Topic: Shining a Light into the 'Black Box' of Payroll - Determining the Economics of Outsourcing

There are continuing pressures to improve administrative efficiency – ‘payroll’ and certain associated personnel administration tasks are seen as ideal candidates for outsourcing in order to drive costs down and thereby deliver efficiency. The uniform treatment of the diverse payroll activities in the literature does not, however, represent the reality of payroll. The research described here concerns twenty case studies of UK-based organisations. The study identifies ten payroll related processes and analyses their costs in order to assess the economics of outsourcing. It emerged that firms that used external service providers had lower payroll costs. A further effect was a professionalisation of payroll which led to higher service quality.