As the payroll technology and services marketplace continues to grow and evolve, consolidation across the market has been quite active, already producing four major acquisitions in the past 90 days, with more likely on the way in 2022.
With many firms across sectors seeking to elevate payroll as a critical process within their organizations, the marketplace for payroll technology and services has seen increased competition and growth. In addition to long-time players making sizable investments to drive innovation, meet market demands and accelerate growth, the threat from new market entrants and nontraditional players such as fintech providers is intensifying the pressure. Thus, providers are looking to acquisitions to accelerate roadmaps and support growth plans.
With firms across sectors growing their footprints globally, triggered by strategic plans, mergers and acquisitions, and a need to support employees with “work from anywhere” options, managed payroll and global employer of records services will continue to see increased adoption. Further, with many firms yet to move payroll – and, in many cases, core HR to the cloud – the opportunity is ripe for managed payroll services to transform payroll operations through cloud platform-based offerings that pair technology and services through a single vendor solution.
Looking ahead, expect to see payroll providers continuing to accelerate investments to advance their offerings, capabilities and presence through partnerships and potential acquisitions as a key lever for filling white spaces and meeting market demands.
Providers will continue closing delivery gaps in key countries of operation, particularly with buyers focused equally on meeting intensifying compliance demands while elevating the employee experience. Highly localized, in-country capability and expertise will be essential to competing for multinational buyers seeking to address both as they modernize their operating models.
As buyer demands are increasingly inching payroll providers toward a broader scope of services and solutions, expect to see payroll service providers expand their offerings to include more ancillary services. Top focus areas include global mobility, global employment solutions, localized HR compliance support, and payroll funding and money movement services.
Providers will continue forging deeper partnerships and expanding marketplaces to supplement in-country capability, expand integrations and broaden portfolio offerings to meet client demands. HCM integrations are an important investment area, as technology platform providers seek to supplement their own global payroll gaps and provide their users with a range of integrated solution options. Additionally, look for marketplace-style payroll offerings to continue to advance – providing more solutions to enhance the employee experience, such as additional digital payment methods, financial wellness solutions, and AI-enabled tools to support insights-driven decision-making for payroll impacting events.
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Stay tuned for new ISG research in 2022 dedicated to the managed payroll services marketplace. The complete ISG Provider Lens annual research plan can be found here, featuring an expanded HR research set, including further studies dedicated to HR outsourcing and transformation services and HCM platform technology.