Cost Analysis

 

Start-Up Cost

• ADP does not directly list their variable cost information online
• ADP’s pricing is related to the size of the company: starting prices are based on whether the company is a small, medium, or large business:
• ADP has as start-up fee that begins at $25 and extra fees to process yearly taxes, based on the size of the company.  
• In addition to the start-up costs, there are also monthly charges:
• Basic packages cost about $10/employee per month
• Advanced packages cost about $23/employee per month

Payroll Cost

• ADP offers three online services for small and medium-sized companies:  

1. Essential Payroll
2. Enhanced Payroll
3. Complete Payroll 

• In an example found for “…15 employees: The cost [of ADP] totaled about $284 per month for Essential Payroll and $370 per month for Enhanced Payroll. For employee time-tracking, the EZLaborManager service costs $57 per month for a 15-employee operation” (PC World, 2012). 
• It is reasonable to assume that the initial cost of implementing ADP for medium and large-sized businesses is considerably higher when using ADP. 
• ADP also charges additional fees for added company services. For a small company, it is “…$45 plus $5.75 per employee or $102.50 for ten employees) to process W-2s and 1099s at year-end. Tax filings, garnishments, labor law posters, and other add-ons cost extra” (Handrick, 2018). 
• However, an ADP subscription is beneficial for larger companies and offers many features and services that other payroll companies do not. This includes check printing and workplace posters as well as around-the-clock customer service.

Clients and Industries Using ADP

• Top industries that use ADP software are: hospitals/healthcare, computer software, and staffing and recruiting, which comes out to 21%.
• About 1800 companies with 1000-5000 employees that use ADP software.
• Many clients are within the U.S., although ADP is used internationally as well. Canada and UK are the second largest regions with most companies that use ADP (Companies using ADP Payroll, 2017).
• This portrays that bigger companies holding more employees will have a higher cost of ADP usage. ADP can offer memberships to companies at a better rate depending on the number of employees the company holds. A business of 100 plus employees can pay a price of around $3,000 per year for the service along with a setup fee. W-2 and 1099s will cost extra for employees on these two (Handrick, 2018).

Automation Potential

• The article, Before Automating Your Company’s Processes,  Find Ways to Improve Them, discusses robotic process automation (RPA).  It notes that RPA is a type of software that automates the complex process by performing them in the same way that a human would through the imitation of human activities and behaviors. This helps reduce development time and “extends the range of functions that can be automated” this way it can increase the number of business activities it performs (Davenport, 2018).  
• This type of software is frequently used for a number of business activities including financial processes.
• ADP is the world’s largest HR and payroll services company in the world. As such, they must be fully compliant with all laws and legislation regarding HR, employee payroll and paid time off packages. Because they are Lean Six Sigma, they realized the need to  “standardize, optimize, automate, and centralize” key processes.  As a result, they have fully embraced RPA and utilize the technology to streamline processes and gain efficiencies.  This is something that a smaller company would be unable to do.
• Therefore, while there is a cost associated with leveraging HRIS such as ADP, the cost is minimal compared the cost associated with trying to remain up-to-date on the constantly changing laws and regulations for payroll and paid time off packages and employing a cadre of individuals to process payroll and HR services.  
• The company can benefit from the process improvements realized through ADP’s use of RPA which is something that a smaller company would never be able to implement.

IVK & ADP Cost Analysis Illustration

• The line graph demonstrates the overall costs of upfront and implementation of ADP projected month-to-month over a two year period.  
• There are three projected scenarios: 
• Situation A (not shown) is the costs faced by IVK if they do not implement ADP. 
• Situation B is the cost of implementing the basic ADP plan.  
• Situation C are the costs of implementing the premium plan of ADP’s HRMS system. 
• The bar graph is showing the same information but without projecting it over time. These are totals for FY1.
• The table shows the assumed costs of training employees on the new system. These are costs specific to implementation and are also incorporated into the two graphs. 
• The graphs illustrate that the ADP premium HRMS system will cost the least amount over a two year period.   
• Making it possible for fewer HR employees to managing the information of more employees is a large part of this reduction in costs.  
• Training cost is higher as far as implementation is considered. However, the cost saving over time more than makes up for that.  

References

Companies using ADP Payroll. (2017). Retrieved October 15, 2018, from https://idatalabs.com/tech/products/adp-payroll

Geier, E. (2012, September 26). Payroll Services in the Cloud: Intuit vs. ADP. Retrieved October 9, 2018, from https://www.pcworld.com/article/2010572/payroll-services-in-the-cloud-intuit-vs-adp.html

Handrick, L. (2018, August 02). ADP vs. Paychex vs. Gusto: Who's the Best Payroll Provider for 2018. Retrieved October 9, 2018, from https://fitsmallbusiness.com/adp-vs-paychex-vs-gusto/

Davenport, T. (2018, June 13).  Before Automating Your Company’s Processes, Find Ways to Improve Them.  Harvard Business Review, Retrieved from https://hbr.org/2018/06/before-automating-your-companys-processes-find-ways-to-improve-them

Smith, A. (2018). How much does ADP payroll service cost? Komparit. Retrieved from: https://www.kompareit.com/business/hr-payroll-adp-service-cost.html

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