Why Are Businesses Outsourcing Their Payroll?

There’s no doubt that payroll becomes more challenging and complex for HR and finance departments as organisations expand . To ease the pain and to simplify payroll, many organisations outsource to a payroll provider, with the following often the most quoted key reasons for the decision to do so:

To be confident that payroll will be compliant – in every country where payroll is needed to standardize processes to integrate international payroll with ERP/HCM systems to decrease costs and increase efficiencies to have a single point of contact, rather than multiple contacts in different time zones

For those with limited in-house resources and thus knowledge base, it is extremely important that when obtaining support from an external expert source, the providers being considered are very aware of the importance of compliant payroll.  Not correctly following local legislation risks non-compliance, this can be costly in terms of corporate fines. Not least the impact of errors in salaries and wages on employees, especially with the increase in focus on employee satisfaction – minimizing errors in salaries and wages, in turn minimizes the potential for disgruntled employees.

Therefore, by partnering with experts with knowledge of local legislation, also able to support setting up in new jurisdictions, helps reduce complexities and allows for a smooth initiation.

Importantly, in terms of project timelines, organisations also want to minimize the potential for any delays with a quick and straightforward set up, which an experienced third-party partner enables. It is often apparent that HR will be one of the last departments made aware of an impending new international project and, as such, given a very tight time-frame in which to set up payroll in a new country. In such a situation, working with a trusted global payroll provider can reduce the pressure on the department, be cost effective, whilst ensuring payroll compliance.

Although the process of outsourcing and finding a trusted provider can be time consuming, in the long term, the benefits it provides for the business as a whole, such as savings in time and efficiencies, makes it very worthwhile.

For example, an important question to ask when sourcing a global payroll provider is whether they will be able to provide standardization and simplify the payroll processes. Outsourcing these can allow for better standardization and consistency of such processes around the world, which in turn will support a reduction of costs by minimizing errors and increasing efficiency.

Bringing further cost reductions, the use of technology are something that cannot be ignored – and how the provider will be able to support an organisation to effectively facilitate it. Payroll providers today are increasingly required to be able to bring to the table systems that can integrate with current in-house systems and align with the client’s business requirements. More so, the need for full system integrations for global payroll, HR and finance departments can help streamline processes, again bringing about standardization and, therefore, reduce costs.

Internally, the positive impact of the use of the integrated systems will also be seen through its capability to automate administrative tasks managed by the payroll and HR departments. By saving time on these tasks, employees can focus their attention on actions that will have a more positive effect on a business – such as maximizing employee satisfaction.

Brian Medd-Sygrove

Azalea advisors LLP