Focus on core strengths, lower overhead costs, streamline work processes, and add more value to the organization — these are the main drivers of companies that outsource payroll.
For multinational companies with thousands of employees worldwide, human resource administration can’t be taken lightly. It plays a significant role in creating a positive workplace environment, boosting employee morale, and improving productivity.
Instead of dealing with its administrative areas — recruitment, compensation, benefits, payroll, performance management — transferring these functions to companies that specialize in providing these services is more strategic.
This oil and gas “supermajor” is early to realize that outsourcing can give them a competitive edge.
During the ‘80s, when it was still known as British Petroleum, BP PLC started outsourcing some of its IT operations. By 1993, it had outsourced all of its IT operations.
Seeing its benefits, the petroleum refining giant considered outsourcing its human resources due to the skyrocketing number of its employees and the increase of its incompatible systems which resulted in uncompetitive HR delivery.
In 1998, BP started looking for an outsourcing partner who will handle the administrative side of HR: payroll, compensation, benefits, recruitment, performance management, employee development, training, and the like. Its more strategic HR services such as HR policy and labor relations, meanwhile, remained in-house. By 1999, it signed a $600-million deal with a BPO company headquartered in California — the biggest HR BPO contract during that time. And more than a decade after, BP renewed the HR contract.
The transnational consumer goods company Unilever had partnered with a global outsourcing company for the provision of many of its HR processes including payroll administration, recruitment, performance management, workforce reporting, reward and core HR administration, and learning system hosting. These HR services were carried out in delivery centers in Manila, Bangalore, Bucharest, Curitiba, Dalian, and Prague.
This five-year contract aimed to enhance the user experience and drive greater efficiencies of the Unilever employees through the introduction of a series of service improvements.
The international information technology company Unisys also outsourced its UK payroll function to a global HR and payroll services provider to gain more focus on areas that give value to their clients.
With over 22,500 employees around the world, Unisys wanted to handle payroll administration to “a very high standard” because of its significance to its employees. To achieve this, they sought the help of the experts in this area. By doing so, the IT company expect to reduce risks, get clear cost benefits, and become more confident in the performance of their service provider.
Prudential Financial is an American Fortune Global 500 and Fortune 500 company providing various financial products and services to individual and institutional customers in more than 40 countries worldwide.
In 2002, the financial giant signed a 10-year contract worth $700 million with a human resources outsourcing company. Some of the known services included in this deal were the payroll, employee data, staffing, records management, and information systems and support of Prudential’s employees.
The constant call for innovation drove the American retail corporation Target to outsource to the cloud. Using third-party software, Target utilized a system that manages learning, payroll, and recruiting.
Moving to cloud apps enabled the retail giant to streamline processes and free up time for their in-house employees to focus on their key initiatives. Moreover, it also played a key role in creating quick data-driven decisions that support growth and hiring efforts.
The second-largest pharmacy store chain in the United States, Walgreens signed a 10-year outsourcing deal with a BPO provider in India to handle its accounting processes. According to this report, this move involved the transfer of around 500 Walgreens employees to the service provider’s payroll.
This deal was expected to improve cost-efficiency and facilitate the growth strategy of Walgreens like most companies that outsource payroll.
Goldman Sachs is an American global investment banking, securities, and investment management firm. It is one of the pioneers of the offshoring process in its industry.
Of its 36,000 employees, >nearly 6,000 worked in Bangalore. These offshore employees provide critical support and service functions for Goldman Sach’s global operations — banker payroll, IT, preliminary research for analyst reports, and the like.
The strategy of placing employees in “high-value locations” helps companies like Goldman Sachs in boosting bottom-line growth.
Adding up to the list of companies that outsource payroll is Mondelez. With the mounting pressure to cut costs due to the slow growth in emerging markets, the snacks company Mondelez International planned to resolve this through the massive outsourcing of white-collar jobs. This move was seen to reduce overhead costs, enabling the company to boost profitability despite slow revenue growth.
Based on estimates, Mondelez outsourced 40 percent of work processes. Human resources, finance, and procurement are some of the functions it moved offshore.
The Russian office of L’Oréal has one simple reason for outsourcing its payroll function and the maintenance of its SaaS platform for HR administration — these areas are not their expertise. As a cosmetics company, L’Oréal wanted to focus on its core strength which is the production of high-quality personal care products.
This American multinational technology company is known for its innovations in hardware, software, cloud-based services, and cognitive computing. IBM also provides business transformation outsourcing services. To become more effective in the field of business processing, IBM offshored its entire payroll team in Manila, Philippines.
Like IBM, Regus also has its entire payroll team offshored in the Philippines to support its growing number of employees. As of this writing, the company has over 10,000 employees worldwide.
Regus is a multinational company headquartered in Luxembourg concerned in providing office spaces, meeting rooms, virtual offices, video teleconferences services, business lounges, and co-working spaces.
There are two general reasons why you can easily outsource your payroll:
Companies that outsource payroll know this for a fact. When the business line of your company is far from doing HR tasks like payroll, it is better to entrust it to the experts in this field. This will enable you to save time, focus on your core business, and prevent overhead expenses in hiring additional employees and in purchasing software for your payroll process. Outsourcing also helps in preventing payroll mistakes.
There are many payroll service providers in the market. These companies specialize in providing a wide range of HR outsourcing services. There is a company with service packages perfect for every business size.
As your business grows, so does the number of employees working under you. Therefore, handling payroll and other HR tasks can start to become a nuisance and steal a lot of your time and focus on your core business. You know for sure how time is more valuable than money in business. And this is what outsourcing exactly gives you: the time to focus on what is essential.
Outsourcing is a strategic choice for many companies. However, it can be a bane to those who won’t take the proactive measures in selecting the appropriate service provider.
What are the reasons, exactly, why outsourcing fails? Here are some of the reasons why:
To prevent these mistakes, it is crucial, first and foremost, to find a reliable service provider with a proven track record in the industry.
Here’s the thing: outsourcing is not a one-shot deal. In most cases, it requires a trial-and-error approach. You have to keep on digging until you find the right company that meets your needs.
Remember these tips in your search:
Arm yourself with knowledge about this business activity. After that, understand how it works and how it can work for your business. If you know friends or colleagues who are already into outsourcing, asking them about it can help a lot. They can give you advice about the positive and negative effects of outsourcing. Gather all the insights. After that, try to assess and determine what you should look for and avoid when choosing a service provider.
Once you have short-listed vendors, find out the company that specializes in the area that you need to outsource. Remember, every business has a unique set of requirements. The good one will spend more time understanding what you do, your needs, and your expectations.
BPO companies often promote themselves to be the best in the industry to attract prospective customers, yet everything boils down to their depth of expertise. Review their metrics — call duration, capacity to handle calls, customer satisfaction (CSAT) scores — to gauge their performance.
A scheduled office visit helps you learn about the work environment and corporate culture.
Take the time to meet with a few suppliers and know what they can do for your business. You are the client and you are investing in a provider that will represent your company in many ways. Consider all aspects of hiring to get the value that you’re paying for.
How the outsourced provider manages your payroll functions will eventually reflect on your credibility. It becomes an extension of your company and the values you stand for.
To know which among the companies qualify the most, check out for this information:
The service quality encompasses a variety of factors. Some key pointers to take note when looking into their quality are the following: recruitment procedures, training methodology, quality assurance processes, and payroll technologies.
Not all outsourcing companies are willing to customize their services according to the client’s exact needs. They have the packages set in place so the customer only has to choose. Look for those who are willing to custom-fit their capabilities toward achieving your business goals.
How long has the service provider been in operation? There are a few companies that have made consistent work throughout the years. They take pride in their depth of expertise and experience. Did the company handle the same account before? The company can deliver better service if they have previous experience. Find out its success rate in providing the service.
The prospective candidate should provide detailed information on project scope, timelines, and costs. As a business owner, you want to make “more wins” for this endeavor.
Adaptability to technology
If your business has an existing technology or in-house software, the service provider should be able to learn this technology and use it to your advantage.
In Magellan Solutions, it takes six weeks to start a campaign. It includes the following aspects:
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