If you’re a CFO, “payroll ROI” usually feels like an oxymoron—payroll is a cost of doing business, not a growth lever. But once you look at error rates, penalties, and the amount of senior time it quietly consumes, the economics of managed payroll get very real, very fast.

Below is a practical ROI model you can use in the boardroom, with concrete assumptions you can plug into a spreadsheet for your own company. I’ll keep it vendor-neutral in structure, but I’ll flag where a Rippling + thePeopleStack model tends to outperform.

1. Why CFOs struggle to quantify payroll ROI

Most finance leaders see payroll in three buckets:

1. People – HR/Payroll FTEs and some shared Finance time
2. Systems – payroll software, time & attendance, integrations, IT overhead
3. Noise – errors, penalties, rework, employee escalations

The first two are easy to budget. The third is usually hand-waved away, even though that’s where a lot of the real cost and risk sits:

• An EY survey found one in five payrolls in the U.S. contains errors, with an average cost of $291 per error to fix.Paycom.com+1
• The same research shows an organization averages 15 corrections per payroll period, which translates to over $113,000/year in direct rework for a typical mid-market company.HCAMag
• Around 40% of small to mid-sized businesses incur IRS penalties for incorrect payroll filings, with an average penalty of $845/year.blinkpayroll.com
• Payroll teams typically spend several days each pay period just keeping payroll running; many spend 5–20 hours per month processing and additional hours fixing errors and answering payroll questions.HRMorning+1
• And the macro trend line is clear: by 2025, roughly 60%+ of companies are using some form of payroll BPO, largely to capture compliance expertise and cost savings.Corban OneSource

So, the ROI case isn’t “Is payroll cheaper outsourced?”
It’s: “When we fully price the real cost of in-house payroll, how much business value do we unlock by moving to a managed model?”

2. The ROI framework (simple enough for a board slide)

At its core, the model is:

ROI = (Baseline Cost – Managed Payroll Cost) ÷ Managed Payroll Cost

Where:

• Baseline Cost = your all-in cost of running payroll in-house today
• Managed Payroll Cost = your all-in cost with Rippling + a managed payroll partner (fees + any retained internal effort)

To make this CFO-grade instead of hand-wavy, break Baseline Cost into four buckets:

1. People cost (internal)
2. Systems & IT cost
3. Error & rework cost
4. Compliance risk & penalty cost

Then mirror that structure under managed payroll and measure the delta.

3. Step 1 – Quantify your in-house baseline

3.1 People cost

Include:

• Dedicated payroll staff (salary + benefits)
• HR generalists who spend part of their time on payroll
• Finance/Accounting time on payroll journals, reconciliations, and audits

Example (mid-market, ~500–600 employees):

• 1 Payroll Manager @ $95k salary, 25% burden → $118,750
• 0.5 HRBP FTE on payroll issues @ $110k + 25% → $68,750
• 0.2 FTE Controller/Accounting @ $150k + 25% → $37,500

Total people cost ≈ $225,000/year

Adjust for your org, but be honest about the fractional time Finance spends untangling payroll issues.

3.2 Systems & IT cost

Include everything you’d stop paying for (or materially reduce) with a managed Rippling-centric model:

• Standalone payroll system licenses and per-employee fees
• Time & attendance / scheduling tools, if duplicative
• Middleware or manual integrations (file drops, scripts, IT support)
• Training and vendor support contracts

A typical mid-market company using “classic” payroll software might see:

• Core payroll software: $80–150/month base + $20–40 per employee per month in usage fees, plus training and upgrades.HireLevel

Even if you’re already on Rippling, you may still be paying for:

• Legacy systems you haven’t fully retired
• External consultants for year-end, tax registrations, or gnarly edge cases

Let’s assume, conservatively for our example:

Systems & IT baseline = $40,000/year

3.3 Error & rework cost

This is where the numbers often surprise CFOs.

EY’s survey + downstream analyses show:Paycom.com+2HCAMag+2

• 20% of payrolls contain errors
• An average organization makes 15 corrections per payroll
• Each error costs ~$291 in combined direct + indirect cost (reprocessing, checks, staff time, employee time lost, etc.)

If you run bi-weekly payroll (26 cycles/year), your baseline direct error/rework cost is roughly:

15 errors × $291 × 26 runs ≈ $113,490/year

And that’s before pricing in:

• Employee turnover risk (roughly half of employees say multiple payroll errors are a reason to consider leaving)Worksite, LLC+1
• Manager time dealing with “my pay is wrong” escalations
• Morale impact of under/overpayments

For a CFO-friendly model, I’d use $100k–120k/year for a typical 500–600 person company as a reasonable starting point unless you have better internal data.

3.4 Compliance risk & penalties

Multiple data points suggest that:

• Roughly 40% of small/mid-sized businesses incur IRS payroll penalties, averaging ~$845/year in assessed penalties.blinkpayroll.com+1
• IRS payroll-related penalties and interest collectively represent billions in additional taxes and penalties every year.IRS+1

For a mid-market company operating in dozens of states, real exposure is usually higher than the “average small business.”

For modeling, I like to split this into:

1. Hard penalties – actual dollars paid (fines, interest, late fees)
2. Soft risk – the expected value of adverse events (e.g., a $250k+ exposure from misfiled payroll tax over multiple years, as seen in many municipal and private-sector cases)New Haven Register

To keep it simple (and conservative) in a spreadsheet:

• Hard penalties baseline: $10,000/year
• Soft risk (expected value): $15,000/year

So:

Compliance baseline ≈ $25,000/year

3.5 Putting the baseline together

For our illustrative 550-employee, multi-state U.S. company:

• People cost: $225,000
• Systems & IT: $40,000
• Error & rework: $113,490
• Compliance penalties & risk: $25,000

Baseline in-house cost ≈ $403,490/year

You can literally drop those four lines into a tab in your Finance model.

4. Step 2 – Quantify managed payroll with Rippling + a partner

Now define your Managed Payroll Cost as:

1. Rippling platform cost (HRIS + Payroll + Time/Benefits/etc., depending on scope)
2. Managed payroll service fee (thePeopleStack or equivalent)
3. Residual internal effort

4.1 Platform + service

Numbers will vary, but for a mid-market org on Rippling, a realistic all-in might look like:

• Rippling HRIS + Payroll + Time: say $12–18 PEPM depending on modules and discounting
• Managed payroll service: flat monthly fee covering:
  • End-to-end pay runs
  • Exceptions + audits
  • Tax registrations and filings
  • Year-end (W-2/1099, etc.)
  • Advisory on edge cases

Let’s pick round, defendable modeling numbers:

• Rippling: $15 PEPM × 550 employees × 12 months ≈ $99,000/year
• Managed payroll service (PeopleStack): $6,000/month flat = $72,000/year

Total external managed cost ≈ $171,000/year

4.2 Residual internal effort

Even with full managed payroll, you’ll still have:

• HR/People Ops coordinating new hires/terms and approvals
• Finance confirming GL mappings, exceptions, and supporting audits
• Exec oversight

But this is typically measured in hours per month, not FTEs.

For modeling:

• 0.25 FTE HRBP + 0.1 FTE Finance, roughly → $40,000/year

So your Managed Payroll Cost becomes:

• Platform + service: $171,000
• Internal residual effort: $40,000

Total managed model cost ≈ $211,000/year

5. Step 3 – Calculate ROI (with real numbers)

Using the example above:

• Baseline in-house: $403,490/year
• Managed model: $211,000/year

Annual savings = $403,490 – $211,000 = $192,490

Now apply the ROI formula:

ROI = (Baseline – Managed) ÷ Managed
ROI = $192,490 ÷ $211,000 ≈ 91%

That’s a CFO-friendly story:

• You’re cutting the fully-loaded cost of payroll by ~48%
• And you’re generating a ~90% ROI on the managed payroll investment
• While also reducing downside risk, which isn’t fully captured in the simple ROI math

Even if you haircut the assumptions significantly—say error frequency is lower in your org or you treat some compliance risk as zero—you still typically land with a very healthy double-digit ROI.

6. Building your own model (template structure)

Here’s a simple structure you can literally mirror in Excel or Sheets:

Tab 1 – Assumptions

• Employee count, pay frequency
• Internal salaries & burden rates
• Current software costs
• Estimated errors per pay period, cost per error
• Historical penalties / your risk assumption
• Managed vendor fees (Rippling + partner)
• Target reduction in errors and penalties

Tab 2 – Baseline (In-House)

• People cost = Σ(FTE × loaded cost)
• Systems cost = licenses + IT + consulting
• Error cost = errors/pay run × cost/error × runs/year
• Penalties + risk = average penalties + expected loss estimate
• Total baseline

Tab 3 – Managed Model

• External platform + services
• Residual internal effort
• Total managed cost

Tab 4 – ROI & Scenarios

• Base case ROI
• Conservative case (lower error baseline, smaller reductions)
• Aggressive case (you also redeploy HR FTEs to higher-value work)

7. Where Rippling + thePeopleStack specifically improve the math

The framework above works for any vendor. But Rippling + managed payroll shifts a few levers more than most:

1. Fewer systems → lower systems & IT cost
   • With Rippling, HRIS, time, devices, and payroll share a single data model, cutting down on middleware, file juggling, and IT support.Rippling
2. Automation shrinks error & rework cost
   • Automated classification, built-in tax logic, and integrated time data reduce the raw number of errors you ever have to touch.
   • A managed partner like thePeopleStack adds human QA over those automations—catching edge-case issues before they become $291 mistakes.
3. Compliance is a shared, expert-driven responsibility
   • You lean on Rippling’s constantly updated rules engine plus a team that lives in multi-state payroll and tax registrations every day.Deel+1
4. Executive time is freed up, not just HR time
   • When payroll stops being a bi-weekly fire drill, Finance and HR leadership reclaim days per month. Surveys show payroll teams frequently lose over a full workweek per month to inefficient processes and tools.Onrec+1

In practice, that often means you can either:

• Avoid adding headcount as you grow from 200 → 600 → 1,000 employees, or
• Redeploy existing HR/Finance capacity into strategic work: workforce planning, comp design, FP&A, etc.

Those are very real opportunity costs that don’t always show up in the first-pass ROI math—but CFOs feel them.

8. How to use this in a CFO conversation

If you’re using this as a blog post (which was the original goal), here’s the arc you’d follow:

1. Open with the problem
   • Payroll seems like a fixed cost; in reality, it hides significant avoidable expense and risk.
2. Introduce the four-bucket model
   • People, Systems, Errors, Compliance.
3. Show the math with conservative data points
   • Lean on EY’s error rates and cost per error, IRS penalty stats, and typical time-to-run payroll benchmarks.
4. Work a numeric example
   • Show how a mid-market company turns payroll from “table stakes” into a 90%+ ROI managed investment.
5. Offer a downloadable template or model
   • The logical CTA is: “Download our CFO-grade Managed Payroll ROI Template” or “Book a 30-minute ROI workshop with thePeopleStack.”
6. Tie it back to Rippling
   • Position thePeopleStack as the Rippling-native partner that can both run the numbers and then own the operating model once a CFO signs off.

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