According to recent reports, the payroll outsourcing service market is expected to reach $22.8 billion by 2027. This wave of growth among companies choosing to outsource payroll from an external entity has recently received a boost due to companies’ response to the pandemic as well. Apart from this recent influence, here are other key reasons that mainly fuels the growth of the payroll outsourcing industry.
The Need To Reduce Payroll-Related Costs
One of the predominant reasons why there is a growth in payroll outsourcing is its cost-saving feature. Outsourcing payroll eliminates the need to maintain an in-house team and related professionals, which brings a substantial operational cost saving.
On the other hand, even the indirect costs associated with recruiting, training, benefits, sick leaves, other overheads, and most importantly, the licenses of payroll processing engines and maintenance fees are eliminated. With an outsourced payroll company, you only pay a fixed amount for all the payroll processing and related services.
To Ensure A Risk-Free Payroll Process
Payroll is one of the most sensitive business functions of a business as it should strictly comply with the legislation of a given country. In such a context, maintaining an in-house payroll team where employees can easily commit errors due to work overload, tedious tasks, and lack of understanding can delay payroll processing and even result in serious legal issues and fines.
As outsourced payroll services are conducted by experts, under a dedicated and experienced team using advanced payroll systems, tools and fool-proof strategies and several accuracy standards in place, the probability of making legal errors is zero.
Furthermore, as the service providers are constantly up-to-date with payroll laws, they can also ensure your company’s payroll processes are updated to the latest regulations without any delay, eliminating any possible legal risks. This comprehensive risk-free attribute is another significant driver of growth in the payroll outsourcing industry.
For Better Decision Making Through Real-Time Analytics
Often overlooked, another key reason for the boosted growth of the outsourced payroll market is the benefit of real-time analytics.
Outsourcing your payroll gives you privileged access to additional information and a variety of expert consultations that can help you evaluate your company’s payroll status and structure based on the data available with them. This provides your company with real-time analytics for making all the necessary decisions to restructure your payroll, human resources, financial or benefits structure to aid the growth of your business while eradicating risks.
These analytics will also help you improve your company’s planning and strategy formation processes by targeting accurate payroll segments.
Increase Of Multi-State Payroll
The world has become a global village with remote working becoming a new trend for various beneficial reasons. This trend has escalated even higher because of the recent pandemic. All these patterns of rising demand for remote working have increased multi-state payroll. Multi-state business operations make your company responsible for the local, state, and federal payroll tax withholding, payment and reporting obligations of the respective country.
Companies have realized over the years that learning these multi-state payroll procedures are complex and call for a dedicated learning curve which is not effectively or efficiently possible through an in-house team. Companies are also alarmed by the serious legal consequences that would come about as a result of legal incompliance.
Payroll outsourcing companies have networks in different countries and representatives to keep them updated on payroll legislative changes. So with payroll outsourcers, companies are assured that their multi-state payroll is up to date and strictly complies with relevant legal requirements no matter which country or state they are operating in. This makes it a feasible option for companies to outsource payroll rather than having an in-house payroll team, thereby making the rise of multi-state payroll a significant contributor to the growth of the payroll outsourcing industry.