How does outsourcing affect payroll proficiency?
In some countries more than others, employing staff involves complex payroll administration and legal requirements. It’s nothing time, expertise and effort can’t solve, but why invest in something that’s not your core business – especially when you can team up with a complementary partner that offers peace of mind? An increasing number of organisations are doing just that to boost their overall payroll proficiency. Here's how these partnerships rank in terms of effectiveness across Europe.
Scores by country
External help to navigate the payroll maze
Outsourcing has its merits for most payroll subprocesses. But according to hundreds of European companies, these are the ones for which working with a partner provides the highest added value: calculating payroll, monitoring legislation, collecting and integrating data, managing transfers to governments, and handling payroll documents. By taking over these crucial processes, partners guarantee correct calculations, legal compliance and maximum efficiency. It’s no coincidence that outsourcing is most popular in countries with high levels of payroll complexity.
Ria Vermeir, Unit Manager of Outsourcing Services at SD Worx Belgium
Partner: top 3 countries
Ranked from most proficient to least proficient
In Belgium, payroll partners have been around since the 1940s under the moniker of social secretariats. The knowledge and expertise they have built up through the decades is enormous, and companies often have long-term relationships with their Belgian partner organisations. They are, after all, perfectly poised to unburden companies in Belgium’s complex payroll landscape. As they’re closely linked to the legislative world, they are the first to know which developments and regulations are coming up and quickly implement them into their applications, tools and systems.
So, by relying on payroll partners, Belgian companies don’t need to invest in continuous training or adjust their payroll processes in the face of Belgium’s intricate legislative context. Their partner stays up to date for them. No wonder more than 3 in 4 Belgian companies are willing to outsource their payroll.
Almost 6 in 10 Norwegian companies are willing to outsource payroll processing entirely. If anything, this strong result showcases that Norway’s business environment has a high level of trust in payroll partner organisations. In addition, Norwegian companies often see these partners as one-stop shops that can help them with a whole range of payroll aspects all at once, only adding to their payroll proficiency.
Some of the main tasks and responsibilities Norwegian businesses happily let partner organisations take off their plate are related to tax rules and regulations, legislative changes and making sure that salaries are paid on time during holiday seasons.
Traditionally, Spanish companies aren’t very inclined to outsource payroll and IT, preferring instead to develop knowhow and technologies in house as much as possible. But lately, there’s been a shift. Because of the tightening labour market and the fact that many seasoned professionals are nearing retirement, internal payroll specialists are increasingly considered to be critical employees. In other words, more and more companies fear that losing the expertise of these internal professionals is likely to be detrimental to their payroll process.
To avoid the impact of such a brain drain, businesses in Spain are increasingly open to outsourcing and using external IT solutions. In fact, half of the Spanish companies are willing to outsource their entire payroll to reduce the risks of losing internal knowledge and knowhow that would be expensive to build up again.
Partner: bottom 3 countries
Ranked from most proficient to least proficient
There aren’t many Swedish companies that jump for joy at the thought of outsourcing their payrolls – or any other business process for that matter. Although 2 in 5 companies say outsourcing is easy in Sweden, the vast majority prefer to keep payroll processing in house. Traditionally, Swedes pay a lot of attention to safety, security and data privacy matters, which could partly explain why only 5% of Swedish companies hand their entire payrolls over to an external partner. Midmarket companies are most open to full payroll outsourcing: for them, it’s a particularly efficient approach to cutting costs in today’s challenging business environment.
As is the case in other Scandinavian countries, SaaS solutions are very popular in the Swedish market. User-friendly IT systems from external system providers offer solid solutions that address Swedish companies’ security concerns, while also accommodating the needs of an upcoming younger workforce. A growing proportion of Swedish companies – over 28% – have already switched from using their own technology to SaaS.
Less than half of Danish companies believe that an external partner makes payroll processing easier. That’s a relatively low result, probably driven by negative experiences with the service quality in the past and/or the high cost of outsourcing payroll processes in Denmark. Add the fact that payroll consultants are often considered a critical resource due to the tight labour market in this domain, and it quickly becomes clear why so many Danish companies prefer to keep as much control over the payroll process as they possibly can.
Many companies – almost 1 in 3 – then opt to manage the payroll process in-house while using an IT system from an external services provider. This enables them to maintain a high level of control while enjoying peace of mind when it comes to data quality, keeping data up to date and so on.
Even though 1 in 3 Swiss companies feel positive about fully outsourcing payroll, less than 5% do so. This puts Switzerland in last place for payroll partners and outsourcing in Europe. There seems to be an overall lack of trust and knowledge about what payroll partners can offer. Swiss companies value the flexibility they have when managing payroll internally, wrongfully fearing that this might turn into inflexibility when outsourcing payroll. Many are also discouraged by the possible challenges that come with connecting their own HRIS system with an external payroll system.
At the same time, 4 in 10 Swiss companies see the positive impact of outsourcing on the total cost of payroll handling. After all, hiring internal payroll expertise is not just very expensive but payroll professionals are also hard to find on the labour market. Once they get a taste of the services and expertise payroll partners provide, many Swiss companies come to understand that outsourcing enables them to leverage a broad and deeper pool of experience-based knowledge at an overall lower cost.