A new report from Technavia is predicting a very bright future for payroll outsourcing. According to their most recent forecast, global payroll outsourcing is expected to grow by just under 4.5% from now through 2020. Payroll outsourcing is now the fastest-growing segment of HR outsourcing, both in the United States and abroad.
Since its inception, payroll administration as a service has enjoyed steady growth domestically. Companies such as BenefitMall, Paychex, and ADP have leveraged their experience and business model to help small and medium-sized businesses handle payroll and other back office functions affordably and efficiently. And as the market has expanded here, it has also expanded across the world.
So, what is driving the current growth in payroll outsourcing globally? There are a number of things to consider.
The world is indeed becoming a very small place. As such, small and medium-sized businesses that never would have thought of expanding beyond national borders a decade ago are now thinking globally. And to complete globally, companies have to be as lean and efficient as possible. Outsourcing payroll services is just one of many ways to make a company leaner.
Outsourcing payroll allows companies to target their resources more on expansion and less on back-office functions. All of the money saved through outsourcing is money that can be better spent on exploring new markets, increasing competitiveness, and developing new products and services. Outsourcing payroll offers the added benefit of utilizing experts who are better positioned to handle payroll functions across multiple jurisdictions, as a company expands both domestically and globally.
Ongoing Economic Malaise
Despite government reports and rosy-eyed forecasts from the business media, both the U.S. and global economies are still stuck in an ongoing state of malaise. Our recovery from the last recession has been painfully slow to the extent that businesses still do not have exceptional levels of confidence in the future.
One of the many symptoms of this economic malaise is downsizing. Companies are not only hiring fewer workers, but they are also outsourcing a greater number of office functions in order to ensure the staff they do retain can concentrate on the core aspects of the business. It turns out that payroll services are easy to outsource because there are so many high-quality providers out there. As long as the economic malaise continues, the corresponding growth in outsourced payroll services will also continue.
Increasingly Complex Regulation
The implementation of the Affordable Care Act is a prime example of how increasingly complex regulations make things harder for business. The ACA alone has contributed significantly to the growth of payroll services here in the U.S., as companies struggle to maintain compliance with a law that seems to have no absolute standards. Many are finding it easier to offload payroll functions to outsourcing experts rather than have to navigate regulations on their own.
The key for payroll service providers is to stay ahead of the regulations in order to better compete for all of the new business coming their way. This is no easy task given the pace at which regulations change. Nonetheless, small and medium-sized businesses are looking for competent outsourcing partners that can take the stress of keeping up with regulations and tax changes off them by handling payroll and other HR functions.
There is no reason to believe that the growth in outsourced payroll services will slow any time in the near future. Now is the perfect time for payroll services providers to leverage their experience and resources to achieve their own growth by attracting new clients and adding new products and services.