Outsourcing of payroll growing in Europe

The European countries have the most complex payrolls worldwide. Yet there are distinct differences in the level of outsourcing of the payroll because of the variations in national legislations. Although the US (globally) is the clear leader in the outsource level of payroll, Europe is now playing catch-up.

Payroll complexity 2017

The complexity of the payroll is the highest in Europe. We learn that from a comparative analysis of NGA Human Resources 2017. A striking conclusion from that same study is that the Anglo-Saxon countries have the least complex payroll systems. Is that an explanation of why the outsourcing level of payroll in countries such as the US, Canada and the UK is higher? In other words, is the outsourcing level in Europe lower because of the complexity and thus the complicated social legislation?

As there is no “Social Europe” you must as multi-country company working in Europe, take into account all the various national laws. But in addition to that difficulty, the European countries also each have individually a very complicated payroll administration. If you look at it through a pair of American or Asian spectacles, it becomes immediately clear that the European project is still far from perfect.  And for the Europeans themselves, this does not provide an immediate intra-Community boost. For the supplier, who offers payroll solutions across various countries, this means that a very careful analysis must be made of what is determined at national level.

European companies outsource their payroll less easily than in the U.S. A fine exception is Belgium, which, through it social legislation and history ensures that today more than 90% of all salary slips are calculated by an external party. But that is not the case in France, Germany or Italy, where less than 20% of the payroll is outsourced. Furthermore, the European companies choose for national providers to handle their salary processing. In this way, the national social legislation also seems to ensure a biosphere of “protectionism”. You won’t find any Italian payroll provider on the Danish market.

According to SD Worx, the market for the payroll providers in Europe will grow on average by 3.6% until 2021. Players such as SD Worx, which also offer multi-country solutions, notice that companies want to outsource the complexity as much as possible. And then you shouldn’t be surprised if you are already being confronted with new laws such as the GDPR (General Data Protection regulation). If the growth prognosis proves correct, choosing for SaaS solutions (Software as a Service) will be the most logical step.

Author: Rico Bel

Sources: NGA, ADP, SD Worx