UK: Increased Revenue, Sudden Legislative Changes And A Shortage Of Talent Among Key Triggers For Global Companies In CEE To Choose Outsourcing

Commissioned by TMF Group - a global provider of business services operating in over 80 countries - and conducted in late 2016 by professional research company Gfk, the survey canvassed the views of 90 HR managers and 91 Finance managers across a broad spectrum of industries, in three countries (Poland, Hungary and Romania). The survey is in its third consecutive year.

Key findings – Poland

• 77% of finance managers have difficulties with sudden changes in local legislation.
• 83% of human resources managers pointed to a talent shortage (43% in industry, 23% in trade) as a key challenge in their activities.

Foreign companies operating in Poland outsource the largest number of business functions in Central and Eastern Europe (CEE):

• 67% of respondents in Poland outsource at least one service
• 67% have additional outsourcing needs. The high interest in outsourcing is linked to 58% of interviewed companies increasing their revenue in 2016.

HR and payroll functions are the top preferences for outsourcing (35%), followed by legal administration and corporate secretarial functions (25%). Additional external support needs cited by the HR and Finance managers interviewed include tax compliance (28%), legal administration (17%) and international corporate tax structuring (12%).

Motivations

For CFOs in Poland, the main motivations for outsourcing are:

• increasing adaptability to legislative changes (73%)
• being compliant with tax regulations (60%) and
• reducing the risk of penalties (60%).

CHOs in Poland are driven to outsource to:

• increase adaptability to legislative changes and
• spend fewer resources on reporting to their Group and local authorities (57%).

Key findings - Hungary

68% of interviewed companies operating in Hungary reported no revenue growth in 2016, and the survey results stressed a clear link between the slow growth rate and the low interest for outsourcing in Hungary.

40% of respondents said they outsource at least one service and only 3% have additional support needs. International companies operating in Hungary perceive fewer difficulties with their HR and payroll functions, and they mainly look to outsource accounting and financial reporting (27%) and legal administration and corporate secretarial (12%).

The need to increase adaptability to legislative changes (30%), more flexibility for internal processes (28%) and better compliance with tax regulations (26%) are the key motivators for companies doing business in Hungary to seek the expertise of local providers.

Key findings - Romania

• 33% of CFOs find it increasingly difficult to comply with their Group and Romanian authority reporting standards (compared to 26% in 2015).
• A high talent shortage in the industry, services and trade sectors is a key reason for multi-national companies in Romania turning to outsourcing.

Out of the three countries, Romania has the largest number of respondent companies which increased in revenue in 2016 (75%). The study shows that 63% of the HR and Financial professionals interviewed would outsource at least one service and almost half of them place Accounting and Financial Reporting in their top preferences.

Corporate secretarial comes second (28%) and is followed by HR and Payroll functions, dropping to 25% from the 40% in 2015. Sudden changes in legislation and a talent shortage (mainly in industry) are the key challenges for CFOs and CHOs in Romania.

Motivations

Among the main drivers for outsourcing in the country, the respondents mentioned an increased need to adapt to legislative changes (over 60%, double the 2015 result), better tax compliance (over 60%) and mitigating risks of penalties for non-compliance in dealing with VAT and social contributions (over 55%).

Benefits of outsourcing

The research shows that, in all three countries, both CFOs and CHOs are aligned on the benefits of outsourcing finance and HR payroll functions: more time to focus on core business, more comfort from reducing the administrative burden and improved decision making due to better reporting capabilities.

They also have the same motivations to outsource: to be more adaptable to legislative changes, and to reduce the risk of non-compliance penalties.

Regional Director for CEE at TMF Group Daniel Proychev commented: "Despite slower growth in Hungary, the Central and Eastern European region as a whole has seen an economic growth rate of more than 3% in the last three years, and this is expected to continue at higher than the EU average.

"CEE countries also offer favourable tax rates, but compliance with local rules and regulations can stop many international companies in their tracks and prevent them from reaching their full potential. Finding the right talent can also be a challenge in some parts of CEE, and this is also where many companies find value and crucial support in external administrative service providers."