In line with a global trend, the number of organisations outsourcing their payroll services is increasing year-on-year. The Australian Payroll Association (APA) 2019 Payroll Benchmarking Report supports this trend. “Outsourced payrolls make up 32.5% of survey respondents, which is an increase from 2018 when outsourced payrolls made up 24.7% of survey respondents,” the report says.
Dispelling a commonly held notion that outsourced payroll suits organisations with a certain number of employees, the survey showed a consistent outsourced percentage across all ranges of total employee numbers. So, if workforce size is not always a determining factor, what might influence an organisation to outsource its payroll?
“For many businesses, payroll is seen as a necessary function, but not core business” Eugene LaFontaine, national managed services operations manager, Frontier Software
Eugene LaFontaine, national managed services operations manager at Frontier Software, consistently sees three common drivers in this area.
“Clients opting to use Frontier Software’s payroll services do so because of concerns about their internal payroll knowledge and capability, a desire to be compliant and an intention to mitigate the associated risks,” says LaFontaine.
Lack of knowledge
Australian payroll is complex. Depending on the industry in which an organisation operates, it can be subject to modern awards, EBAs, taxation, superannuation or reporting obligations. Internal teams require an in-depth understanding of the payroll landscape they inhabit.
“Such knowledge comes at a cost, in terms of both training and lost time, and employees must maintain currency,” says LaFontaine.
“For many businesses, payroll is seen as a necessary function, but not core business.”
Single-point sensitivity is a concern for many organisations that would struggle if they lost the knowledge held by one or two key staff to turnover, retirement or signifi cant illness. Many organisations also seek to segregate payroll duties to help mitigate the potential for fraudulent activity.