Why Companies Will Have to Ditch In-house Administration for Outsourcing at Some Point

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Many business leaders perceive outsourcing as taking on more risk, and convince themselves that it’s not worth the effort. They feel they’ll be giving up control, and that’s not an easy feeling to deal with. It’s not difficult to understand why administrators would feel this way, especially when you consider that you would likely want to keep administration in-house as much as possible, due to the sensitive nature of transaction information and personal employee data involved in HR. There’s also the extra care to remain compliant with statutory guidelines or payroll tax requirements in order to avoid unwanted consequences.

Why is in-house administration expensive?

Keeping administration in-house is expensive and is not a lasting solution especially for an organisation with plans to expand in the future. Research has proven that organisations using an in-house team for such functions as payroll, time and attendance, benefits administration, and workforce administration, end up spending 20 percent more that companies that outsource these same tasks. As you would expect, such companies start to pay even higher as they grow.

While small organisations intent on remaining confined to their locale would still be fine with taking care of their payroll in-house, it’s an entirely different matter for companies looking to establish a global presence. No matter the scale, a company that reaches beyond the shores of a particular country will need a global payroll outsourcing company in order to cope with the complexities of running an international business.

Why would the in-house team be less productive?

As the company begins to expand into new international locations, the in-house team would find it extremely difficult or impossible to be as productive and efficient as they need to be. This is not due to their incompetence but to the challenges that come with doing business and managing local staff in a new country. There are new compliance obligations to meet, local payroll norms to understand, and it’s even worse when it’s a country with a different language. Take a minute to imagine how difficult it would be to correctly interpret the laws.

From the foregoing, you can see it doesn’t make much sense to maintain in-house administration when outsourcing is an option. Analysts at Technavio have forecasted that the global payroll outsourcing market will grow at a CAGR of about 6% between 2017 and 2021. Their report indicates the following as market drivers that are contributing to this growth:

  • A rising need for payroll cost visibility
  • Higher demand to cut down costs related to payroll
  • Increased adoption of integrated sourcing strategies

Payroll outsourcing is slowly but surely becoming a saviour for many companies because it eliminates the extra costs that come with adopting the latest technologies and other payroll-related costs. Also, with manufacturing processes increasingly extending across international boundaries, a rise in globalisation on a cultural and economic level, and more stakeholders using lean methodologies, there is now a greater need for payroll cost visibility to make entering virgin markets less of a challenge.

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