the hackett group - u.s. payroll sourcing optimization study results
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2014 Payroll Sourcing Optimization Study Results | 1© 2014 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
U.S. PAYROLL SOURCING OPTIMIZATION STUDY RESULTSPresented to:
The Hackett Group ─ Global Time to Pay Advisory Program
Felicia Cheek, Sr. Director
April 10, 2023
Statement of Confidentiality and Usage Restrictions
This document contains trade secrets and other information that is company sensitive, proprietary, and confidential, the disclosure of which would provide a competitive advantage to others. As a result, the reproduction, copying, or redistribution of this document or the contents contained herein, in whole or in part, for any purpose is strictly prohibited without the prior written consent of The Hackett Group.
Copyright © 2014 The Hackett Group, Inc. All rights reserved. World-class Defined and Enabled.
2014 Payroll Sourcing Optimization Study Results | 3© 2014 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Today’s Hackett Presenter
Felicia Cheek, Sr. Director/Sr. Advisor
Global Time to Pay Advisory Program
For more than 20 years, Felicia Cheek has worked as a payroll advisor, consultant, both internal and external, or account manager with companies like ADP, Time Warner (TBS, Inc), Xerox (ACS) and now The Hackett Group. During this time she's used her excitement and experience to enhance the payroll profession. In her position at The Hackett Group she is responsible for advising and leading hundreds of companies on their journey to top performance in payroll. In addition, she has fostered strategic relationships with the American Payroll Association, Purely Payroll in the UK and both of the Australian Payroll Associations. Ms. Cheek is a frequent speaker at payroll and human resources events around the globe and writes articles for various professional organizations and industry publications. She's a member of the American Payroll Association and was inducted into their Hall of Fame and received their prestigious Meritorious Award in 2009.
Today's AgendaOverview
Strategic Outsourcing
Sourcing & System Capabilities
Productivity
Costs & FTEs
Challenges
Future
Summary
Demographics
Overview
This section describes the study purpose
and objectives as well as details high
level observations.
2014 Payroll Sourcing Optimization Study Results | 6© 2014 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
STUDY PURPOSE & ANALYSIS
Payroll Sourcing Optimization Study Purpose
Identify benefits and challenges of different payroll solutions
Illuminate critical practices while showing how effectively these are being applied today
Highlight key delivery practices across current and trending payroll processing platforms
Empower payroll professionals with insight necessary to maximize current and/or future system capabilities
2014 Payroll Sourcing Optimization Study Results | 7© 2014 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
1 2 3 4 5
Regrdless of the solution, payroll leaders still spend more than 50% of their time on day to day payroll activities
Payroll leaders recognize strategic outsourcing as a tool that allows them to increase their focus on analytical and process improvement type activities
69% of time tax filing and payments is outsourced
High Level Observations
There is a lot of excitement and high high expectations for cloud solutions in the payroll environment.
56% believe cloud technology will bring needed flexibility, insight & control
Customizations in payroll have not gone away and are common across all technology platforms—but is it for the right reason?
66% of customizations are to accommodate unique business requirements
Integration & Flexibility are the biggest challenges for all payroll systems, regardless of their platform (i.e. cloud, ERP, Service Bureau)
46% list integration & flexibility as the biggest challenge of their payroll system
ProductivitySourcing FutureChallengesFunctionality
25% spend >50% of their time on day to day payroll activities
Sourcing
Sourcing in payroll can be broken into two categories—
•Gross to net
•Other activities and sub processes
In general, regardless of whether the gross to net calculation occurs in house or is outsourced, decisions need to be made around certain other activities like tax filing and payments, verification of employment, payment distribution, etc. etc.
This section will highlight sourcing decisions in general and by payroll platform.
2014 Payroll Sourcing Optimization Study Results | 9© 2014 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Process Sourcing Profile
In-House•>=5,000 employees•53% in a Corporate Environment•50% outsource Tax Filing & Payments•46% use an ERP solution•69% customizations
Outsource•<=5,000 employees
•71% in a Corporate Environment
•52% under Finance
•67% use a Best of Breed Solution
•47% customizations
2014 Payroll Sourcing Optimization Study Results | 10© 2014 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Tax Filing & Payment
W-2/T-4
Check Printing
Verification of Employment
Garnishment Payments
Pay Statement Distribution
Garnishment Administration
Gross to Net
Payroll Inquiries
Employee Data Maintenance
31%
43%
46%
47%
50%
52%
59%
64%
91%
93%
69%
57%
54%
53%
50%
48%
41%
36%
9%
7%
In-House Outsource
Selective outsourcing is a common practice allowing payroll resources to focus on activities that create the most value…
System Characteristics
Technology should be designed to automate the payroll administration process and increase productivity.
Effective payroll solutions have features and functionality that increase productivity throughout the payroll administration process.
2014 Payroll Sourcing Optimization Study Results | 12© 2014 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
In almost every category, participants indicate an average level of expectations and satisfaction – basically they understand the significance of technology in payroll, but, they’re current experience leaves a lot to be desired
As it relates to performance and satisfaction, there is not a lot of difference in results for current payroll platforms
The different payroll platforms are:
Most are not overly excited about the current payroll platforms, however, most providers are developing new solutions…
2014 Payroll Sourcing Optimization Study Results | 13© 2014 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Almost 40% believe the level of agility in their current payroll platform is good, while more than 60% want more agility…
36%
46%
18%
Good Average Poor
Status Payroll Platform
Service Bureau ERPCloud
*small peer group
Good 20% 39% 50%
Average 53% 46% 40%
Poor 26% 16% 10%
While neither Service Bureau or ERP users are overly excited about the level of agility in their solution, almost 40% of ERP users are comfortable with the level of agility offered
High Expectations For Cloud Solutions—At first glance, cloud solutions indicate a significantly higher level of system agility than is currently available.
2014 Payroll Sourcing Optimization Study Results | 14© 2014 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Most are split down the middle when it comes to the user experience, ½ indicate it’s good, while 9% would like it to be better
Status Payroll Platform
Service Bureau ERP Cloud*small peer group
Good 47% 43% 80%
Average 40% 46% 20%
Poor 13% 12% 0%
Only 43% of participants that process payroll using an ERP solution believe the user experience is good, compared to 46% that indicate the user experience is average.
High Expectations For Cloud Solutions - At first glance, cloud solutions indicate real promise when it comes to the overall user experience
50%
41%
9%
Good Average Poor
2014 Payroll Sourcing Optimization Study Results | 15© 2014 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Improved features & functionality is necessary to streamline and automate the payroll process…
Status Payroll Platform
Service Bureau ERP Cloud*small peer group
Good 27% 43% 80%
Average 60% 46% 20%
Poor 14% 12% 0%
Regardless of the solution, no one is overly excited about the features and functionality currently available
High Expectations For Cloud Solutions – Everyone is expecting increased features and functionality with the implementation of cloud solutions. With the focus on decreasing the level of customizations, the expectation is some of those features that are available only through customizations currently, will be included in regular features and functionality of cloud solutions
45%
46%
9%
Good Average Poor
2014 Payroll Sourcing Optimization Study Results | 16© 2014 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Only 38% of participants believe technology costs are good in their current environment, 16% have poor technology costs…
Status Payroll Platform
Service Bureau ERP Cloud*small peer group
Good 33% 27% 50%
Average 47% 54% 40%
Poor 20% 20% 10%
For most ERP systems, there is little excitement around technology costs as there are lots of things that impact their overall technology costs
High Expectations For Cloud Solutions - Again, while cloud solutions are growing in usage, for those that are using them, 1/2 believe their technology costs are good, which is clearly a big expectation of cloud technology.
38%
46%
16%
Good Average Poor
2014 Payroll Sourcing Optimization Study Results | 17© 2014 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
43% believe dependency on IT resources is as expected, while 14% are not comfortable with their dependency on IT resources…
Status Payroll Platform
Service Bureau ERP Cloud*small peer group
Good 60% 19% 70%
Average 20% 65% 20%
Poor 20% 16% 10%
Most ERP users are not overly excited about their overall dependency on IT resources, with only 19% believing their level of dependency is good.
High Expectation For Cloud Solutions - Once again, cloud solutions, although still growing in usage is meeting expectations around lowering dependency on IT resources, ultimately reducing the number of in-house IT resources required to maintain the payroll system.
43%
43%
14%
Good Average Poor
ProductivityProductivity in payroll is achieved through simplification, standardization and automation throughout the process
2014 Payroll Sourcing Optimization Study Results | 19© 2014 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Automation of business processes is important, yet only 23% of participants indicate it is easy with their current solution…
Regardless of the solution, most are looking for an easier process when it comes to automation of business processes. 50% or more believe the experience on their current solution is just average.
High Expectations For Cloud Solutions – When comes to ease of automation of business processes, early indications from those using cloud solutions do not show this as an area with an advantage.
23%
48%
29%
Easy Average Difficult
Status Payroll Platform
Service Bureau ERP Cloud*small peer group
Easy 7% 23% 40%
Average 53% 50% 50%
Difficult 40% 27% 10%
2014 Payroll Sourcing Optimization Study Results | 20© 2014 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
The ability to create ad-hoc reports with ease is difficult for 25%, regardless of the solution, while 37% indicate it’s easy…
Those using Service Bureau’s have the most difficult time with reporting as 40% indicate it’s difficult, while 38% of those using an ERP solution indicate it’s easy to create ad-hoc reports.
High Expectations For Cloud Solutions – Still in it’s early stages, of those using a cloud solution, 40% indicate it’s easy to create ad hoc reports while 60% indicate there is experience is average
37%
38%
25%
Easy Average Difficult
Status Payroll Platform
Service Bureau ERP Cloud*small peer group
Easy 33% 38% 40%
Average 27% 35% 60%
Difficult 40% 27% 0%
2014 Payroll Sourcing Optimization Study Results | 21© 2014 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Security will continue to be an important feature of any solution, still 23% indicate it’s difficult to configure…
Status Payroll Platform
Service Bureau ERP Cloud*small peer group
Easy 30% 31% 40%
Average 33% 42% 40%
Difficult 26% 27% 20%
38%
39%
23%
Easy Average Difficult
Configuring security is fairly evenly divided regardless of the payroll platform.
High Expectations For Cloud Solutions – Looking at early user results, 40% indicate it’s easy to configure security, while 20% believe it is difficult. Even though they believe it’s difficult, it does appear to be easier than capabilities with Service Bureau’s and/or ERPs.
Costs & FTEs
2014 Payroll Sourcing Optimization Study Results | 23© 2014 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Technology costs represent 45% of total payroll processing cost for in house processing but only 9% when outsourced
Outsourcing costs vary depending on the type of agreement, scope of processes and activities outsourcedTechnology costs vary depending on the system, level of customizations, whether there is an upgrade or implementation; level of integrationIt takes .43 technical resources/1,000 employees to support and maintain the payroll system, regardless of the payroll platform
In-House Outsource $-
$20.00
$40.00
$60.00
$80.00
$100.00
$120.00
$140.00
Total Cost Technology Cost
Challenges
This section details some of the common
challenges experienced across all payroll
solution platforms
2014 Payroll Sourcing Optimization Study Results | 25© 2014 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Flexibility and integration have long been the top challenges with payroll technology…
Flexibility and integration are the two biggest challenges in the payroll administration process, regardless of the sourcing solution
Agility; 17%
Application Support; 15%
Compliance; 2%
Cost; 8%
Data Control; 12%
Flexibility; 23%
Integration; 23%
Status Payroll Platform
Service Bureau ERP Cloud*small peer group
Agility 14% 20% 0%
Application Support 7% 16% 22%
Compliance 7% 0% 0%
Cost 14% 8% 0%
Data Control 14% 12% 11%
Flexibility 14% 28% 22%
Integration 29% 16% 44%
46%
2014 Payroll Sourcing Optimization Study Results | 26© 2014 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
The HRIS, Time Reporting and Accounting system are integrated with payroll 73% of the time…
Sometimes these systems are not integrated, requiring manual processes be put in place. In addition, system integration affects other systems like variable compensation, employee expense reimbursement and equity administration systems.
While ERP systems have more integration, most of the time it is just data movement, and rarely includes workflow across systems.
Expectations For Cloud Solutions – center around unifiedsolutions, decreasing the concerns around integration
73%
27%
Yes No
Status Payroll Platform
Service Bureau ERP Cloud*small peer group
Yes 47% 85% 78%
No 53% 15% 22%
2014 Payroll Sourcing Optimization Study Results | 27© 2014 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
More than 50% would like more flexibility in their payroll system
Status Payroll Platform
Service Bureau ERP Cloud*small peer group
Good 33% 39% 60%
Average 13% 34% 10%
Poor 54% 27% 30%
One of the biggest concerns we have always heard about Service Bureau solutions centers around flexibility as indicated by 54% of our respondents
ERPs are more flexible, but the level of flexibility must be balanced with the cost of customizations and maintenance
High Expectations For Cloud Solutions - As indicated earlier, more than 50% are looking to cloud solutions for more flexibility without the additional technology costs that usually accompanies Service Bureau and ERP solutions
42%
25%
33%
Good Average Poor
58%
FutureWhat does the future look like for the
payroll administration process?
2014 Payroll Sourcing Optimization Study Results | 29© 2014 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
14%
44%
42%
High Average Low
Just a year ago, the percent of payroll professionals that have knowledge of cloud solutions in payroll was much lower than it is today. The landscape is rapidly changing, primarily because Human Resources is aggressively adapting cloud solutions, forcing payroll to increase their overall knowledge of cloud capabilities in payroll.
Most payroll solution providers offer cloud solutions, and those that don’t are rapidly developing them.
Status Payroll Platform
Service Bureau ERP Cloud*small peer group
High 20% 4% 60%
Average 40% 42% 40%
Low 40% 54% 0%
Payroll professionals are becoming more knowledgeable of cloud technology…
58%
2014 Payroll Sourcing Optimization Study Results | 30© 2014 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
For those that understand cloud technology, the expectations are high, believing it will allow additional flexibility, insight and control not available in current systems.
From a platform perspective, those currently on ERP solutions that understand cloud technology have the highest expectations
56%
44%
Yes No
Status Payroll Platform
Service Bureau ERP Cloud*small peer group
Yes 33% 67% 38%
No 67% 33% 62%
And they have high expectations!— with 56% believing cloud solutions will offer more flexibility, insight and control…
2014 Payroll Sourcing Optimization Study Results | 31© 2014 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Payroll processing in the cloud will continue to increase over the next 2-5 years….many factors are leading to more companies becoming comfortable with cloud solutions…
Status Payroll Platform
Service Bureau ERP Cloud*small peer group
Yes 56% 42% 89%
No 44% 58% 11%
Movement to cloud technology is increasing with 45% of companies planning to move to the cloud in the next 2-3 years!
45%
55%
Yes No
FutureWhat does the future look like for the
payroll administration process?
2014 Payroll Sourcing Optimization Study Results | 33© 2014 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Mobile Functionality is clearly an area where there is lots of room for improvement, regardless of sourcing or processing platform…
Status Payroll Platform
Service Bureau ERP Cloud*small peer group
Good 29% 24% 50%
Average 43% 32% 50%
Poor 28% 44% 0%
Mobile functionality is an area that every solution has opportunities to improve in. ERP platforms have the largest opportunity in this area
Mobile devices are computers for most Millennia's
Companies that do not have ESS available outside the company firewalls are missing the point of ESS
As with most things, cloud solutions promise good capabilities in this area
29%
37%
34%
Good Average Poor
71%
Summary
2014 Payroll Sourcing Optimization Study Results | 35© 2014 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Summary
Payroll leaders are anxiously awaiting enhanced technology capabilities that can move the payroll administration process to the next level
Strategic outsourcing should always be a part of the payroll sourcing solution, freeing payroll resources to work on more value added activities
Tax filing and payments is the most commonly outsourced sub process in payroll
In general, payroll systems lack agility, limiting their ability to quickly respond to internal business needs
Payroll technology costs represent approximately 45% of total cost, leaving many looking to cloud solutions to reduce technology costs in payroll
56% of those that have an understanding of cloud technology believe it will provide additional insight, flexibility and control in payroll
45% of companies are planning to move to cloud technology over the next 2-3 years
2014 Payroll Sourcing Optimization Study Results | 36© 2014 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Questions or Comments?
Demographics
The study included almost 80 companies across the United States and Canada. There was broad representation from companies:
•Paying employees in both the United States and Canada
•Aligned under Human Resources and Finance or Global Business Services
•Calculating gross to net in house and outsourcing
•Operating in a leveraged, corporate or decentralized environment
•Paying employees in almost all industries
•Using all technology platforms for payroll processing
2014 Payroll Sourcing Optimization Study Results | 38© 2014 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
The payroll administration process continues to be fairly equally split between Human Resources and Finance…
51%47%
2%
Human Resources Finance Global Business Services
12% of companies aligned under Financeoperate in a shared servicesenvironment
25% of companies aligned under Human Resources operate in a shared servicesenvironment
2014 Payroll Sourcing Optimization Study Results | 39© 2014 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
64% of our participants process payroll in-house, which is fairly common of large multinational’s based in the U S…
64%
36%
Inhouse Outsource
2014 Payroll Sourcing Optimization Study Results | 40© 2014 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
With 60% operating in a corporate environment….
60%
32%
8%
Corporate Shared Services Decentralized
2014 Payroll Sourcing Optimization Study Results | 41© 2014 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
14%
7%
19%
20%
22%
10%
2%7%
Less than 500m Between 500 and 999m Between 1Bn and 4.99 Bn Between 5Bn and 9.99BnBetween 10Bn and 19.99Bn Between 20Bn and 49.99Bn Between 50Bn and 99.99Bn More than 100Bn
Companies represent different revenue levels…
2014 Payroll Sourcing Optimization Study Results | 42© 2014 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
7%
8%
5%
7%
3%
7%
5%2%2%1%7%
10%
10%
5%
2%2%
3%
5%
2%2% 3% 2%
Accommodation & Food Services
Agriculture, Forestry, Fishing & Hunting
Apparel, Household & Personal Products Manufacturing
Automobiles & Component Manufacturing
Banking
Commercial & Industrial Materials Manufacturing
Communication equipment, computer, electronics and Semicondu
Construction
Diversified Financial Services
Educational Services
Energy
Food, Beverage & Tobacco Manufacturing
Healthcare Services
Insurance
IT Services
Media, Recreation & Entertainment
Non-Energy Utilities
Pharmaceuticals, Biotechnology & Life sciences
Professional, Scientific and Technical Services (non-IT or c
Public Administration
Retail Trade
Software
Most industries are represented
2014 Payroll Sourcing Optimization Study Results | 43© 2014 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
39%
27%
18%
16%
ERP Service Bureau Cloud Other
All payroll solutions are represented in the study, but the largest participation was from ERP’s and Service Bureau’s…
2014 Payroll Sourcing Optimization Study Results | 44© 2014 The Hackett Group, Inc. All rights reserved. Reproduction of this document or any portion thereof without prior written consent is prohibited.
Felicia Cheek
Senior Director – Global Time to Pay Advisory Program
Phone: + 1.770.703.7470
Mobile: +1.404.218.8666
fcheek@thehackettgroup.comwww.thehackettgroup.com
Suite N5001117 Perimeter Center West
Atlanta, GA 30338Phone: +1 770 225 3600
Martin House5 Martin Lane
London EC4R 0DPPhone: +44 207 398 9100
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60327 Frankfurt am Main, GermanyPhone: +49 69 900217 0
8, rue de Port Mahon75002 Paris, France
Phone: +33 1 53 43 0400
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Suite 40335 Lime Street
Sydney, NSW2000Australia
Phone +61 2 9299 8830
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