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The payroll outsourcing services market is estimated to grow at a CAGR of 5.8% between 2022 and 2027. The size of the market is forecast to increase by USD 7,087.99 million. The growth of the market depends on several factors, including the growing need for payroll cost visibility, the escalating demand to reduce payroll-related costs, and the increasing demand to standardize processes, technology, and governance.
This report extensively covers market segmentation by product (hybrid and fully outsourced), type (mid-market, national, and multinational), and geography (North America, Europe, APAC, South America, and Middle East and Africa). It also includes an in-depth analysis of drivers, trends, and challenges. Furthermore, the report includes historic market data from 2017 to 2021.
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Technavio categorizes the global payroll outsourcing services market as a part of the global data processing and outsourced services market within the global IT services market. The parent global IT services market covers companies offering IT consulting and system integration services, application services, electronic data processing services, business process outsourcing services, infrastructure services, and Internet services. Our research report has extensively covered external factors influencing the parent market growth during the forecast period.
The growing need for payroll cost visibility is notably driving the market growth, although factors such as data security risks may impede the market growth. Our researchers analyzed the data with 2022 as the base year, along with the key drivers, trends, and challenges. A holistic analysis of drivers will help companies refine their marketing strategies to gain a competitive advantage.
Key Payroll Outsourcing Services Market Driver
The growing need for payroll cost visibility is notably driving the payroll outsourcing services market growth. Economic and cultural globalization, the extension of manufacturing processes across geographies, and the widespread use of lean methodologies are driving demand for payroll cost visibility. Transnational organizations often seek contracts that confer global visibility of costs and aggregate reporting of payments, employee data, and other services. Multi-country contracts provide flexibility and scalability that help operators venture into untapped markets.
Clients typically opt for vendors with domain expertise and those that conform to strict service-level agreements. The primary focus includes providing a hassle-free environment for HR professionals to drive and develop strategic activities (such as workforce planning and talent management) rather than spending time on administration and transactional duties. Therefore, payroll outsourcing service providers are developing solutions that promote self-service by employees in a bid to reduce administrative workloads. Such factors will foster the growth of the market during the forecast period.
Significant Payroll Outsourcing Services Market Trend
The rise of multi-country and centralized outsourcing models is a major trend in the payroll outsourcing services market. Organizations are looking for outsourcing partners that have exposure to multiple countries and can handle all the recruitment functions using sophisticated methods such as benchmarking, best practices, and process improvement. Globalization has toughened the competitive environment for outsourcing providers. India and China are considered to be the main countries receiving outsourcing projects. Many other countries from Eastern Europe are adopting payroll outsourcing strategies to maintain a competitive edge.
In the US, mid-sized companies have started to play a larger role in the global economy. The rapid adoption of payroll outsourcing strategies is expected among multinational companies. Globalization gives companies the opportunity to introduce flexibility in the processes for international expansion without dealing with the complexities and difficulties of diverse national regulations. Multi-Country Recruitment Process Outsourcing (MCRPO) is the latest trend and the fastest-growing segment among organizations. It involves the outsourcing of some or all payroll sub-processes in two or more countries. Thus, the increase of MCRPO is estimated to foster the growth of the market during the forecast period.
Major Payroll Outsourcing Services Challenge
Data security risks are a major challenge impeding the payroll outsourcing services market growth. Companies are very concerned about their confidential information when outsourcing business operations to service providers due to the increased risk of data breaches and cyber theft. They opt for providers that conform to strict compliance and regulation policies regarding information sharing. Data includes names, social security numbers, addresses, salary details, health, and biometrics records of employees, which is very sensitive information.
Outsourced technical support companies may require data centralization and universal access to maintain seamless operations. While such an upgrade can improve efficiency, it can also aggravate the risk of data leakage. Issues related to security breaches can also arise during the handling of confidential information. Apprehensions about security are intensified by the fear of offshoring organizations without secure data services and privacy handling policies. Such factors will hamper the growth of the market during the forecast period.
Key Payroll Outsourcing Services Market Customer Landscape
The report includes the adoption lifecycle of the market, covering from the innovator’s stage to the laggard’s stage. It focuses on adoption rates in different regions based on penetration. Furthermore, the report also includes key purchase criteria and drivers of price sensitivity to help companies evaluate and develop their growth strategies.
Global Payroll Outsourcing Services Market Customer Landscape
Vendors are implementing various strategies, such as strategic alliances, partnerships, mergers and acquisitions, geographical expansion, and product/service launches, to enhance their presence in the market.
International Business Machines - The company operates under multiple segments including software, and infrastructure among others with a high focus on software.? The company?offers software platforms and solutions that enable clients to predict, automate, secure, and modernize their solutions, on a secure hybrid cloud.
The report also includes detailed analyses of the competitive landscape of the market and information about 15 market vendors, including:
Qualitative and quantitative analysis of vendors has been conducted to help clients understand the wider business environment as well as the strengths and weaknesses of key market players. Data is qualitatively analyzed to categorize vendors as pure play, category-focused, industry-focused, and diversified; it is quantitatively analyzed to categorize vendors as dominant, leading, strong, tentative, and weak.
The market share growth by the hybrid segment will be significant during the forecast period. Hybrid outsourcing is a model that combines the advantages of a captive structure with that of an external outsourcing structure, which is partly bounded by a minimum level of local delivery. This model allows organizations to maintain competence in terms of processes and quality while reducing costs and leveraging labor arbitrage simultaneously.
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The hybrid segment shows a gradual increase in the market share of USD 12,515.51 million in 2017 and continued to grow until 2021. Global organizations strive to improve their payroll operations by adopting country-specific payroll management services. Country-specific models are adopted based on multiple factors such as governance systems, processes and policies, the level of operations, and types of payroll record systems. Highly transactional processes, including travel expenses, accounts payable, or payroll, is predestined for outsourcing because of their high transfer potential linked with clearly defined sub-processes and required skill sets. Hybrid models enable these highly transactional processes by using the complete potential of optimizations and savings. Such factors will foster the growth of the market during the forecast period.
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North America is estimated to contribute 54% to the growth of the global market during the forecast period. Technavio’s analysts have elaborately explained the regional trends and drivers that shape the market during the forecast period.
North America will experience steady growth in the mid-market and transatlantic contracts segments covering both the US and European operations during the forecast period. Companies in North America seek payroll services from low-cost countries such as India and rely on outsourcing service providers.
The anti-outsourcing legislation in the US hinders public sector organizations from outsourcing business process services in particular industry verticals. The anti-outsourcing legislation entails call center workforces in foreign lands to disclose their location to the US end-consumers and give the latter the right to be transferred to a US-based call center upon request. Transferring calls to US call centers requires a high degree of automated call transfer technology. This necessitates heavy upfront investment resulting in rising expenses for public organizations operating in the US. However, with the surging adoption of cloud-based payroll software, vendors in the region are encouraging the transformation of payroll services by leveraging automated sub-processes, business analytics, big data, and the deployment of mobility and cloud delivery models to governments. With the advent of digital technologies, such cloud-based payroll software helps in executing payroll processes quickly, without any interruptions. For instance, in September 2021, Texas-based Oracle Corporation launched Oracle Payroll Core, a flexible payroll management solution for intergovernmental organizations (IGOs) and non-governmental organizations (NGOs). Therefore, the adoption of such software requires specific skill sets to manage and update, which, in turn, will foster the demand for payroll outsourcing services during the forecast period.
The payroll outsourcing services market in North America witnessed a slowdown owing to the COVID-19 outbreak. However, several companies started offering their employees the work-from-home (WFH) facility, prompting them to adopt cloud-based payroll software solutions to manage their remote workforce. This helped the market in North America to gain traction in 2020. Moreover, the lifting of lockdown restrictions owing to the large-scale vaccination drives, coupled with increased funding toward the development of infrastructure and connectivity across end-user industries in 2021, helped the companies to resume their in-office activities. Such factors are expected to propel the gradual growth of the payroll outsourcing services market in North America during the forecast period.
The report forecasts market growth by revenue at global, regional & country levels and provides an analysis of the latest trends and growth opportunities from 2017 to 2027. The market has been segmented by Product (Hybrid and Fully outsourced), Type (Mid-market, National, and Multinational), and Geography (North America, Europe, APAC, South America, and Middle East and Africa).
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Payroll Outsourcing Services Market Scope |
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Report Coverage |
Details |
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Page number |
170 |
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Base year |
2022 |
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Historic period |
2017-2021 |
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Forecast period |
2023-2027 |
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Growth momentum & CAGR |
Accelerate at a CAGR of 5.8% |
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Market growth 2023-2027 |
USD 7,087.99 million |
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Market structure |
Fragmented |
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YoY growth 2022-2023(%) |
4.36 |
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Regional analysis |
North America, Europe, APAC, South America, and Middle East and Africa |
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Performing market contribution |
North America at 54% |
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Key countries |
US, China, Australia, UK, and Germany |
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Competitive landscape |
Leading Vendors, Market Positioning of Vendors, Competitive Strategies, and Industry Risks |
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Key companies profiled |
Acara Solutions India, Accenture Plc, Alight Solutions LLC, Automatic Data Processing Inc, Ceridian HCM Holding Inc., Complete Payroll Solutions, Deloitte Touche Tohmatsu Ltd., Workday Inc., Wipro Ltd., The Access Group, TalentPro, Safeguard World International LLC, Ramco Systems Ltd., Paycor Inc., Paycom Software Inc., Intuit Inc., International Business Machines Corp., Infosys Ltd., Hexaware Technologies Ltd., and Hewlett Packard Enterprise Co. |
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Market dynamics |
Parent market analysis, Market growth inducers and obstacles, Fast-growing and slow-growing segment analysis, COVID-19 impact and recovery analysis and future consumer dynamics, Market condition analysis for the forecast period |
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Customization purview |
If our report has not included the data that you are looking for, you can reach out to our analysts and get segments customized. |
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1 Executive Summary
2 Market Landscape
3 Market Sizing
4 Historic Market Size
5 Five Forces Analysis
6 Market Segmentation by Product
7 Market Segmentation by Type
8 Customer Landscape
9 Geographic Landscape
10 Drivers, Challenges, and Trends
11 Vendor Landscape
12 Vendor Analysis
13 Appendix
Research Framework
Technavio presents a detailed picture of the market by way of study, synthesis, and summation of data from multiple sources. The analysts have presented the various facets of the market with a particular focus on identifying the key industry influencers. The data thus presented is comprehensive, reliable, and the result of extensive research, both primary and secondary.
INFORMATION SOURCES
Primary sources
Secondary sources
DATA ANALYSIS
Data Synthesis
Data Validation
REPORT WRITING
Qualitative
Quantitative
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