Study: Noncompliance Expenses Add Up

Roseland, N.J. — Aug. 9

According to a May 2012 study among midsized business owners and senior executives conducted by the ADP Research Institute (ADP RI), 33 percent of U.S.-based midsized companies incurred unintended expenses related to noncompliance with government regulations in the past year.

Of those who were fined or penalized, each received an average of 6.4 fines or penalties, according to the study.

Moreover, the study also found that organizations who process payroll in-house received nearly three times as many fines or penalties as organizations that outsource their payroll — an average of 5.7 fines or penalties for businesses that process payroll in-house, vs. two fines or penalties for companies that outsource their payroll.

According to an ADP RI study on how companies do payroll, conducted in 2011, over the last seven years the percentage of companies processing payroll in-house vs. through an outside vendor has declined. In 2005, for instance, 54 percent of midsized U.S. companies managed payroll internally, while 46 percent outsourced the function.

By 2011, just 48 percent of those companies processed payroll in-house, while 52 percent strategically outsourced this function to a trusted partner.

The same ADP RI study also showed a decline in satisfaction among companies that manage their payroll in-house and increased satisfaction among organizations that outsource payroll.

In 2007, 72 percent of midsized U.S. companies processing payroll internally were satisfied with their payroll function compared to 61 percent in 2011. Meanwhile, satisfaction with payroll processing grew 10 percent among companies that outsource the function, from 52 percent in 2007 to 62 percent in 2011.

Source: ADP