Blog: Aon Hewitt exits payroll business

Compensation & Benefits

Aon Hewitt exits payroll business

Multi-country payroll outsourcing has tremendous potential but needs strategic focus and investments
Aon Hewitt exits payroll business

Aon Hewitt has sold its payroll business to Everstone Capital, a private equity investment firm focused on India and Southeast Asia.

Payroll outsourcing business is growing very rapidly in Asia, especially the multi-country payroll outsourcing (MCPO). According to Everest Group, the Asia Pacific MCPO market is growing at 25-30 per cent year-on-year.

With a global average growth of this industry at 18-20 per cent, it is a very attractive segment for this region. However, only a few players have been able to crack the model to provide a single view of multi-country payroll in Asia Pacific.

Talent2, headquartered in Australia, is one of them. It has built a strong local reach (with organic and inorganic growth & via partnerships) and has invested in a strong technology engine that is the backbone of the process and provides economies of scale. Other Asia HRO-focused providers, like PeopleStrong have also build a strong technology backbone not only to support their delivery but also as a standalone solution. Most of the business that the global players (ADP, NGA Human Resources and others) are delivering in Asia comes from global deals that get deployed in emerging economies. Asia focus players like Talent2, PeopleStrong and Neeyamo have been outperforming global players when it comes to Asia deals.

The newly acquired company will operate under the brand Excelity Global and Gurinder Singh, Head of Aon Hewitt’s Asia Pacific payroll business, will continue as the Chief Executive Officer of the rebranded entity. Today, the organization offers a range of HR Outsourcing Services across 17 countries in the Asia-Pacific region, serviced through its offices in India, Singapore, China and the Philippines. The company processes over 9 million pay slips annually and has the capability to service clients across industries globally.

With this change of ownership, the organization has the opportunity to get the focus it requires to fulfill the potential that this segment presents. “Standalone payroll outsourcing was an anomaly for Aon from business model perspective,” shares Rajesh Ranjan, Partner and Head, Everest Group's Business Process Services (BPS) research program. “The business will require further investments in acquiring capabilities across countries and most importantly in building a technology that provides a multi-country solution platform. Only then, this opportunity can be leveraged and the business can provide the multiples that a private equity will look for.”

Indian organizations that were more reluctant to outsourcing few years ago are changing their approach as their business grows and they need to build in scale and flexibility at the same time while giving them an opportunity to control the processes with the right SLAs and KPIs. From HR Outsourcing perspective, Indian organizations will build a hybrid model. For example, they will keep learning inhouse as it is more contextual to their business and also the upper-middle and top level recruitment, but will outsource the mass entry-to-mid level hiring and look at multi-country payroll solutions.

The space of HRO (payroll outsourcing and recruitment process outsourcing) is ripe for more M&A activity in the coming year in emerging economies like India and China. Ranjan predicts that more acquisitions will take place as the global players aim to build local capabilities in this market at an accelerated pace. “For many of them, India is still a missing link in their armor and a key country to capture the growth opportunity in the region.”

Read full story

Topics: Compensation & Benefits

Did you find this story helpful?

Author

QUICK POLL

How do you envision AI transforming your work?