MCPO in emerging rapid growth phase

CIOL Bureau
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GURGAON, INDIA: Multi-country payroll outsourcing (MCPO) is in the emerging rapid-growth phase, ahead of other standalone multi-country HR process outsourcing markets on the maturity curve, states a new study by the Everest Research Institute titled, 'HRO Market Update: Multi-Country Payroll Outsourcing: A New Approach to an Old Problem'.


Everest defines MCPO as transfer of ownership of some or all payroll sub-processes for at least 2 countries on an ongoing basis, said a press release.

Everest found that from a smaller base, MCPO is growing at a much faster rate than multi-country HRO market – between 2006-2008; while MCPO grew from US$ 91.5 million to US$202.9 million, registering a 49 per cent growth, multi-country HRO grew only 12 per cent during the same period, up from US$ 1055.3 per cent million to US$ 1313.2 million, it added.

The study analyzed 84 multi-country payroll deals signed as of December 2008, where 3,000 employees or more were covered.


According to the study, the key business drivers leading to increasing adoption of MCPO among MNCs included cost reduction, compliance, improving management control and insight, vendor consolidation, expansion into newer geographies and technology rationalization.

“While there are suppliers that cover more than one market, only a few have adequate country coverage across all regions. We have seen more and more suppliers creating partnerships with ERP providers to offer single platform-based MCPO in a pay-as-you-go pricing model,” said Gaurav Gupta, principal and country head, Everest Group.

He added that since 2007, they have witnessed entry of offshore-led suppliers like Infosys, TCS and Caliber Point, to offer a combination of ERP capabilities along with a global sourcing delivery model. In 2009, they expect to see more such suppliers to enter the market.


According to the study, the suppliers can use any of the three outsourcing models for payroll, namely – technology, selective and comprehensive – or a combination thereof.

The study also points out that the average contract term for MCPO deals is 4.9 years compared to multi-country HRO deals where the average contract term is 6.4 years. The study further found that 62 per cent of the MCPO deals covered four or more buyer countries.

The most common implementation approach in MCPO remains a phased roll-out. Further, in almost all MCPO deals, buyers include core payroll sub-processes including payroll preparation, payroll calculation, payroll distribution, reconciliation, and payroll tax reporting and filing, the release added.

Gupta added, “In MCPO deals, we often see suppliers competing as well as partnering with each other. This partnership is further complemented with their partnerships with local payroll providers to provide in-country payroll calculation, tax filing, and limited local help-desk support in countries which the supplier doesn’t directly cover on its own.”