Nine in ten European companies count on external help for payroll
Speed and efficiency are the biggest challenges in payroll processing
March 26, 2024
Ten per cent of European companies manage their payroll independently, relying on their own experts and software to do so. In contrast, 7% completely outsource the payroll process to an external party. Over 80% of European companies (83%) choose to partly outsource and partly manage their payroll administration internally with their own experts or software. This is according to a new large-scale survey by SD Worx, the leading European HR services provider, who polled over five thousand companies across 18 European countries. The survey also shows that 71% of employers are satisfied with the overall payroll processing within their company. However, organisations still struggle with several challenges, including speed and efficiency of payroll processing.
Just under half (46%) of European companies say they themselves are actively involved in payroll tasks and sub-processes. In particular, Romania (59%), Slovenia (57%) and Croatia (54%) take quite a bit of ownership when it comes to payroll processing and administration. Overall, it is mainly very small or very large companies that are heavily involved in payroll. For European companies with more than 2,500 employees, it is 55%, for organisations with 500-999 employees it is 50%, and for the very smallest, finally, with one to nine employees, it is 49%.
Three in ten companies use self-built software for their payroll
Three in ten European companies (32%) use self-built software for payroll processing and administration. This is by no means always specialised software, with smaller companies in particular using applications such as Excel, for example, as a basis for processing payroll calculations themselves. About a quarter (23%) of organisations use a payroll solution hosted by the supplier in the cloud (SaaS model), while another quarter (26%) have external payroll software running on their own servers or in the private cloud. Finally, 20% of companies do not use payroll software themselves - this is completely outsourced to an external party.
On average, 37% of the companies that outsource their payroll (whether partially or not) rely on accountants or financial experts, especially in Eastern European countries such as Serbia (51%), Poland, Romania and Slovenia (all three 44%) but also in, for example, Germany (47%). This is especially true for smaller companies. In addition, 27% of European companies, especially medium-sized and slightly larger ones, enlist the help of a specialised payroll service provider.
Seven in ten satisfied with company payroll processing
Good news: fewer and fewer European companies are experiencing problems with their payroll administration. In 2021, 19% of companies were still struggling with this, while in 2024 this dropped to 11%. Currently, employers are mainly concerned about the speed and efficiency of payroll processing (41%), the accuracy of processing (40%) and keeping payroll-related costs under control (38%). Specifically, this includes all costs related to payroll processing, such as outsourcing costs, in-house experts, software and the like. In addition, compliance with constantly changing legislation is an ongoing concern for companies (36%).
It is notable that organisations using a combined (internal/external) payroll model in particular see challenges to a greater extent. This is less the case with organisations that manage their payroll entirely in-house. Finally, those who outsource their entire payroll tend to see the fewest challenges.
Despite the challenges, 71% of employers are quite positive about overall payroll handling. 80% are satisfied with the punctuality with which wages are paid, 74% with the accuracy and quality of payroll processing and 62% with the speed with which the payroll process can be processed. However, there is still room for improvement, and increased digitalisation will make this possible. With real-time payroll systems, for example, companies can organise their payroll even faster. The impact of last-minute adjustments becomes immediately visible. More and more companies are also integrating their payroll processes with other systems, such as HR and accounting, which promotes operational efficiency.
"Legislation is becoming increasingly complex and constantly evolving, new rules are added, sometimes retroactively, both at local and European level. It is therefore important to stay alert. We help our local and international customers in various ways: by informing them, by managing the process for them completely, by setting up online or physical training courses, and also by being available to them personally should they have any questions. We don't lose sight of that human factor," says Tom Saeys, COO at SD Worx. "We believe in striking the balance between automated solutions and personal support so that our clients, employers and employers, can enjoy smooth and accurate payroll processing."
About the study
SD Worx, the leading European HR service provider, assists organisations with their HR and payroll. To know what really matters to employers and employees, SD Worx regularly conducts surveys. The analysis of the most recent survey, the 'Navigator Series', provides organisations with a compass to navigate through the challenges of HR and payroll. The survey was conducted in February 2024 in 18 European countries: Austria, Belgium, Denmark, Finland, France, Germany, Italy, Ireland, Croatia, the Netherlands, Norway, Poland, Romania, Serbia, Slovenia, Spain, UK and Sweden. A total of 5,118 companies and 18,000 employees were surveyed. The results are weighted and guarantee a reliable representation of the labour market in each country.