Ten headline findings in 2023
We asked: ‘how do you currently process your payroll?’ This year, we’ve seen a 27% increase in UK businesses choosing to outsource their payroll to an external provider.
To mirror this, there’s also been a 19% drop in businesses processing their payroll in-house via payroll software, which had been stable for the previous three years.
However, despite this decline, keeping payroll processing in-house using payroll software remains the top choice, with 51% of businesses choosing this method.
Other options for processing payroll have also seen some changes. For instance, there’s been a surprising 270% increase YOY in businesses using free HMRC payroll software, with 9% of all respondents now using this method to process payroll.
Stay compliant with changing legislationWith a good payroll provider you'll have help from experienced payroll experts and enjoy top-notch software that updates regularly to ensure every pay run is compliant.
Save time and moneyIn reality, the true cost of in-house payroll processing is often much higher than outsourcing when you factor in the cost of time and individual or team salaries.
Support business growthA managed service made for your business size will be a bespoke offering that’s more than capable of taking on all of the payroll processing, distribution and reporting for you – leaving you to focus on developing your business.
Remove a single point of failureOutsourcing your payroll mitigates the risk of a single point of failure that's present in smaller payroll departments.
Improve the employee experienceA more consistent and reliable payroll experience, on time and without errors, equals a happier workforce and increased retention.
Read our brochure on payroll outsourcing
A surprising 22% of businesses are using managed payroll services that require data input via insecure methods.
And shockingly, we’ve seen a 67% increase in a return to outdated managed services that specifically use paper, telephone or email input. This is hardly the direction we were expecting!
Rather curiously, there’s been a slight dip this year in businesses using cloud-based software and on-premise or desktop software despite them remaining the most popular solutions. We’ve also seen a 43% increase in the use of managed services with cloud-based interfaces.
Award-winning, cloud-based software right this way!
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Later in the report, we reveal the desire for better customer service is rising. Is this, coupled with the increased use in managed services, showing a need for more advice and support with payroll processing?
In the last 12 months, 59% 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.
Rising steadily since 2019, we've seen just shy of a 100% uplift from 2022 in businesses connecting their payroll & HR software via APIs.
Though API integration remains the least popular solution, this significant uplift could indicate usage will continue this upward trend.
The use of separate payroll & HR systems remains the most popular option with 34% of respondents taking this approach.
Since 2021, the amount of businesses not using HR software at all is falling. This may be due to cost-saving decisions that many companies have made since the Covid-19 pandemic.
We’ve joined forces with Natural HR to provide all-in-one Payroll & HR Software. That means the best of payroll and the best of HR, in one place, with one log in, and one source of truth for all your people data.
Want to find out more? Book a demo to see the magic happen.
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‘Payroll & HR’ software is great for payroll or HR – but never both!
APIs are way too much hassle to implement
APIs don’t work and cause headaches, I can live without them
I like my separate systems as they are
I don’t know much about integrated payroll & HR software
By integrating your payroll & HR platforms, data is shared seamlessly between the two, and usually consolidated into one dashboard. That means no more endless screen-scrolling and flicking between systems, just one true source of information.
In the world of payroll and HR, data is king. But if your data isn’t flowing from one system to another it’s an easy way to get lost in the weeds. True payroll and HR integration means data is reflected from one into the other, and that means one source of truth.
From integration you can expect singular inputs and approvals on things like new starters, expense claims and changes to employee details. Inputting this data once and in one system simplifies previously convoluted processes.
See it for yourself
In 2021 and 2022, we reported a year-on-year drop in payroll frustrations listed by respondents, suggesting providers were responding to the needs of their customers.
However, in 2023 there's on average (across all pain points listed in the graph) a whopping 73% increase in the number of frustrations reported.
The top frustrations were calculating holiday pay (22%), limited reporting and analytics (21%) and limited functionality (20%).
Alarmingly, payslip accuracy is 200% more frustrating than it was in 2022. Having always been a very small percentage of people listing it as a frustration, it has now shot up significantly, with reliability of the technology not far behind with a 162% year-on-year increase.
If your employees work a set number of hours and receive a fixed salary, holiday pay is relatively easy to calculate. But it can become tricky very quickly if your employees work irregular hours or term-time only, earn overtime, or receive bonuses and commission.
Miscalculating holiday pay is an easy mistake to make, but it could leave you non-compliant and frustrate your employees.Does your current platform or service do the heavy lifting for you when it comes to holiday pay calculations?
Try our part-time holiday calculator
…and our zero-hours holiday calculator
We asked: ‘When switching payroll provider, how easy did you find it?’ The good news is, switching your payroll provider is getting easier with just 2% saying it's difficult - a decrease of 85% since last year.
The majority of respondents were on the fence with 42% finding it neither easy nor difficult, and approximately 25% finding it quite easy and quite difficult.
What would it take for the passive 42% (who found their switch neither easy nor difficult) to shift towards having a more positive experience? What exactly would make it easier for them?
Communication is regular and timely
Training materials and support are high quality
Data transfer process is taken care of by the provider
First/parallel pay run runs smoothly and is error free
Something else
Those that were considering switching but decided not to go through with it rose dramatically.
The number of businesses that decided not to switch rose by 31% last year and has risen again by a further 28% since 2022, showing a continuing trend towards an overall reluctance to switch providers.
Perhaps the cost-of-living crisis is making decision makers more risk-averse and deciding to stick with their existing suppliers. Is it simply a case of ‘better the devil you know’?!
With the frustrations with payroll providers also rising, it's surprising that more people aren't more motivated to switch. The cost-of-living crisis could be making decision makers more risk averse, or buyers potentially think their current frustrations are an industry-wide problem that can't be solved by changing to a new provider?
That being said, more people are considering switching - even if they're not going through with it. Potentially next year we'll see more people making the move when their frustrations spur them to take action!
Interestingly, the number of respondents that are unable to secure investment from their business has seen a steep rise this year (100% increase) when looking at why people aren’t making the switch.
The current economic climate is clearly impacting business leaders’ decision-making process and causing a reluctance to invest in new technology.
However, investing in new software will often improve efficiencies, giving a better return on their investment in the long term.
The top three reasons for not making the switch were insufficient incentive to move (32%), more convenient to stay with current supplier (21%), and too much hassle (21%).
Unsurprisingly, the frustrations we uncovered earlier in the report have led to a significant increase in the number of businesses looking to switch providers.
Businesses looking to switch payroll providers within the next 3-6 months have increased by a whopping 346% YOY. Meanwhile, 20% of businesses are considering switching within the next 6 - 12 months – that’s a 152% increase since last year.
When you team the increased levels of frustration with the fact that businesses are finding it less difficult to switch, we could see a lot of churn in the market this winter and next spring.
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Automation of payroll processes remains a top priority for businesses.
40% of respondents want to see this, closely followed by advanced analytics and reporting at 38%. Improved employee experience and better customer support is also high on the agenda.
Improved employee self-service and step-by-step implementation process have seen the biggest rise this year (approximately 60% each). Whilst a simple, clean look & feel (UX), flexible payment methods (including salary advance) and branding and customisation options have seen a decrease.
What’s apparent is we’ve seen a definite shift. Every category that was on the rise last year has fallen, and every option that was less popular in 2022 than in 2021, is now on the up.
Whilst we’d predicted market churn would continue to climb based on the trendline since 2020, it has actually slowed YOY.
Since 2020, the number of people who'd spent less than 1 year with their current provider had been rising, but in 2023 that figure dropped by 17% - showing that market churn has slowed down. However, based on the number of people looking to switch within the next year (39%) (see insight 8), we expect to see that figure pick up again in 2024.
Most respondents (26.85%) have been with their current payroll provider for 10 years or more, showing loyalty and stability are important to customers in this industry. However, the amount of long-term stints continues to decline, suggesting this won't be the case for long as customers scour the market for better options.
We've also seen a significant change since last year towards being with a provider for 3-5 years (this was the opposite in 2021-22 where the biggest uptick was at both ends of the spectrum).
Last year, 16% of businesses told us they were looking to switch providers within 12 months, but based on our findings in this year's survey, only 12% followed through with the switch.
On that logic, of the 38% who said they'd switch this year, 29% will go through with the switch in 2024 - which would be the highest market churn we've seen!
We don't predict the figure will be quite that high, but we're definitely predicting an uptick in businesses changing providers this year.
It’s no surprise to us that businesses want more payroll automation. And good payroll software can apply legislation, minimising the need for manual calculations, which 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.
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