Anne Clifford, Senior Advisor, Human Resources Advisory Services

On October 7th, 2010 ADP announced its acquisition of MasterTax, LLC and MasterTax Services, LLC. The release stated, “We look forward to leveraging our combined expertise in tax and compliance services, as well as introducing MasterTax’s clients to ADP’s broad offering of proven solutions.”

Here are EquaTerra’s views on what changes may be in store for these companies’ clients:

• We expect little change or benefit for existing ADP clients, as the payroll tax engine that processes $14 billion in taxes runs well–as we would expect from the service provider whose market strength comes from their payroll expertise and, ability to leverage technology to perform Automatic Data Processing (“ADP”).
• There will be some amount of uncertainty for the existing MasterTax clients. This is especially the case as many clients made the strategic decision to NOT outsource their tax deposit and filing, often due to complexity, size and the clients’s ability to internally manage the float opportunities that exist with payroll taxes. Call to Action: MasterTax clients should review and assess the commitments through their contractual consent/change in control provisions to assess the long term potential impact.
• Companies who process their payroll in-house and use internal shared service delivery models continue to have the opportunity to outsource their payroll tax processes, but their options around services and service providers just became significantly smaller.

For more on this topic, read “Service Provider M&A – Change of Control Doesn’t Have to Mean Loss of Control”.

Filed under: Market Trends and News, Outsourcing by EquaTerra