We’ve all heard the old adage “A bird in the hand is worth two in the bush”. As trite as that may sound, it still rings true in business today. It’s much more cost effective to keep an existing client than it is to replace one. Statistics vary but according to recent studies, it can cost anywhere between 4-10 times more to replace a client than to keep one.
In the payroll industry, it’s particularly competitive and clients often bounce between payroll service bureaus (PSBs) based simply on price. When a client leaves a PSB, that then requires sending out a sales rep to reacquire the client, often at a discount. Add in the overhead to on board that client again, and the cost quickly adds up.
Historically, payroll companies increased their value proposition by adding new products that eased the administrative burden for the business owner or payroll administrator. Tax payment services and Direct Deposit were groundbreaking in the 80’s and now are standard services that no company does without.
Over the years additional services were added to the suite of offerings including handbooks, retirement services, health insurance administration, and general ledger services. As payroll companies continued to add more and more products for their clients, every conceivable need was addressed including expense reporting, work opportunity tax credits, and pay cards.
But as payroll companies added client centric products, how could they gain a competitive advantage?
They seem to have exhausted the product offerings and now just about every PSB can offer the exact same services. Furthermore, there are only so many services a client can need and the PSBs could only price themselves so low.
In recent years, there has been a shift in the PSB focus on services. The goal remains the same, keeping your existing clients and attracting new ones. But with the client product services saturated, the PSB’s have turned to addressing employee needs, changing lanes from the congested road of client products to the wide-open freeway of employee benefits. After all, happy employees are productive employees.
Moreover, just as it’s true that the cost of keeping a client is significantly less than replacing one, the same holds true for employees. It can cost a company 6-9 months’ salary to replace an employee when you factor in recruiting, on boarding, and training. Therefore, PSB’s have turned their attention to their clients’ workforce, knowing that offering more employee centric products can have a direct impact on client retention. The premise is that if the client sees the services offered by the PSB directly impacting their staff positively, the PSB retains that client.
Recently many PSB’s have started offering employee benefits like Financial Wellness, Health Wellness, Income Verification, Milestone Anniversary Award Programs, and Student Loan Repayment Assistance. Some of these offerings were non-existent or not even on the radar as little as 2 years ago. Now PSBs like ADP, Paychex, and others have not only added them to their suite of product offerings, they are creating strategies around them. As we turn the corner on product offerings, it will be the clients’ employees who help keep that bird in the PSB’s hand for the foreseeable future.