Multi-country payroll outsourcing grows 49 percent

By siliconindia   |   Tuesday, 26 May 2009, 20:34 IST   |    2 Comments
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Multi-country payroll outsourcing grows 49 percent
Bangalore: Multi-country payroll outsourcing (MCPO) is in the emerging rapid-growth phase, ahead of other standalone multi-country HR process outsourcing markets on the maturity curve, says a new study by Everest Research Institute called, 'HRO Market Update: Multi-Country Payroll Outsourcing (MCPO): A New Approach to an Old Problem'. "Since 2007, we have witnessed entry of offshore-led suppliers like Infosys, TCS and Caliber Point, to offer a combination of ERP capabilities along with a global sourcing delivery model. In 2009, we expect to see more such suppliers to enter the market," says Gaurav Gupta, Principal and Country's Head, Everest Group. Everest in the report reveals that MCPO is growing at a much faster rate that multi-country HRO market. From 2006 to 2008, MCPO grew from $91.5 million to $202.9 million, registering a 49 percent growth while multi-country HRO grew only 12 percent during the same period, up from $1055.3 million to $1313.2 million. The study analyzed 84 multi-country payroll deals signed till December 2008, where around 3,000 employees were covered. According to the study, the key business drivers leading to increasing adoption of MCPO among MNCs included cost reduction, compliance, improving management control & insight, vendor consolidation, expansion into newer geographies and technology rationalization. The study also points out that the average contract term for MCPO deals is 4.9 years compared to multi-country HRO deals where the average contract term is 6.4 years. The study further found that 62 percent of the MCPO deals covered four or more buyer countries. The most common implementation approach in MCPO remains a phased roll-out. Further, in almost all MCPO deals, buyers include core payroll sub-processes including payroll preparation, payroll calculation, payroll distribution, reconciliation, and payroll tax reporting and filing. Buyers include Asia Pacific more frequently in MCPO deals than they do in multi-country HRO. Out of the 104 multi-country HRO deals signed as of December 2008, only 30 deals included Asia Pacific. However, out of the 79 MCPO deals till December 2008, as many as 58 deals included Asia Pacific. While a full-scope multi-country HRO still remains a challenge in Asia due to weak business case in the region and limited supplier capability. "MCPO helps buyers gain control and visibility into their regional payroll cost and headcount information at a palatable cost," says Rajesh Ranjan, Research Director- HRO, Everest Research Institute While buyers in manufacturing and financial services sector remain the leading adopters of MCPO, several successful examples in various industries including financial services, manufacturing, transportation & tourist services, telecommunications, electronics manufacturing services, and banking have given credence to the proposition of MCPO.

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