In the early 1970’s, when the first outsourced payroll companies emerged, we imagine that the debate immediately started regarding whether outsourcing a payroll was better than insourcing (running the payroll in-house).
This debate has raged ever since and a significant number of articles promoting either option have been written; when Googling “payroll outsourcing versus insourcing”, there are 227,000 results. While one could argue that outsourcing is relatively inflexible, by the same token, in-house personnel often lack the tax experience in complex jurisdictions like Africa. Argument and counter argument can be made ad infinitum.
The Goldman Sachs analysis for the American Payroll Association, found that the prevalence of outsourcing decreases as the number of employees increases – refer to the chart below. Larger companies can afford to spend significant sums on payroll systems. Whether cost savings or increased efficiency is obtained is unknown. However, in the in/outsourcing argument this inverse correlation appears to be the only quantifiable fact.
Axiomatic Consultants currently provide both insourcing and outsourcing options to clients in 42 African countries and the Covid-19 crisis has furnished us with some interesting and enlightening insights into the in/outsourcing debate.
Perhaps the most valuable lesson we learnt was the efficiency obtained where a hybrid model was employed by a company – some payrolls are insourced, while others are outsourced but where all payrolls used a common true cloud technology platform. Where the company experienced problems with an insourced payroll for a myriad reason, this was immediately “transferred” to an outsourcing model. Axiomatic offers both models and we simply took over the running of the insourced payroll until the problem was resolved.
This arrangement is almost like having a free insurance policy, a free put option or a golden parachute which leads to a seamless transition between the two models to ensure employees do not experience any delays to their pay.
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