2014 PAYROLL BENCHMARKING REPORT. Annual study examining trends, efficiency and costs of payroll in Australia

Transcription

1 2014 PAYROLL BENCHMARKING REPORT Annual study examining trends, efficiency and costs of payroll in Australia

2 Disclaimer and copyright: Copyright Australian Payroll Association Pty Ltd. All Rights Reserved. The information and data in Australian Payroll Association s 2014 Payroll Benchmarking Study was collected, analysed and compiled by Australian Payroll Association Pty Ltd. Readers are free to cite, reference, share and quote information contained within this report as part of their own works with the appropriate credit to Australian Payroll Association. We request that all references made to the report are cited as Australian Payroll Association 2014 Payroll Benchmarking Study Australian Payroll Association 2014 Payroll Benchmarking Survey 2

3 Introduction The 2014 Payroll Benchmarking Report accompanies Australian Payroll Association s annual payroll benchmarking study for Australian organisations. This year s survey received responses from 1782 organisations representing 1,155,255 employees and almost 40 million pays per annum making it the largest payroll study in Australia. The survey respondents represented a wide variety of industries, geographical locations, levels of payroll complexity and employee populations. The report looks at payroll costs and trends including staffing, technology and other costs as well as efficiency benchmarks and market share data. This report provides payroll professionals and employers the opportunity to analyse their own benchmarks in comparison to industry standards. As author of the survey, Australian Payroll Association wishes to acknowledge and thank all payroll professionals and employers that participated. Kind regards, Tracy Angwin Managing Director Australian Payroll Association 2014 Australian Payroll Association 2014 Payroll Benchmarking Survey 3

4 Participant Profiles Australian Payroll Association s 2014 Payroll Benchmarking survey was completed between November 2013 and January The survey participants represented 2732 full time equivalent payroll professionals from 1782 Australian employers. The average annual salary, including superannuation, across all States/Territories and roles was $78,856. This is up from $73,629 from the 2012 survey. These payroll professionals collectively pay 1,155,255 employees and produce 39,077,453 payslips per annum. The total salary cost of the payroll professionals in the study was almost $200million. Almost half of the employees working in the surveyed organisations were paid fortnightly. Employee population by pay cycle (Figure 1) Weekly % Fortnightly % Monthly % Bi monthly % This report segments respondent organisations into categories based on the number of employees paid. This gives a view to economies of scale as well as market share statistics for different sized organisations. We also break down costs into per payslip and per employee paid. Per payslip relates to the cost of producing a single pay for an employee in an organisation. Per employee is the total cost to run the payroll operation for a single employee per annum Australian Payroll Association 2014 Payroll Benchmarking Survey 4

5 Payroll reporting lines Overall 56.2% of respondents report payroll to finance. However the trend shows that the larger the organisation, the likelihood of payroll reporting to HR increases. Based on our survey data, as organisations get larger employee populations they are more likely to have payroll report to HR rather than Finance. There is also a trend for larger organisations to have payroll report to a separate department, often shared services. Payroll Reporting Lines (Figure 2) When breaking down the figures by employee numbers it shows that as organisations increase in employee population, the likelihood of payroll reporting to HR increases. HR vs Finance - Employee numbers (Table 1) Employee numbers Reporting line HR 37.4% 42.5% 54.9% 58.3% Finance 57.5% 54.1% 39.4% 33.4% Other 5.1% 3.4% 5.7% 8.3% (Figure 3) 70% 60% 50% 40% 30% 20% % 0% HR Finance Other 2014 Australian Payroll Association 2014 Payroll Benchmarking Survey 5

6 Outsourced vs inhouse payroll The majority of Australian employers run an inhouse payroll function. This is unique with trends in the US and Europe being towards outsourcing payroll. This could be as a result of the complexity of Australian payroll legislation, as outsourcing your payroll does not outsource your regulatory responsibilities. Outsourced payrolls make up 25.4% of the survey respondents. Having an outsourced payroll function is more prevalent at the less than 200 employee and the over 10,000 employee ranges. This is likely because at less than 200 employees it is an expensive luxury to have a specialist payroll professional on your team. Employers with over 10,000 employees have an opportunity to leverage scale in their payroll operation, by potentially offshoring parts of their payroll process to countries like India and the Philippines. This is in line with international trends for large businesses. Outsourced vs Inhouse payroll (Figure 4) Outsourcing 25.4% Inhouse 74.6% Outsourced vs Inhouse payroll - Employee numbers (Table 2) Employee numbers Outsourced 16.3% 11.5% 5.4% 27.3% Inhouse Payroll 83.7% 88.5% 94.6% 72.7% 2014 Australian Payroll Association 2014 Payroll Benchmarking Survey 6

7 Average payroll salary The average salary (including superannuation) of a payroll professional has increased from $73,629 (APA 2012 Payroll Benchmarking Report) to $78,856. The average salary (including superannuation) for a Payroll Manager with a payroll of more than 500 employees is $127,166 nationally with additional variances between states. However there are significant variances between industries. The lowest average payroll salary is $70,706 in the Personal Services industry. The highest average payroll salary is $90,095 in the Transportation and Logistic industry. (Figure 5) Agriculture, Forestry and Fishing - $76,515 Arts and Recreation - $72,814 Construction - $81,424 Education and Training - $80,023 Electricity, Gas, Water and Waste Services - $83,194 Finance and Insurance - $88,677 Healthcare - $75,713 Hospitality and Leisure - $71,372 Information Media and Telecommunications - $78,208 Local Government - $73,527 Manufacturing - $79,764 Media - $84,156 Mining - $82,621 Not for profit/charity - $75,998 Personal Services - $70,706 Professional and Business Services - $77,626 Property and Real Estate - $75,880 Public Administration - $80,581 Retail - $75,929 Tourism and Entertainment - $67,193 Transportation and Logistics - $90,095 Utility - $82,625 Wholesale - $82,098 $50,000 $55,000 $60,000 $65,000 $70,000 $75,000 $80,000 $85,000 $90,000 $95, Australian Payroll Association 2014 Payroll Benchmarking Survey 7

8 A smaller variance exists between employer size. The highest average payroll salary reported is for employers with less than 50 employees, however this is likely to be a sampling bias due to pro-rated salaries at this level. Average payroll salary peaks at $80,695 in the employee range. It is likely that in the 10,000+ employee range the ratio of junior payroll staff to senior payroll staff pulls down the average salary to $75,601. (Table 3) Average payroll salary < 50 employees (pro rated if necessary) $82,390 Average payroll salary employees $77,316 Average payroll salary employees $76,577 Average payroll salary employees $80,695 Average payroll salary employees $79,336 Average payroll salary employees $75, Australian Payroll Association 2014 Payroll Benchmarking Survey 8

9 Average cost per payslip and employee paid Overall the total cost per payslip increased from the last survey with the largest increase being average salary per payslip. Included in the total costs are: Salary costs payroll staff salaries and wages including superannuation Technical costs payroll, time and attendance and employee self service software and service costs Other costs payroll consulting costs payroll recruitment costs payroll training costs payroll stationery costs payroll conference costs travel memberships Top performer benchmarks are calculated as an average cost of the top 25% of survey respondents. The average costs per payslip for Australian employers with more than 200 staff is: (Table 4) Average technical per payslip 2.21 Average salary per payslip 8.19 Average other per payslip 0.71 Average total per payslip Likewise, the average cost per employee paid has also increased. This is an important benchmark to consider particularly when comparing weekly, fortnightly and monthly payrolls. The average cost per employee paid for Australian employers with more than 200 staff is: (Table 5) Average technical per employee paid Average salary per employee paid Average other per employee paid Average total per employee paid Australian Payroll Association 2014 Payroll Benchmarking Survey 9

10 (Figure 6) (Figure 7) 160 3,500 Average total per payslip Average total per employee 3,000 2,500 2,000 1,500 1, < < Number of employees Number of employees All costs have been broken down by employer size due to the large number of employers that completed the survey. The average cost per payslip by employer size is: (Table 6) Category Average Top Performers total per payslip < 50 employees total per payslip employees total per payslip employees total per payslip employees total per payslip employees total per payslip employees The average annual cost per employee paid by employer size is: (Table 7) Category Average Top Performers Average total per emp paid < 50 employees 3, Average total per emp paid employees Average total per emp paid employees Average total per emp paid employees Average total per emp paid employees Average total per emp paid employees Australian Payroll Association 2014 Payroll Benchmarking Survey 10

11 Cost of payroll < 50 employees Costs in the under 50 employee range are much higher than average as expected. This is due to the inability to get any worthy economies of scale from small payrolls. Therefore the salary costs are much greater than other employer sizes, even when the salaries are pro-rated to the number of hours spent on payroll. (Table 8) Average technical cost per payslip Average salary cost per payslip Average other cost per payslip Average total cost per payslip (Table 9) Average annual technical cost per employee paid Average annual salary cost per employee paid 2, Average annual other cost per employee paid Average annual total cost per employee paid 3, Cost of payroll employees In this range the person responsible for payroll is typically not working full time and therefore costs may be higher than average per payslip and per employee paid. However they are significantly lower than the < 50 employee category. (Table 10) Average technical cost per payslip 2.66 Average salary cost per payslip Average other cost per payslip 4.67 Average total cost per payslip (Table 11) Average annual technical cost per employee paid Average annual salary cost per employee paid Average annual other cost per employee paid Average annual total cost per employee paid Australian Payroll Association 2014 Payroll Benchmarking Survey 11

12 Cost of payroll employees At this level many employers have a fully time payroll professional responsible for payroll. Technology costs are only slightly less than the category, however salary costs reduce dramatically. (Table 12) Average technical cost per payslip 2.46 Average salary cost per payslip Average other cost per payslip 1.04 Average total cost per payslip (Table 13) Average annual technical cost per employee paid Average annual salary cost per employee paid Average annual other cost per employee paid Average annual total cost per employee paid Cost of payroll employees A large proportion of survey respondents fall into this category and many have a team of payroll professionals. Salary costs in particular are reducing due to economies of scale. (Table 14) Average technical cost per payslip 2.01 Average salary cost per payslip 7.54 Average other cost per payslip 0.54 Average total cost per payslip (Table 15) Average annual technical cost per employee paid Average annual salary cost per employee paid Average annual other cost per employee paid Average annual total cost per employee paid Cost of payroll ,000 employees In this category, cost trends continue to fall in technology, salary and other costs. However salary cost is reducing more when compared to technical cost, suggesting that labour saving technology is being widely employed at this level. (Table 16) Average technical cost per payslip 1.72 Average salary cost per payslip 4.87 Average other cost per payslip 0.56 Average total cost per payslip Australian Payroll Association 2014 Payroll Benchmarking Survey 12

13 (Table 17) Average annual technical cost per employee paid Average annual salary cost per employee paid Average annual other cost per employee paid Average annual total cost per employee paid Cost of payroll 10,001+ employees Although not a large section of the employer community in Australia, employers with more than 10,000 employees benefit from both economies of scale and implementing technology to minimise the payroll production cost. (Table 18) Average technical cost per payslip 1.14 Average salary cost per payslip 2.96 Average other cost per payslip 0.08 Average total cost per payslip 4.18 (Table 19) Average annual technical cost per employee paid Average annual salary cost per employee paid Average annual other cost per employee paid 2.43 Average annual total cost per employee paid Australian Payroll Association 2014 Payroll Benchmarking Survey 13

14 Outsourcing costs Approximately 25% of employers outsourced their payroll to a third party rather than having the process managed inhouse, based on survey results. Although the 25% was reported from all sized organisations, the financial benefits are greatest for the very small and the very large employers. At the less than < 50 employee bracket, the cost savings in outsourcing are compelling. As organisations get larger, and as economies of scale and technology are implemented, the differential cost between outsourcing and inhouse payroll processing decreases. The cost savings of outsourcing should always be weighed up against any impact to internal customer service, governance and control. (Table 20) Outsourcing Costs Outsourcing Inhouse Average outsourcing per payslip < 50 employees Average outsourcing per payslip employees Average outsourcing per payslip employees Average outsourcing per payslip employees Average outsourcing per payslip employees (Table 21) Outsourcing Costs Outsourcing Inhouse Average outsourcing per emp paid < 50 employees , Average outsourcing per emp paid employees Average outsourcing per emp paid employees Average outsourcing per emp paid employees Average outsourcing per emp paid employees (Figure 8) Average total per payslip Outsourcing Inhouse 20 0 < Number of employees 2014 Australian Payroll Association 2014 Payroll Benchmarking Survey 14

15 Average Accuracy rates To calculate accuracy, we took the number of errors per pay period as a percentage of the total payslips produced. Errors are defined by those requiring recalculation. The reported accuracy is as follows: (Table 22) <1000 payslips per annum 99.25% ,000 payslips per annum 99.42% 10, ,000 payslips per annum 99.61% 100,000+ payslips per annum 99.69% The average accuracy rate for all respondents was 99.53% 2014 Australian Payroll Association 2014 Payroll Benchmarking Survey 15

16 Payroll market share Survey respondents were asked what payroll system they used and had a choice of 40 products. If the payroll system wasn t listed, other could be chosen. With employers in the , and categories, the five products with the most market share made up more than three quarters of the total market. At the 10,000+ category, the top five products made up over 90% of total market share. The nine products that are most prevalent in the top five for all categories are ADP Payforce, CHRIS21, Meridian, NGA Preceda, Oracle, Payglobal, SAP, Talent2 Alesco and TechnologyOne. Market share top 5: (Figure 9) Meridian 41.9% CHRIS % ADP Payforce 9.2% Payglobal 4.2% Technology One 3.8% Top five payroll products represent 77.2% of market share in this category. Market share top 5: (Figure 10) CHRIS % Meridian 23.5% ADP Payforce 14.0% NGA Preceda 5.9% Payglobal 5.5% Top five payroll products represent 77.6% of market share in this category Australian Payroll Association 2014 Payroll Benchmarking Survey 16

17 Market share top 5: (Figure 11) CHRIS % Talent2 Alesco 14.9% NGA Preceda 11.3% Payglobal 11.1% SAP 8.8% Top five payroll products represent 75.9% of market share in this category. Market share top 5: 10,000+ (Figure 12) Talent2 Alesco 32.3% SAP 17.9% CHRIS % Oracle 16.7% Meridian 8.4% Top five payroll products represent 92.2% of market share in this category Australian Payroll Association 2014 Payroll Benchmarking Survey 17

18 Outsourcing market share ADP with their Payline and Payforce products combined have a market share of 61.2% over all employee size categories. The vendor with the next highest market share is Talent2 PayPlus with 11.4%. Overall, the top five outsourcing products by market share have a total of 84.4% of the market. Outsourcing Market share top 5 (Figure 13) ADP Payline 50.5% ADP Payforce 10.7% Talent2 PayPlus 11.4% CHRIS21 6.6% Meridian 5.2% Top five payroll products represent 84.4% of market share in this category. Trends At Australian Payroll Association we are seeing trends away from payroll as being a back office business cost. The utilisation of mobile and cloud computing as well as big data will be the key to improvements in payroll benchmarking in 2014 and beyond. With a number of new entrants to the payroll market in 2013 and more planned for 2014, we believe technology functionality will continue to improve and costs will ease. The technology companies that provide rich functionality and reporting, which is intuitive and smart, coupled with great service will be able to take best advantage of these trends Australian Payroll Association 2014 Payroll Benchmarking Survey 18

19 Payroll Association market share After two and a half years of choice in the payroll association market, we thought it was time to measure market share across the most widely known payroll support organisations. Based on overall results Payroll Association market share is: Payroll Association Market share (Figure 14) Australian Payroll Association 16.00% The Association for Payroll Specialists 25.80% None 53.50% Other 23.00% Market share by employer size (Table 23) Employee numbers APA 15.3% 17.0% 26.9% 26.7% TAPS 21.3% 33.0% 34.4% 46.7% Other 20.8% 22.6% 26.9% 13.3% None 42.6% 27.4% 11.8% 13.3% With the increase in governance and regulatory fines along with the upcoming superannuation reform, it is concerning that over 50% of survey participants are yet to align themselves with a payroll association to support their payroll function Australian Payroll Association 2014 Payroll Benchmarking Survey 19

20 FTE per 1000 employees The benchmarking study showed on average there are 2.36 full time equivalent payroll staff per 1000 employees paid. This is an increase from the 2012 study of 2.01 full time equivalent payroll staff per 1000 employees paid. This could be a reflection of a decreased overall workforce vs payroll staff. For weekly paid employees, the ratio of payroll staff to employees paid is much smaller. For these payrolls, 275 weekly employees on average are paid by one full time equivalent payroll professional. For fortnightly paid employees the ratio is 550 employees per full time equivalent payroll professional. For monthly payroll, one full time equivalent payroll professional is paying on average 1192 employees. FTE per 1000 staff (Table 24) Weekly 3.64 Fortnightly 1.82 Monthly Australian Payroll Association 2014 Payroll Benchmarking Survey 20

21 About Australian Payroll Association Australian Payroll Association (APA) provides membership advisory services, education and specialist recruitment and consulting services for Australian employers. Please contact the following people for further information on any of our services: Membership, Qualifications, online and onsite learning Kylie Robertson Payroll recruitment and knowledge assessment Andy Thompson Benchmarking report, payroll consulting, industry partnerships and media Tracy Angwin Client testimonials APA have been an excellent support service when dealing with payroll situations that are out of the normal day to day function. Their response times are in most cases instant, and all the staff are a pleasure to deal with. They beat any competitor hands down and come highly recommended by our organisation. It is great to know that payroll professionals can be part of such a valued and trusted association! Gina Tsotra, HUGO BOSS Australia Pty Ltd I would recommend Australian Payroll Association to any business that wants to ensure they are kept up to date with changes relating to legislation, taxation, industrial relations and more. They offer access to the latest information, training, best practice and many more resources when we need them. I believe Australian Payroll Association is at the forefront of the payroll profession and believe they offer indispensable learning opportunities. Their support is unrivalled and I have full confidence in their advice, knowledge and experience within the payroll arena. William Withers, Campbell Arnotts I ve been extremely happy with the payroll services provided by APA and would thoroughly recommend them for their high ongoing levels of customer service. Susan Smith, Reject Shop Limited The Australian Payroll Association provides a valuable resource to all Payroll Professionals with their regular updates to a range of payroll and employment related issues presented to us. I rely on the excellent service provided by APA to inform me of the many changes and issues facing our industry. Damian Membry, Monash University APA are an impressive team which delivers on their promises and are stand out performers in the Payroll sector. Diane Davis, Energex Ltd Our payroll expertise, your peace of mind 2014 Australian Payroll Association 2014 Payroll Benchmarking Survey 21