We asked: ‘how do you currently process your payroll?’ Last year, a quarter (25%) of UK businesses said they were outsourcing their payroll provision to an external provider. This year, that figure has dropped to 20% (which is a significant percentage decrease of 20%).
Interestingly, the percentage of businesses using payroll outsourcing is now at its lowest since we started this survey back in 2019.
Keeping payroll processing in-house using payroll software continues to be the weapon of choice for most business – with nearly two thirds (63%) of businesses choosing this method.
That figure was sat at 57% back in 2019, rose to 66% during the pandemic, and has subsequently flatlined.Other methods of processing payroll have seen some changes. For instance, there’s been a 35% increase YOY in businesses using an accountant, with 12% of all respondents now using this method to process payroll.
The current cost of living crisis means rising costs for businesses and households alike. It’s not surprising that cutting costs - wherever possible - is high priority for most. Team this with the common misconception that outsourcing is more expensive than keeping payroll in-house, it’s not surprising that we’re seeing UK businesses turn away from this method.
Just how expensive is payroll outsourcing? And what are the hidden costs of keeping payroll in-house? We explore this in our blog post how much does it cost to outsource payroll?
A surprising 18% of businesses are using managed payroll services that require data input via insecure methods such as sending files, spreadsheets, paper, and email, or using the telephone. This constitutes a 19% increase in the uptake of these methods since last year – this is hardly the direction we’d expect this figure to take!We’ve also seen a slight increase this year (+6%) of businesses using on-premise or desktop payroll software. This is a swing away from the trend - this figure was previously seeing a steady decline each year since 2019.Rather curiously, there’s been zero growth in the use of cloud-based software. Uptake was predicted to be at 45% this year based on the pre-Covid trend but has in fact stagnated at 36%.
In the last 12 months, 61% of medium to large businesses experienced a cyber security breach. Of these, 32% experienced attacks at least once a week!Which is why it’s so surprising to see a rise in the use of insecure data transfer methods for payroll – particularly given the sensitive (and valuable) nature of employee data.Check out the latest findings from the government’s annual survey
The use of separate payroll & HR systems has increased by 36% since 2019. Businesses connecting their payroll & HR software via APIs has dropped this year too (by 8% YOY).
Plus, the use of the same solution for payroll & HR has remained flat over the past two years at 29%.
All this points to the fact that businesses are turning away from integrated payroll & HR.Overall, uptake of HR software is once again growing, with nearly 3-in-4 (73%) businesses now using either an integrated or separate system. This figure has seen an increase of 18% since 2019 – when HR software uptake sat at 62%
As employees feel the pinch of soaring living costs, it’s critical that businesses get payroll right, on time, all the time. Yet it’s no secret that the risk of human error increases when we carry out repetitive tasks like duplicating data entry.
But one source of truth doesn’t need to be the holy grail for payroll & HR teams – integration options are readily available.
But are they good enough?
The proportion of UK business who have moved to a new payroll provider within the last 12 months continues to climb towards pre-pandemic levels.
Back in 2019, 17% of businesses had been with their provider less than a year. During the pandemic, that figure dropped to 8%. But market churn is recovering incrementally YOY. Last year, 12% of businesses had switched to a new payroll provider within the previous 12-month period, that figure has risen to 16% in 2022 (that’s a 23% increase).
Interestingly, most businesses are in one of two camps, they’re either after 'long-term partnerships' or they’re 'frequent switchers' looking for the best deal. Those in the middle is down 43% YOY.
Nearly 1 in 3 businesses (32%) have been with the same provider for more than 10 years! This figure has picked up YOY and seen a 15% increase since 2021.
Due to the critical role that payroll plays, it’s not a huge shock that businesses are reluctant to move to a new provider. It can often be a case of better the devil you know.
Plus, the switching process isn’t always easy (we cover this on page 7). The first step is to conduct a review of your provider to understand what’s going well, what’s not, and if there’s enough incentive to move elsewhere.
Overall trends continue their downward trajectory since 2019, with businesses reporting fewer frustrations with their payroll solution. Auto enrolment and pensions, reporting and analytics, customer service or support, software reliability and user interface are among the areas that continue to frustrate businesses less and less!
This year, small rises in frustration are reported in a lack of integration and software accessibility (both up 1 percentage point) and calculating holiday pay (up 2 percentage points).
Interestingly, industry NPS findings have seen an overall drop of 10 points since 2021 (the score is now -28 compared to -18 last year).This constitutes a big regression. Going by the trend since 2019, the score would have been at -9 if the industry had kept up its improvements.
We asked: ‘When switching payroll provider, how easy did you find it?’
35% of businesses found switching payroll providers easy, 26% were on the fence (finding it neither easy nor difficult), and the majority (38%) found it difficult. This year’s result represents a regression from last year, when 4-in-10 businesses said they found their switch easy.Some vaguely good news here is that those who found switching ‘very difficult’ has dropped since 2019. Back then nearly a quarter (24%) of businesses felt this way, this year that figure sits at 13%.
What would it take for the passive 26% (who found their switch neither easy nor difficult) to shift towards having a more positive experience? What exactly would make it easier for them?
This year, 4 in 10 (40%) businesses considered changing payroll provider but decided not to go through with it. That’s seen a 30% increase on last year’s figure – which means more businesses are thinking about switching, but something’s putting them off!
30% of businesses didn’t switch to a new provider because it’s ‘more convenient to stay with current supplier’ (that’s an increase of 26% since last year).
Interestingly, respondents citing ‘inability to secure investment’ as
the reason not to switch, has doubled year-on-year (up to over 6%).But hassle and risk - both of which saw stratospheric rises in 2021 - have reduced this year, although they’re still at double the level seen before the pandemic.
Are we seeing industry inertia creeping in? For many businesses, it seems there’s not enough reasons to make the move to a new payroll provider. Although the fact they considered a move shows they aren’t as happy as they’d like to be with their current provision.
Since 2019 – before the pandemic – we’ve seen a staggering 108% increase in businesses saying they want to switch their payroll provider immediately.
What’s more, business looking to review their current provider soon (within the next 3-6 months) has increased 49% YOY.
Meanwhile, 23% of businesses are pushing out the switch to 12-36 months – that’s a 37% increase since last 2021.
More than half (53%) of businesses would most like to see automation of payroll processes – this is up 20% since last year.Interestingly, the biggest change since 2021 is the desire for ‘better onboarding and training’ which is up 53% YOY.Most businesses had previously been voting for improved analytics, but that’s taken a slight drop this year compared to last year (down 6%). However, nearly half (45%) of businesses still want improvements to be made in this area.
It’s no surprise to us that businesses want more payroll automation. Software than applies the legislation and minimises the need for manual calculations, saves time and reduces the risk of errors. If you’re one of the many businesses looking for more payroll automation, learn more about Moorepay’s software (that’s jam-packed with automation) here: Moorepay's cloud-based Payroll Software.
