Posted tagged ‘multi-country payroll’

HRO Carrying On Despite Slow, Decelerating Economy

July 25, 2012

Amy L. Gurchensky, HRO Research Analyst, NelsonHall

For those of you who are not aware, NelsonHall assesses the confidence in the HRO market on a quarterly basis. The report involves surveying HRO suppliers from all disciplines to get a pulse on the market.

 From time to time, my colleagues and I will blog about these results. I thought I would take a step back and re-examine HRO supplier confidence levels since the report began.

 As the name suggests, the supplier confidence level measures how confident HRO suppliers are in the future market with a level of 100 representing no change in confidence.

Since the report began, the index has constantly shown a healthy level, despite some fluctuations in between. The following chart graphs HRO service provider confidence levels since its inception.

HRO Supplier Confidence Chart

2011 shows a major turning point in HRO vendor optimism, revealing a downward trend line that coincides with the Employment Situation report produced by the Bureau of Labor Statistics.

There is no need to panic though. It appears that supplier expectations are now more accurately aligned to pipeline activity, which showed a slight weakening in Q1 2012. Again, the most important thing to remember is that the indices are still at a healthy level.

Despite the headwinds from the economic recovery, business for HRO has carried on as evidenced in the following contract activity:

  • ADP: awarded a multi-country payroll contract by HP covering ~130,000 employees in 40 countries across Asia Pacific (excluding India), Europe, and the Americas (excluding the U.S.)
  • Fidelity: awarded a DC administration contract by the University of Washington for ~31,000 employees; it is now the sole recordkeeping provider for the university
  • Talent2: awarded a three year RPO contract by Bankwest in Australia providing full RPO services from job requisition through onboarding including employment branding, establishing an innovation program for sourcing, and more
  • IBM: awarded a learning services contract by a government entity in South Africa including content development and delivery of learning
  • Aon Hewitt: renews and expands its multi-process HR outsourcing contract with BMO Financial Group for payroll, workforce administration, H&W administration, recruitment services, and compensation administration covering 46,000 employees in the U.S. and Canada for eight years.

There will likely be continued challenges from clients such as stalled decision-making or demands for lower pricing, and some service lines will fare better than others in this slow economy that is decelerating.

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Trending Now in Payroll Outsourcing

November 2, 2011

Yesterday, NelsonHall published its “Targeting Payroll Outsourcing” report for our clients, so I thought it would be appropriate to briefly touch on some of the findings.  The global payroll outsourcing market was estimated to be $12bn in 2010.  Currently, the mid-market (50%) combined with the national segment makes up ~90%, while large multi-nationals make up the remainder. 

While the mid-market segment is quite large, majority of growth is expected from the large multi-national market because of the increase in demand for multi-country payroll across all regions.  In fact, the desire for multi-country standardization has been reflected in NelsonHall’s HR Outsourcing Confidence Index (HROCI) for some time now.  We are seeing a shift from multi-country standardization on a global level to more of a regional level. 

The drivers for payroll outsourcing have remained the same overall, but the rankings have changed.  The number one reason for outsourcing payroll continues to be cost reduction with ~85% of all buyers citing this objective.  Moving up one notch is the desire to have a multi-country platform managed by a single vendor to obtain global visibility of cost and aggregated reporting of data.  Finally, the third most important driver cited for outsourcing payroll is to ensure compliance and manage risk due to continual changes in tax laws including Sarbanes-Oxley in the U.S., and labor contracts.   

Another interesting change worth noting is the shift that has occurred with who is leading the discussion to outsource payroll.  In 2009, HR spent the largest proportion of time discussing the decision at 83%, with the CFO / finance department allocating ~70% to it.  This year, the CFO / finance department is spending the biggest proportion of time on discussions at 86%, while HR is spending ~80%.  Two main reasons explain why the CFO is spending the most time leading discussions.  First, payroll often falls under finance departments in Europe, and second, the CFO is involved when cost is the primary driver. 

One final thing I’d like to point out now is the 3% global increase since 2009 in self-service and electronic statements that are resulting in less time, money, and paper consumed, along with the increasing popularity of paycards as an alternative to paper payroll checks.  Paycards save employers >50% of the cost of issuing a check.  An estimated 2.5% of employees in the U.S. are paid via paycards with HRO providers such as ADP and Ceridian offering paycards on a standalone basis.

The payroll report goes into greater depth on these topics and others including market size and growth estimates, technology platforms utilized, and estimated vendor revenues and market shares to name a few. 

Amy L. Gurchensky, Research Analyst, HRO, NelsonHall

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The Intricate World of HRO Provider Partnerships

October 4, 2011

It is uncommon to see a multi-process HR outsourcing (MPHRO) provider with a go-it-alone strategy.  Beyond the services a particular MPHRO service provider considers core, you will usually find other select HRO vendors. The option to operate in a networked HRO supply chain environment can be a valuable choice.  Some benefits include:

  • Providing clients with the option of selected best-of-breed software applications with the primary provider managing the interfaces and integrations under one contract
  • Investing in what the MPHRO vendor does best and offering a wider range of service options through partnerships
  • Entering new geographies faster with less investment, an option especially seen in knitting together global payroll and increasingly in multi-country RPO
  • Buying time to develop more robust internal offerings
  • Creating a pool of potential investments or M&A targets.

This week, NorthgateArinso (NGA) and Workday announced a partnership to bring multi-country payroll to the Workday cloud.  Workday 16 customers will have the option to access NGA’s payroll processing capabilities in 51 countries through NGA’s new euHReka Inclusion Framework.

Workday, launched in 2006, is one of the first and largest start-ups to provide a SaaS-only HR ERP. Revenues are estimated to be  ~$150m this year with ~210 customers, most in the mid-market, but some are large market clients with 55k to 100k employees.  Still U.S.-centric in revenues and clients, Workday is expanding into the U.K. and Canada and plans to expand further in Europe in 2012. Workday is in a fast growth mode, targeting a 100% increase in revenues for 2012. It is busy selling, implementing new clients, and building out a full suite of HR and financial cloud-based ERP services. In the meantime, it can offer clients greater options via its partner network. In addition to NGA, other partners for multi-country payroll include ADP, Patersons, and SafeGuard World International.

Another example comes from Ceridian, which is expanding its investment and service partnership with Dayforce. The two have been partnering since 2009 to offer InView, a platform SaaS solution that blends Ceridian’s payroll, human resources, and benefits administration offerings with Dayforce’s workforce management software application. The expanded InView HR and Self-Service is to be released in 4Q 2011 and new payroll functionality is on track for 1Q 2012.

InView is starting out quickly as a successful partnership. Ceridian set a target of 300 clients for the first year and exceeded that number in six months. As more clients go live, the partnership will have to carefully balance service with growth to ensure long-term success.

HRO vendor partnerships are not always successful and must be carefully structured and managed, especially when the vendor partners may well compete with one another in some markets or services. With care, this can be a strategy with benefits for clients and the HRO vendor partners.

Linda Merritt, Research Analyst, HRO, NelsonHall

Interested in reading the latest HRO news from NelsonHall? Subscribe to our newsletter by emailing amy.gurchensky@nelson-hall.com with “HRO Insight” as the subject.

Much Ado About Payroll Outsourcing

February 26, 2010

When taken literally, the title of Shakespeare’s famous play “Much Ado About Nothing” implies that a great fuss is being made of something insignificant. But we can all easily agree there is nothing insignificant about payroll – not for those being paid, the company paying its employees or the vendor providing the payroll services in an outsourced environment.

As I reported yesterday on NelsonHall’s webinar, “Payroll BPO, How Buyers Benefit and What Providers Should Know”, two of today’s top drivers of outsourced payroll are, not surprisingly given the state of the economy and increased globalization, cost reduction/cost control and multi-country payroll requirements. Let’s look a little more closely at both of these.

Reduction and control of costs – this is the top driver in both the mid-market/national segment and the large multi-national segment, with a full 80 percent of all buyers outsourcing to reduce costs. And the savings are big…clients have reported anywhere from 10 – 50 percent, with an overall average savings of 25 percent. Providers are lowering buyers’ payroll costs by: 1) economies of scale via the one to many model; 2) labor arbitrage through offshoring and nearshoring of both back-office and front-office administration; and 3) improved quality of service/process improvement with better consistency and efficiency. For example, one vendor estimated that reducing “quill pen” (sorry, couldn’t resist the temptation to link back to Shakespeare) manual work and eliminating duplicate work can save clients 40 – 50 percent.

Multi-country payroll – large multi-national corporations are increasingly demanding a global/multi-country payroll platform environment wherein one single vendor – albeit with a SaaS solution or an ERP system such as SAP or Oracle PeopleSoft – can support multiple geographies with pre-defined country specific rules and templates. Providers that use ERPs and/or SaaS also use in-country payroll provider partners, as required, to ensure correct payroll-related activities. For example, although Patersons has more than 20 countries in which it can provide its own payroll services, it frequently uses a third-party provider to process in-country net payroll calculations. The third-party then passes the data back to Patersons Logon2 system, and Patersons in turn issues standard pay slips and reports.

Although the mid-market national segment is much larger today than the large multi-national market, we saw some very large multi-country payroll contracts awarded in 2009. For example, NorthgateArinso and AstraZeneca entered into a seven year payroll, HR administration, and talent management contract. The payroll component calls for NorthgateArinso to provide payroll services to AstraZeneca’s 65,000 employees across more than 100 countries (including Shakespeare’s native U.K.) And ADP was awarded a contract for managed payroll services by Swiss Re to support 10,000 employees and 2,500 pensioners in 25 countries (yes, you guessed it…including the heralded playwright’s own country.) Given that the large multi-national market is forecasted to grow at a much higher rate than the mid-market segment, we can anticipate seeing more large multi-country payroll contracts being signed this year.

There are many other drivers – beyond cost reduction and multi-country capabilities – behind outsourced payroll, including eliminating transactional work to enable focus on more strategic initiatives, gaining access to better technology without the capital investment, and ensuring compliance with ever changing tax laws and labor regulations. What are you seeing in the payroll outsourcing marketplace?

Gary Bragar, Lead HRO Analyst, NelsonHall