Recent research shows the payroll market continues to grow, drivenÂ by technology and global reach.
By Gary Bragar
NelsonHallâs most recent Payroll Market Analysis showsÂ the global payroll services market is estimated at $18.1Â billon with a 4.1 percent annual growth rate. The multi-countryÂ payroll market is growing at nearly two times theÂ rate of the overall market, representing nearly 17 percentÂ of total standalone payroll service revenues.
Through interviews with HR executives that leverageÂ a payroll solution, NelsonHallâs Payroll Market AnalysisÂ finds that the top selection criteria for a new providerÂ include technology capability, flexibility, globalÂ capability, and a partner network for global payrollÂ coverage. In addition to being able to pay employeesÂ globally, HR is looking for a platform that can provideÂ visibility into their global workforce. Organizations wantÂ access to global data through real-time reporting andÂ predictive analytics. The ability to provide consolidatedÂ reporting across business divisions and regions, includingÂ incorporating external third-party data integrations,Â is also important. As such, organizations seek a singleÂ application to support the global employee populationÂ that delivers ease of access to global payroll data. LargeÂ market payroll demand is led by HR transformationÂ projects, particularly for multi-country services.
As regulatory changes like GDPR and ACA are becomingÂ more complex and demanding, organizations are findingÂ it difficult to maintain compliance. This increase in theÂ volume and complexity of compliance challenges isÂ forcing HR to seek expert support to manage the risksÂ associated with operating globally.
NelsonHall research finds that organizations are alsoÂ looking to consolidate systems globally and enhanceÂ integrations with key technologies. Companies thatÂ fully outsource payroll are looking for global payrollÂ consolidation and standardization through cloud-basedÂ payroll platforms, global reporting and analyticsÂ capability, and global compliance services. When it comesÂ to technology, payroll solutions should complement anÂ organizationâs corporate IT strategy and tightly integrateÂ with HR technology and key business platforms globally.
Nearshoring and offshoring continues to be leveragedÂ for global payroll delivery. Approximately 95 percent ofÂ payroll partners leverage some form of near/offshoringÂ to deliver payroll services. NelsonHall research findsÂ that approximately 65 percent of delivery is occurringÂ in-country, 15 percent in-region, and nearly 20 percentÂ offshore. India and the Philippines are the predominantÂ offshore locations of choice, with Mexico and HungaryÂ often used for nearshoring. In addition, onshoring isÂ on the rise as more clients want in-country expertiseÂ for compliance and employee support. Payroll partnersÂ report more clients requesting in-country processingÂ over nearshore or offshore delivery due to a demand forÂ local expertise to support compliance, languages, andÂ employee inquiries. Going forward, organizations willÂ leverage more onshore delivery models to enhance theÂ employee experience through more customized supportÂ driven by in-country expertise.
Contract lengths tend to be longer when multipleÂ countries are in scope. Large-market organizations areÂ looking at five- to seven-year contracts, which oftenÂ feature additional services including contact center,Â broader multi-process HR services, and global scope orÂ multi-country scope of 10 or more countries. Mid-marketÂ contracts are typically three to five years and include HR/payroll technology for a single region. The Payroll MarketÂ Analysis finds multi-country contracts average 10 countriesÂ in scope, which is up from seven in 2016. Average reachÂ for multi-country coverage is around 100 countries, withÂ an average of 75 percent covered by in-house expertise.Â Payroll organizations continue to leverage in-countryÂ partners to expand service offering geographically inÂ regions where they donât have operations.
The future of global payroll looks good with the servicesÂ market expected to grow at 4.1 percent annually andÂ reach nearly $21 billion by 2021, according to NelsonHallÂ research. Multi-country payroll is growing at nearly fourÂ times the rate of single-country services and will accountÂ for a 21 percent share of the overall market by 2021.
Gary Bragar is HR outsourcing research director for NelsonHall.