, but also out into the supply chain, encouraging vendors and partners to implement greener business practices. “Going green” is a competitive response to changes in social attitudes and to the expectations of customers, employees, and stakeholders.
Because of the many paper-intensive administrative processes in the Human Resources department, it is a great area to embrace corporate sustainability objectives by eliminating paper. Going paperless also saves costs and increases the efficiency and accuracy of HR functions. It can even help with recruiting and engagement—many sought-after job candidates and top-performing employees are passionate about environmental causes. This white paper provides information on the benefits of a paperless HR department and the technology for putting it in place.
High involvement work practices (HIWPs) are a set of interconnected human resource practices aimed at improving employee performance through increasing skills and motivation. They generally involve high skills requirements for jobs, team-based work designs, and incentive structures. HIWPs allow employees more input and organizations to optimize abilities efficiently. They are connected to workplace changes and are a constructive model for high performance work systems. HIWPs can improve competence and commitment while making organizations more dynamic and adaptable to change.
Performance management in hospitals focuses on clinical outcomes, patient satisfaction, and operational efficiency. Key metrics include mortality and complication rates, patient experience scores, average length of stay, and operating costs. For electrical retailers, common metrics center around sales, profits, inventory levels, and customer service. Retailers track sales targets, gross and net profits, stock turnover rate, and metrics like average handling time per customer call. Both sectors also monitor employee engagement and development through performance reviews.
The document discusses performance management systems and how they can help health care organizations navigate challenges. Specifically, it discusses:
1) How Kurt Salmon Associates provides management consulting services including strategy, facility planning, and IT to various health care providers.
2) How performance management systems like the Balanced Scorecard can help organizations link strategic objectives to operations by monitoring key performance indicators.
3) An example of how a performance scorecard could be designed for a cardiology center of excellence, identifying objectives, metrics, and the relationships between metrics in each of the four Balanced Scorecard perspectives: financial, internal processes, learning and growth, and customers.
The document discusses performance management systems and how they can help health care organizations navigate challenges. Specifically, it discusses:
1) Kurt Salmon Associates provides management consulting services including facility planning, strategy, and IT to various health care providers.
2) Performance management systems like the Balanced Scorecard can help organizations translate strategies into action by focusing employees on key performance measures.
3) These systems balance financial and non-financial metrics across perspectives like customers, internal processes, learning and growth, and finances. Leading and lagging indicators are connected to show how improving processes leads to better outcomes.
A business' choice for using an innovation depends on looking into the variables affecting this use and its favorable circumstances. Innovation deployment significantly influences the way business is led, the optimality of asset usage and increase in the organizations competitive advantage. This research is to identify the role Business Processing Management (BPM) play in selected SMEs in Ghana. The method utilized for this investigation was the descriptive research design. This research is exclusively embraced by the utilization of secondary data. The technique for data analysis will be by the utilization of content analysis. The study revealed that the main principles of BPM implementation in the selected SMEs are commitment from management, customer priority, teamwork, and continuous improvement. The study also showed that BPM has a direct relationship with the productivity of SMEs. The main challenges of BPM on the selected SMEs are the lack of resources, lack of experience in quality management, lack of objectives and strategies, Short term objectives concerns, lack of information technology (IT) experts. Since BPM is a broad and an intense concept that needs to be taken seriously when it comes to SMEs ensuring that the firm produces a high-quality goods and services, it was recommended that SMEs needs to have IT experts who can assist in the integration of BPM in all aspect of the business activities.
The document discusses various project management concepts including quality management, benchmarking, cost of quality, organizational theory, risk management, procurement, contract types, stakeholders, and stakeholder management. Specifically, it provides definitions and explanations of quality versus grade, the benchmarking process, the different types of cost of quality, examples of organizational theory models, components of cost of risk, different contract types, definitions of primary and secondary stakeholders, and examples of internal and external stakeholders.
Similar to Total Cost of Ownership Pricewaterhouse Cooper (20)
1. The hidden reality
of payroll & HR
administration costs
Exploring hidden cost
drivers and characteristics
of cost-effective
organizations
January 2011
3. Executive overview
Do you know how much your In this white paper, we’ll break down Past studies have focused exclusively
organization is really spending on the different cost drivers of payroll on large organizations (more than
and HR administration and lay out 1,000 employees). For the first time,
payroll and HR administration?
the strategies that are making some the inclusion of mid-size organizations
Chances are you may not be organizations more cost-effective at in our most recent study provides
considering major cost components these functions. additional insight into this issue, and
related to administering these has allowed us to also measure baseline
important functions and may As a general rule, we have found that TCO costs for organizations between
be spending more than you organizations tend to underestimate 100 and 1,000 employees.
the true expense (the “total cost of
think as a result.
ownership,” or TCO) of processing As with previous studies, our current
payroll, administering employee health TCO study analyzed the TCO of
and welfare benefits, and managing key payroll and HR administration
other key HR systems and functions. functions. The new data from this
year’s study, collected from 279
While most organizations consider costs participating organizations, shows
such as a payroll department’s staff that administration of payroll (PR),
or the acquisition costs of a new ERP workforce administration (WA), time &
solution, many fail to recognize certain attendance (TA), and health & welfare
“hidden” costs necessary for operating benefits (H&W) remains expensive for
and integrating these interdependent employers—and it has gotten costlier
processes. Additionally, organizations over the years, despite a number of
often apply separate technology and technological advances designed to
process solutions to these individual diminish costs.
administration functions without
considering how those solutions work
with each other. This fragmentation
drives up administration costs through
task overlap and other inefficiencies.
For nearly a decade, PwC, with
the sponsorship of Automatic Data
Processing (ADP), has studied these
TCO costs and how to mitigate them.
1 The hidden reality of payroll & HR administration costs
4. Although these functions are expensive, In addition to the above findings,
analysis of data collected in these which are discussed in detail in this
PwC studies has uncovered several white paper, analysis of the data
opportunities for increased cost collected for this study also confirmed
effectiveness. The top cost reduction that two of the key findings of the
strategies, measured by overall earlier TCO white papers continue
TCO, are: to present opportunities for increased
• Outsourcing—organizations cost effectiveness:
managing payroll, workforce • Providing payroll and HR self-service
administration, time & attendance, functionality to employees—this
and health & welfare benefits in- strategy results in a 50% lower TCO
house using premise-based or hosted of workforce administration for large
software solutions spend on average organizations compared with peers
18% more administering these managing the function without
functions than organizations that these features
outsource1 these functions • Integrating time & attendance
• Utilizing a common vendor with payroll—this leads to a cost
or solution—organizations efficiency of 14% over a manual
administering these functions in- approach or an approach that is
house using software solutions from not integrated
multiple vendors spend on average Furthermore, the current study
18% more than those organizations clearly suggests that cost effectiveness
administering them in-house using stems from comprehensive process
a common vendor. Organizations transformation, not just technology
outsourcing multiple functions to a innovations. The required change isn’t
single vendor see even stronger cost always easy, but significant financial
efficiency—on average 32%—versus benefits may await for organizations
organizations using a multiple ready to really embrace and implement
vendor or “best of breed” in-house these changes.
approach 1. The term “outsourcing” in this paper specifically refers to
outsourcing to ADP as this study used only ADP clients to
measure the TCO of organizations outsourcing payroll and
HR functions.
2
5. Methodology
This primary research study includes PwC also conducted multiple follow- • Time & attendance (TA):
data collected from 279 participating up calls with respondents to verify, The process of collecting, reviewing,
organizations, ranging in size from clean and complete data. In total, PwC submitting and approving time
100 employees to more than 100,000 performed more than 500 phone and reporting data, including employee
employees. This study marks the fourth email follow-ups to clarify completed hours worked, paid time off
installment in a series during which participant data. This approach enabled (vacation, sick, holiday) and
PwC has surveyed more than 600 respondents to provide total costs,
leave balances.
organizations. Previous studies occurred rather than just labor or system costs.
in 2003, 2004, and 2006. • Health & welfare
administration (H&W):
The current study set out to measure the The data The administration of employee
Total Cost of Ownership (TCO) of four PwC defined TCO in a manner H&W benefits and programs
core business functions—payroll (PR), that broke down total cost into its including open enrollment and life
workforce administration (WA), time & component parts. For the purposes event status change maintenance.
attendance (TA) and health & welfare of this study, the four core functions
administration (H&W)—and to analyze are defined briefly, as follows: Collectively, these four components
factors impacting these costs. Because • Payroll (PR): The process of provide a comprehensive measure
this study focused only on TCO, areas collecting and entering data of TCO of payroll and HR
such as quality of administration were administration costs.
related to employee hours worked,
not addressed.
determining taxation, calculating
In addition to measuring the TCO of
gross and net pay, and distributing the four processes, and providing an
PwC conducted this TCO assessment
primarily through use of a confidential compensation. overall TCO, the current study sought to
web-based questionnaire administered • Workforce administration update the original studies conducted
from May to August of 2010. Senior (WA): The maintenance and in 2003, 2004, and 2006, especially in
financial and HR executives (i.e., CFOs, administration of the core HR light of significant market changes in
VPs of HR, VPs of Finance, Directors of the delivery, technology, and scope of
database (often referred to as the
Payroll and Controllers) were invited HR systems since 2003.
Human Resource Information
to participate, and in cases where an
Systems or HRIS) and the activities Respondents were asked to answer
organization had multiple respondents
provide input, we created a single associated with maintaining questions that quantified all one-time
consistent response. Many organizations employee information and various and ongoing costs for the areas of
also participated in phone interviews processing activities such as payroll, PR/WA/TA/H&W administration.
conducted by a PwC representative. health & welfare administration, and Detailed component descriptions were
other HR activities. provided in the survey itself as well as
via personal follow up from PwC where
necessary. PwC contacted participants
directly when data fell outside the
normal range of responses and
normalized data where necessary.
3 The hidden reality of payroll & HR administration costs
6. Profile of participants
279 organizations (consisting of 205 organizations that do not outsource these
functions and 74 organizations that outsource to ADP) participated in this study.
120 (43%) are classified as large organizations, with more than 1,000 employees;
159 (57%) are classified as mid-size organizations, with 100–1,000 employees.
Figure 1. Survey participants by organization size
12%
29%
12%
100–300 employees
18%
301–1,000 employees
1,001–2,500 employees
29% 2,501–5,000 employees
5,001 + employees
Note: Percents may differ slightly from other figures in the paper due to rounding.
The larger sample in the 100–1,000 Because of the economies of scale we
space is due to the larger number see in larger organizations (which are
of organizations operating in these discussed within this paper), when we
segments, and the need to augment compare the TCO of organizations that
the work completed in previous studies, outsource to organizations that use
which focused exclusively on large in-house solutions, it was important
organizations. to normalize the results for the effects
of size—in other words, we compared
The term “outsourcing” in this paper the results as if both groups had
specifically refers to outsourcing to organizations of similar size.
ADP as this study used only ADP clients
to measure the TCO of organizations All participating organizations are
This publication has been prepared for general outsourcing payroll and HR functions. U.S.-based companies or subsidiaries or
guidance on matters of interest only, and does The study did not evaluate, and thus business units of non-U.S. companies,
not constitute professional advice. You should
findings cannot be directly applied to, and come from more than 17 industries,
not act upon the information contained in
this publication without obtaining specific ADP’s HR business process outsourcing with the most prevalent industries
professional advice. PricewaterhouseCoopers LLP offerings. PwC makes no representation being manufacturing (15%), healthcare
(PwC) has exercised reasonable professional that the comparative key findings of (13%), and finance, insurance and
care and diligence in the collection, processing, this survey can be generalized to other real estate (10%). Federal and state
and reporting of this information. However,
payroll and HR outsourcing providers. governments were not specifically
data used from third-party sources has not
been independently verified or audited. No addressed in this study. This study,
representation or warranty (express or implied) Organizations surveyed used a wide like previous studies, is focused only
is given as to the accuracy or completeness of range of platforms and solutions, on costs.
the information contained in this publication, including approximately 65 platforms
and, to the extent permitted by law, PwC, its
in payroll alone. Payroll vendors This white paper has been researched
members, employees and agents do not accept
or assume any liability, responsibility or duty represented in the in-house analysis and prepared by PwC. ADP is the
of care for any consequences of reliance on include the market-leading software sponsor of this TCO study.
information contained in this publication. vendors.
4
7. Key findings & recommended
strategies to reduce
administration costs
Four key findings in connection 1. In-house administration of payroll, 4. Utilizing a common vendor or
with the cost of administering workforce administration, time solution to manage multiple
& attendance, and health & functions, rather than leveraging
payroll and HR in-house surfaced
welfare requires a surprisingly a “best of breed” approach or
during our analysis of the data large commitment of time and maintaining disparate legacy
collected in the study: resources—typically over $1,400 per systems, can deliver tangible
employee per year (PEPY) for large cost efficiencies—organizations
organizations and nearly $2,000 administering these functions using
PEPY for mid-size organizations. software solutions from multiple
• “Hidden costs,” as defined below, vendors spend on average 18%
continue to account for more than more than those organizations
50% of the TCO of administering administering them in-house using
these functions in-house. a common vendor. Organizations
outsourcing multiple functions to a
2. TCO for payroll is actually single vendor see even stronger cost
increasing—contrary to our efficiency—on average 32%—versus
expectation, and despite organizations using a multiple vendor
technological advances, or “best of breed” in-house approach.
administration costs have actually
increased rather than decreased In the remainder of this section, we will
since 2003 as organizations focus on explore each of these findings, and their
technology transformation rather implications for organizations.
than process transformation.
3. Outsourcing continues to deliver
overall TCO advantages—using
in-house payroll, workforce
administration, time & attendance,
and health & welfare solutions
increases TCO by 18% on average.
5 The hidden reality of payroll & HR administration costs
8. In-house administration of payroll, workforce administration, time
& attendance, and health & welfare requires a surprisingly large
commitment of time and resources
This study, like PwC’s previous benchmark analyses, showed that many organizations
may be unaware of the true expense of administering the PR, WA, TA and H&W
functions because not all costs are readily visible. Organizations may find that,
upon detailed examination, their actual costs far exceed their expectations, by
up to several hundred percent.
Visibility into the total costs, especially across functions, is low in part because
these related functions are often “owned” by different functional leaders (Finance,
HR, IT). Accordingly, many organizations make decisions about the technology
and sourcing that work best for the individual function without consideration of
the potential synergies across the enterprise.
A complete cost analysis should • Indirect labor costs—Cost of
consider the following types of labor for employees not directly
costs across all four functions: related to the payroll and HR
• System installation costs— departments supporting these
The one-time costs related functions in the field (i.e.,
to the initial acquisition and collecting, approving and
implementation of an organization’s preparing employee hours for
PR, WA, TA, and H&W systems payroll; distributing paychecks;
• System upgrade costs— answering employee questions
The periodic acquisition and about benefits, etc.)—where
implementation costs related to employees are typically spending
upgrading to a more current version only a fraction of their time on
of the PR, WA, TA, and H&W systems these activities
• Direct labor costs—The cost of • Outsourcing costs—The total
labor (salary plus benefits) of the annual costs of any outsourced
direct staff necessary to support the services related to processing of
PR, WA, TA, and H&W functions PR, WA, TA and H&W such as
tax filing, paycheck printing, etc.
• Direct non-labor costs—The
total costs of consultants, vendor
fees and facilities, G&A, and
corporate overhead related to the
PR, WA, TA, and H&W functions
• System maintenance costs—
The IT costs specifically related to
maintaining the current systems
6
9. When all of these costs are included, large Economies of scale lead to a gradual
organizations (more than 1,000 employees) shift in TCO
spend $1,403 combined PEPY on the four key
functions surveyed and mid-size organizations While we show two segments for organization size
(100–1,000 employees) spend $1,953 PEPY as throughout this study, and the difference in results by
shown in Figure 2. segment can appear quite dramatic, we find that economies
of scale within segments are generally more gradual. In
centralized processes like PR and WA, we find that these
economies occur quite smoothly. In more distributed
Figure 2. Average TCO per employee per processes like TA, however, they are not always as apparent.
year by function for organizations managing
the process in-house Figure 3. In-house payroll TCO per paycheck by
$1,953
organization size
$34
$348
$1,403 $22
$312 $21
$18
$221 $17
$484
$321
$354
100–300 301–1,000 1,001–2,500 2,501–5,000 5,001–15,000
Employees
$809
Note: The trend line depicts the gradual decline of TCO per paycheck as organization size increases.
$507
It is no surprise that large organizations achieve greater
economies of scale, and have lower TCOs per employee.
With the amount of centralized labor required for these
Mid-size Large functions, larger organizations are better able to a) have
organizations organizations an individual staff role support more employees; and b)
develop specialization among staff roles to further drive
Health & Welfare (H&W) Workforce Administration (WA) efficiency. Systems spending results also demonstrate the
Time & Attendance (TA) Payroll (PR) impact of size, as systems costs can be spread over a greater
number of employees.
7 The hidden reality of payroll & HR administration costs
10. Hidden costs account for more than Hidden costs drive up the total TCO of these functions beyond
50% of the payroll TCO what conventional wisdom generally suggests. The largest
driver of TCO for PR, for instance, is labor costs, specifically
When evaluating their current or potential future systems, indirect labor costs. The indirect time of employees to
most organizations fail to consider the significant costs perform such tasks as approve and assemble submitted time
beyond the direct labor needed to use the systems and the for processing, distribute paychecks, and maintain the core
cost of the systems themselves. Overlooking these “hidden” PR system represents a substantial cost—nearly $10 per
costs could result in an underestimate of 50% or more as paycheck for both large and mid-size organizations.
shown in Figure 4.
Analogous sets of hidden costs apply to the other processes
Figure 4. Breakdown of TCO by cost type we examined, including H&W, where business managers,
HR professionals, plant managers, supervisors, and others
are involved with activities such as enrollments, life event
changes and plan support.
“Visible” costs
“Seams” costs
49%
When viewed individually, each of the four processes
35% contains unrecognized expense. But there is a bigger picture
here, too, as the inefficient interaction between processes
creates additional costs at the “seams.” The administration
functions covered in this study are interdependent and rely
on one another to work. Seams costs refer to the activities
organizations must undertake to provide integration between
and among various processes, and occur when there is a
need to implement a new interface or manually support
or otherwise maintain the interaction between processes.
51% We have differentiated these “seams” costs from “hidden”
“Hidden” costs
costs because seams costs refer to costs incurred from
65%
operating separate processes and systems within a single,
interdependent business environment—and both have
been captured in TCO.
Mid-size The 2006 PwC study identified these “seams” and quantified
organizations their costs and found that, among the four processes we
have studied, the average organization was spending
Large approximately $100 per employee per year. The current
organizations study, which evaluated PR, WA, TA, and H&W functions
simultaneously, suggested that organizations with seams
experience higher costs—$200 per employee per year or
more—to, among other things, get disparate systems
working together.
8
11. Figure 5. Average cost of integrating core HR systems
Organizations with software integration “seams” face an increased TCO of $200
per employee per year
Time & Health &
Payroll HRIS
attendance welfare
Denotes integration and data flow required between different HR systems
The TCO for payroll is actually increasing
Most would expect PR TCO to have dropped since 2003, the year of PwC’s
initial benchmark study. A focus on improved technology, new delivery models,
department cutbacks, and other factors should have reduced PR TCO over the
years.
But that has not happened. In fact, the TCO for PR has actually risen a full $1
per paycheck since 2003 for large organizations that use in-house solutions.
The increases are primarily driven by the hidden costs described in the section
above. TCO for mid-size organizations and functions beyond payroll was not
measured in the initial 2003 study, so TCO trending for those segments cannot
be included in this study.
Figure 6. Average TCO per paycheck in 2003 compared to 2010 for
large organizations managing payroll in-house
al
Actu
+6%
Ex
pe M
ct ark
at e
io t $17
n
$16
2003 Study 2010 Study
9 The hidden reality of payroll & HR administration costs
12. Additional costs lurk in the mismatch Findings on Software-as-a-Service
of technology and business process delivery models
Because organizations have tight budgets and timeframes, Software-as-a-Service (SaaS) is a prominent delivery
they often implement technology improvements without model that has gained momentum since we published our
taking into account the impact of technology on business initial TCO study in 2003. This deployment model enables
process. Technology alone is viewed by many as the sole organizations to host applications as well as store and manage
solution to cutting costs. However, by implementing or their data on remote, virtual servers, rather than on their
upgrading technology, whether in traditional or new in-house computers (premised-based model). Some software
technology models (such as Software-as-a-Service or SaaS), vendors now offer their solutions exclusively through a SaaS
organizations will likely incur additional, unintended costs— or on-demand model accessed via any Internet connection,
such as manual activities to conform technology to existing while other vendors provide customers a choice of a SaaS or
processes, to accept customization within the organization, or premise-based delivery model.
to link the SaaS technology to existing technology within the
enterprise. This study found that SaaS helps reduce costs for many
organizations—but only to a point. It is clear that while SaaS
It seems self-evident that organizations would seek to can reduce a mid-size organization’s total administration
employ technology solutions that best support their business costs over a premise-based or traditional software model,
processes. But in reality it often does not work this way. organizations outsourcing process functions such as PR
and H&W administration still demonstrate additional cost
Many organizations have not matched their business savings over organizations leveraging a SaaS model. Our
processes with technology and thus cannot take full analysis also showed that the benefits of SaaS models, when
advantage of the applications available to them. The results deployed without the added benefit of process outsourcing,
of the study suggest that many organizations need to focus taper off as organizations get larger and actually provided no
on process redesign when they decide to change software. TCO savings, on average, over on-premise software solutions
Failure to do so drives both the hidden and seams costs for large organizations with more than 1,000 employees.
described above. These findings reinforce the discussion above regarding the
importance of process transformation in conjunction with
technology investment to reduce administration costs.
10
13. Outsourcing continues to deliver overall TCO advantages—using in-house payroll, workforce
administration, time & attendance, and health & welfare solutions increases combined TCO
by 18% on average
Consistent with the findings of our prior Mid-size organizations that use outsourced solutions demonstrate a lower TCO
studies, the current study shows that across the comprehensive bundle of the four processes—PR/WA/TA/H&W—
outsourcing is a cost-effective way to than organizations that use in-house solutions. Given the extensive bundling
administer these four functions. It is of solutions in this segment of the market, this comprehensive approach is the
more cost effective than the various in- most accurate approach for cost analysis.
house solutions we reviewed. This study
shows that organizations using in-house Figure 7. TCO (PEPY) comparison by method across all four functions
solutions for PR, WA, TA and H&W
spend on average 9% more (for mid-size
organizations 100–1,000 employees) 18% Higher TCO
and 27% more (for large organizations
over 1,000 employees) than those that
use outsourced solutions. Of course,
costs for any individual organization
depend on the specific circumstances
of the functions outsourced and the
$1,634
organization’s needs.
$1,388
In our analysis, organizations that
outsource experience lower direct non-
labor costs, indirect labor costs, and
system maintenance costs (“hidden”
costs). These efficiencies are likely
due to the strong process governance
framework and increased process Organizations Outsourcing Organizations Managing
HR & Payroll HR & Payroll In-House
standardization that is typical in the
outsourcing model.
Even allowing for economies of scale,
where TCO drops as organizations are
better able to spread labor and systems
investments, large organizations that
outsource core HR processes see an
additional cost benefit when compared
to in-house organizations.
11 The hidden reality of payroll & HR administration costs
14. Utilizing a common vendor or solution to manage multiple functions delivers tangible cost efficiencies
For many years, the HR community Figure 8. TCO (PEPY) comparison by platform type for payroll,
has suspected that integrated PR, workforce administration, and time & attendance
WA, TA and H&W functions cost less
to administer than separate point
solutions. The survey empirically 18% Higher TCO
confirmed that conventional wisdom. 32% Higher TCO
This applies both to in-house solutions,
and, to an even stronger degree, to
organizations that outsource multiple
functions.
$1,202
Unfortunately, for most organizations, $910
$1,020
common platforms remain a missed
cost-savings opportunity. In fact, our
analysis of the common platform
approach could not look across all
processes because there were simply
not enough organizations with a
common platform for all four processes. Outsourcing Solution—Common Platform
However, sufficient data is available In-House Solution—Common Platform
to evaluate the impact of a common In-House Solution—Multiple Platforms
platform for three of the processes (PR,
WA, and TA) as shown in Figure 8.
Additional cost efficiency from using a common
platform provided by an outsourcer
As shown above, organizations using multiple in-house platforms
experience a TCO that is 18% higher than organizations using a common
in-house solution and 32% higher than organizations outsourcing these
three functions to a single vendor.
In large organizations, the impact was even more dramatic. In-house users
on a common platform experience a 29% higher TCO compared to peers
outsourcing the same functions to a single vendor.
12
15. Looking down the road Figure 9. The lack of systems to manage key HR functions
The need for seamless integration of
payroll and HR administration functions
Succession
will become even more acute in the Planning
coming years. As organizations add
additional solutions to their mix for Compensation
managing automated payroll and HR Management
administration—such as recruiting, Performance
talent management, etc.—the lack of Management
a common platform, and the resulting
cost inefficiencies, is likely to increase. Learning Management
System (LMS)
Of the organizations participating Employee Self-Service
in this study, more than half had no
automated solution for performance Applicant Tracking/
management, compensation Recruitment
management, or learning management.
In addition, more than eight in 10 had Benefits Tracking/
Data Maintenance
no automated solution for succession
planning. Core HRIS
0% 20% 40% 60% 80% 100%
Percent of organizations without a system or solution to manage the HR function listed
Large organizations Mid-size organizations
13 The hidden reality of payroll & HR administration costs
16. If organizations
continue down the
path of pursuing best
of breed strategies,
they will continue to
invest in a philosophy
that produces hidden
and seams costs.
14
17. Conclusion
Whatever solution an organization chooses, organizational design and process
improvements—in conjunction with straight technology investments—will better
address the hidden costs of HR management. Additionally, a comprehensive
evaluation of the integration needs across payroll, workforce administration, time
& attendance, and health & welfare benefits administration rather than individual
process assessments, will allow organizations to identify interdependencies that
can result in reduced costs for the overall solution. Better understanding of the
sources and size of the hidden and seams costs in an organization, and addressing
those process and technology options, will allow organizations to realize their
objective of reducing TCO.
15 The hidden reality of payroll & HR administration costs