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How payroll outsourcing will shape the future of HR

Craig Naylor-Smith, CEO, Parseq

The HR sector will already be aware that the payroll outsourcing trend has been gathering pace over recent years.

However, what might come as a revelation is the huge, predicted growth in the future. According to recent research*, the payroll outsourcing services market is estimated to grow at a CAGR of 5.8% between 2022 and 2027. In terms of actual revenue, this means an increase of USD 7,087.99 million – even allowing for the fact that these are global predictions, this is a significant amount.

Here, we briefly look at some of the reasons behind this growth, and how they will affect the UK’s HR professionals.

Priorities

With the cost-of-living crisis continuing to bite, increased business competition forever rearing its head, foreign exchange rates continuing to fluctuate, and the economy constantly changing, businesses are having to streamline, prioritise and concentrate on their core function more than ever before.

For many, payroll will not be part of this. Indeed, producing an accurate payslip at the end of every month is just the tip of the iceberg for today’s payroll staff. As a result, we are seeing more firms outsource this function, allowing HR departments to concentrate on other issues.

Legislation

Over the next 12 months, a whole raft of new legislative changes are being introduced. These include a rise in the National Living Wage and Minimum Wage, an increase in Statutory Sick Pay and an increase to Statutory Maternity Pay, Statutory Paternity Pay, Statutory Shared Parental Pay and Statutory Parental Bereavement Pay.

There will also be a reduction to the dividend allowance, an additional bank holiday on Monday, 8th of May, and there is expected to be a review of the state pension age. Additionally, we expect to see the lowering of the auto enrolment earnings threshold and the updating of UK GDPR legislation.

For some HR departments, this can be daunting. They are therefore increasingly outsourcing to specialist firms who can navigate it with ease.

Technology

Outsourcing providers should be able to offer sophisticated technology that dovetails perfectly with the latest rules and legislation and can store multiple documents securely in the cloud. They will also commonly often an employee app, allowing staff to enter their own details, such as updating their address and adding a new bank account.

Such technology can even be taken a step further. Sophisticated outsourcing firms will be able to integrate services such as automated invoice processing, document retention and accounting, all through a single portal – which HR professionals will be able to fully utilise in their everyday roles.

Conclusion

The next few years will see a rapid increase in the amount of payroll outsourcing. There will be an impact on HR departments – almost universally, this will be a positive one. Not only will they benefit from the sophisticated technology on offer from outsourcing providers, they will also be able to focus on other business priorities.

This is surely a good result, for all involved.

*Research by Technavio: Payroll Outsourcing Services Market – Size, Industry Analysis 2027 (technavio.com)

 

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