Study Reveals One Third of Midsized Companies in the U.S. Incur Penalties for Noncompliance
In today’s challenging economic and increasingly regulated business environment, midsized companies must tightly manage employee costs to help improve their bottom line and support business growth – driving many to outsource complex payroll processing to partners such as ADP®, a provider of payroll services and tax compliance services.
Helping to ensure compliance with evolving state and federal tax regulations is a key driver of the outsourcing trend. According to a May 2012 study among midsized business owners and senior executives conducted by the ADP Research Institute (ADP RI), a specialized group within ADP, 33% of U.S.-based midsized companies incurred unintended expenses related to noncompliance with government regulations in the past year. Of those who were fined or penalized, each received an average of 6.4 fines or penalties. Moreover, the study also found that organizations who process payroll in-house received nearly three times as many fines or penalties as organizations that outsource their payroll (an average of 5.7 fines or penalties for businesses that process payroll in-house, versus 2 fines or penalties for companies that outsource their payroll).
“A growing number of midsized companies are outsourcing their payroll processing to help mitigate risk in an increasingly complex regulatory environment,” said Regina Lee, President of ADP Major Account Services, National Account Services, GlobalView® and ADP Canada. “As more mid-market organizations realize the value that outsourcing can offer, we’re also seeing increased demand for our ADP Workforce Now® solution, which helps midsized companies simplify the regulatory compliance process, reduce their administrative burdens and focus more squarely on growing their business. In fact, more than a quarter of our new midmarket sales come to ADP from companies previously performing payroll in-house.”
According to an ADP RI study on how companies do payroll conducted in 2011, over the last seven years, the percentage of companies processing payroll in-house versus through an outside vendor has declined. In 2005, 54% of midsized U.S. companies managed payroll internally, while 46% outsourced the function. By 2011, just 48% of those companies processed payroll in-house, while 52% strategically outsourced this function to a trusted partner.
The same ADP RI study also showed a decline in satisfaction among companies that manage their payroll in-house and increased satisfaction among organizations that outsource payroll. In 2007, 72% of midsized U.S. companies processing payroll internally were satisfied with their payroll function compared to 61% in 2011. Meanwhile, satisfaction with payroll processing grew 10% among companies that outsource the function – from 52% in 2007 to 62% in 2011.
“We currently manage nearly 900 employees across the Eastern half of the country,” said Ron Thomas, Vice President of Human Resources at Eagle Transport Corp., a petroleum transport company. “By replacing our in-house payroll system with ADP Workforce Now, we’ve simplified tax law compliance and reporting, while also integrating our payroll and HR systems for the first time. I felt at times our old disconnected solution was out of control. ADP has added a level of control that enables our HR department to place even greater focus on our core mission of managing our people.”
To date, more than 30,000 clients have embraced ADP Workforce Now. This flexible, cloud-based platform is designed to help midsized companies maximize employee productivity while driving their business forward. The platform provides HR managers with the information they need to more effectively manage their workforce via a single point of access. This platform provides a true integrated human capital management (HCM) system that can scale to support an organization’s evolving payroll, HR, benefits, talent management and time and attendance needs.
For more information about ADP Workforce Now, visit www.adp.com/workforcenow