There are a lot of talks these days about outsourcing – from manufacturing to customer service and even white-collar work. But what does the research say? Is it worth it for businesses to outsource their wage work? After analyzing many studies on the topic, we’ve come up with some compelling reasons why you should consider outsourcing your next payroll project.
Learning 1: Outsourcing can help you focus on your core business.
One of the most common reasons businesses outsource is to free up time and resources so they can focus on their core competencies. When you outsource payroll, for example, you can devote more time and energy to developing new products, expanding into new markets, or improving customer service. In a study published by the Harvard Business Review, companies that outsourced non-core activities saw a significant improvement in their overall performance. While you can argue if wage or payroll falls on core or non-core activities, there is no denying the validity of the argument.
Learning 2: Outsourcing can improve your company’s bottom line.
In addition to freeing up time and resources, outsourcing can also save your company money. In a study of more than 200 large firms, Boston Consulting Group found that companies saved an average of 14% by outsourcing their payroll functions. And in many cases, the savings were even greater – as much as 30%. When you outsource wage work, you can avoid the costs of hiring and training new staff, investing in new software or hardware, and complying with ever-changing regulations.
Learning 3: HR and Payroll come in one.
The world is running on software. There is nothing you can name that doesn’t have software for it. Businesses are no different. If you outsource your wage work, chances are that the service provider will offer you an interface that can not just track payroll but also attendance, leaves, and travel requests. This means that all your employee data will be stored in one place, making it easier to manage and track. In a study by the Aberdeen Group, companies using integrated HR and payroll systems saw a 22% reduction in time spent on administrative tasks and a 12% increase in compliance with government regulations. Some of the most popular examples of software like these are SAP, Oracle, and Workday.
Learning 4: Employees prefer an outsourced payroll.
Employees are increasingly interested in working for companies that outsource their payroll. In a survey of more than 500 professionals, staffing firm Robert Half found that 76% would prefer to work for a company that outsources its payroll function. The reason? They believe it would save time and resources so the company can focus on more important things. And these are not just guys from finance. Similar surveys have been conducted worldwide, and employees are responding favorably to outsourcing payroll.
Learning 5: Improved data security
When you outsource your payroll, you can use the latest and greatest technology to keep your employee data safe and secure. In a study by KPMG, more than 60% of companies said they experienced an improvement in data security after outsourcing their payroll function. This is not surprising given that most payroll service providers use state-of-the-art security systems, including firewalls, encryption, and intrusion detection. And because they process payroll for a living, they have a vested interest in keeping your data safe and secure.
Learning 6: You get expert help.
How often has your new employee screwed payroll, and you had to explain to some angry employee why a thousand bucks were cut off from their salary the following month? Yeah, that’s what we thought. When you outsource your payroll, you can avoid these headaches by working with experts who know how to process payroll correctly and efficiently. In a survey of more than 500 businesses, nearly 60% said they experienced an improvement in the quality of their payroll after outsourcing the function.
Learning 7: Payroll is just the beginning.
Outsourcing your payroll is just the beginning. Once you’ve outsourced this function, you can take advantage of a host of other services that can help improve your bottom line. These services include HR Outsourcing, Recruiting Outsourcing, and even Learning Management Systems. In a study by Bersin & Associates, companies that outsourced multiple HR functions saw a 15% reduction in HR costs.
Learning 8: Not having to worry about wage regulations:
The ever-changing landscape of wage regulations is enough to make your head spin. And if you’re not careful, you could find yourself on the wrong side of the law. When you outsource your payroll, you can avoid these headaches by working with a provider that stays up-to-date on all the latest wage regulations. In a survey of more than 500 businesses, nearly 60% said they experienced an improvement in compliance with government regulations after outsourcing their payroll function.
While these eight learnings are amongst those that are shared by businesses worldwide, these are not the only benefits of outsourcing payroll. Other advantages include having more time to focus on strategic initiatives, improved customer satisfaction, and increased efficiency. The list goes on. Outsourcing your payroll is smart for any business, regardless of size or industry. And with the ever-changing landscape of wage regulations, it’s becoming increasingly necessary to work with a provider that can stay up-to-date on all the latest changes.