On a Roll

Payroll Delivery

Recent research shows the payroll market continues to grow, driven by technology and global reach.

By Gary Bragar

NelsonHall’s most recent Payroll Market Analysis shows the global payroll services market is estimated at $18.1 billon with a 4.1 percent annual growth rate. The multi-country payroll market is growing at nearly two times the rate of the overall market, representing nearly 17 percent of total standalone payroll service revenues.

Through interviews with HR executives that leverage a payroll solution, NelsonHall’s Payroll Market Analysis finds that the top selection criteria for a new provider include technology capability, flexibility, global capability, and a partner network for global payroll coverage. In addition to being able to pay employees globally, HR is looking for a platform that can provide visibility into their global workforce. Organizations want access to global data through real-time reporting and predictive analytics. The ability to provide consolidated reporting across business divisions and regions, including incorporating external third-party data integrations, is also important. As such, organizations seek a single application to support the global employee population that delivers ease of access to global payroll data. Large market payroll demand is led by HR transformation projects, particularly for multi-country services.

Global Payroll GrowthAs regulatory changes like GDPR and ACA are becoming more complex and demanding, organizations are finding it difficult to maintain compliance. This increase in the volume and complexity of compliance challenges is forcing HR to seek expert support to manage the risks associated with operating globally.

NelsonHall research finds that organizations are also looking to consolidate systems globally and enhance integrations with key technologies. Companies that fully outsource payroll are looking for global payroll consolidation and standardization through cloud-based payroll platforms, global reporting and analytics capability, and global compliance services. When it comes to technology, payroll solutions should complement an organization’s corporate IT strategy and tightly integrate with HR technology and key business platforms globally.

Nearshoring and offshoring continues to be leveraged for global payroll delivery. Approximately 95 percent of payroll partners leverage some form of near/offshoring to deliver payroll services. NelsonHall research finds that approximately 65 percent of delivery is occurring in-country, 15 percent in-region, and nearly 20 percent offshore. India and the Philippines are the predominant offshore locations of choice, with Mexico and Hungary often used for nearshoring. In addition, onshoring is on the rise as more clients want in-country expertise for compliance and employee support. Payroll partners report more clients requesting in-country processing over nearshore or offshore delivery due to a demand for local expertise to support compliance, languages, and employee inquiries. Going forward, organizations will leverage more onshore delivery models to enhance the employee experience through more customized support driven by in-country expertise.

Payroll TechnologyContract lengths tend to be longer when multiple countries are in scope. Large-market organizations are looking at five- to seven-year contracts, which often feature additional services including contact center, broader multi-process HR services, and global scope or multi-country scope of 10 or more countries. Mid-market contracts are typically three to five years and include HR/payroll technology for a single region. The Payroll Market Analysis finds multi-country contracts average 10 countries in scope, which is up from seven in 2016. Average reach for multi-country coverage is around 100 countries, with an average of 75 percent covered by in-house expertise. Payroll organizations continue to leverage in-country partners to expand service offering geographically in regions where they don’t have operations.

The future of global payroll looks good with the services market expected to grow at 4.1 percent annually and reach nearly $21 billion by 2021, according to NelsonHall research. Multi-country payroll is growing at nearly four times the rate of single-country services and will account for a 21 percent share of the overall market by 2021.


Gary Bragar is HR outsourcing research director for NelsonHall.

Posted July 31, 2018 in Payroll

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