HR Dilemma: Why Outsource Payroll?

April 8, 20228:30 am1558 views
HR Dilemma: Why Outsource Payroll?
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Asia’s thriving commercial centers have attracted a diverse range of foreign organizations. As businesses expand, headcounts follow and it means bigger effort for managing payroll. Obtaining a high level of payroll performance remains a challenge for companies of all sizes, from established enterprise players to SMEs. Payroll management entails not just paying your employees correctly and on time, but also managing any tax and regulatory laws that may apply in your region. Now, will outsourcing your payroll ease the burden?

Reasons to Outsource Payroll

Outsourcing payroll and administrative tasks to external partners allows businesses to organize their efforts and bring forth synergies in teamwork to focus on more strategic aspects and accomplish business goals. Without outsourcing, the HR department may lose focus on more productive activities since they spend the bulk of their productive man hours managing payroll, accounts, taxes, and mundane administrative duties. This effect is even more obvious if your company is operating at a large scale with hundreds or more employees. 

The following are some of the reasons why businesses today increasingly feel the need to outsource payroll.

  • Technology and Expertise – Businesses that choose to handle payroll internally would need staff to do the task. Training staff to administer payroll comes with its own costs and risks when those staff are leaving, or being unable to execute these duties owing to unforeseen circumstances or other internal commitments. Beyond its dedicated role, an outsourced team will have access to the latest payroll software and technology and be aware of any new administrative trends or legislation. These factors could mean external administrators will be able to bring in their expertise to process payroll quickly and more effectively than a less experienced or less well-equipped internal team – and pass the benefits onto their clients.

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  • Compliance and Errors – Payroll administration is more than simply issuing payslips. Ensuring compliance with legal and tax regulations is a significant part of the process. Payroll mistakes lead to dissatisfied employees, potential overpayment, financial penalties and audits. With laws that govern provident fund to calculation of taxes, employee benefit programs and incentives provided to staffers, it becomes challenging for companies to process the exact reimbursements and salary for each employee. Hence, matters which consume a lot of productive hours of HR personnel can be entrusted to external payroll service providers to make it more efficient. Moreover, trading centers like Hong Kong and Singapore represent cultural and corporate melting pots, with rules and regulations designed to accommodate foreign companies and diverse local and international workforce. In these environments, outsourcing allows businesses without infrastructure, time or resources, or without a sufficient depth of regional understanding, to avoid costly compliance issues.
  • Scale and Flexibility – Your business may have been able to handle payroll for a small number of employees but as your company grows or changes, so will your payroll needs. In these instances, outsourced payroll presents a scalable and flexible solution. Your business might need to engage outsourced services during a period of transition, before reclaiming payroll when new infrastructure is in place. Alternatively, you may wish to scale the level of outsourced payroll service up or down depending on your budget, resources, or the size of your workforce.
  • Enhances Cost Savings – Payroll processing when outsourced to external service agencies helps in enhancing cost savings. However, not many companies are aware of the fact that by actually outsourcing payroll functions they are not just saving on time and hassles of calculating payroll, while being responsible to answer every employee in case of any discrepancies; they eventually end up saving significant costs towards the end of the year. Additionally, payroll outsourcing can help companies deal effectively with challenges put forth by laws governing salary for employees, the tax rules, and get direct access to comprehensive reports by payroll experts, thus saving on money and time. Such a vast array of benefits provided by payroll outsourcing companies has made businesses opt for payroll software solutions to manage calculation of pay easily.

While it is true that outsourcing may provide many apparent benefits, it is also important to note that it can have less visible consequences both within and outside of your company. Yet, outsourcing your payroll is still worth considering. Businesses choosing whether to outsource payroll administration should consider factors other than cost. Effective payroll administration contributes to internal satisfaction by providing employees with not just peace of mind, but also a stable foundation from which to perform at their best, impressing clients and, ultimately, delivering organizational success. 

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