Payroll outsourcing: Advantages and disadvantages
Outsourcing is the process by which a company hires services from other companies to take care of certain functions. In the case at hand, payroll. Generally, this service can be in-house or an off-house type outsourcing. The first determines that the service will take place in the facilities of the main company. While the second consists of remote work in functions that do not require activity in the same work center.
In this article, we are going to explain the pros and cons of outsourcing your company’s payroll function.
- What is payroll?
- What is payroll outsourcing?
- Advantages of outsourcing the company’s payroll function
- Disadvantages of outsourcing company’s payroll function
- What should you consider when hiring a payroll outsourcing company?
- How can we help you outsource your company’s payroll?
1. What is payroll?
The concept of payroll refers to the entire staff of employees that is part of a company. It records, all the data referring to the salary of each worker who provides services to a company. Such as salary and non-salary payments, withholdings, deductions, etc.
In addition, it is the instrument that allows, in an orderly manner, to carry out payment of salaries or wages to workers, as well as providing accounting and statistical information, both for the company and the authorities in charge of supervising labor relations.
For the aforementioned, this record must be in writing, to avoid sanctions by the labor authorities. The particularities of each payroll will depend on the specific legislation of each country. Therefore, it is a document that can generate legal repercussions.
2. What is payroll outsourcing?
Payroll outsourcing is a service that specializes in payroll administration, which, together with technology and expert personnel, provides administration, management, and payments to employees, in accordance with current regulations and with platforms that optimize processes. All this, with the objective, that the contracting company can focus on the issues that generate greater economic profitability.
Likewise, it is the economic process in which a company allocates part of its economic resources to fulfill certain tasks that do not constitute its central objective, to another external company or person who specializes in that activity, in this case, payroll, this, by means of a contract.
This practice is becoming more and more popular in the business world. Well, it represents great benefits for the company that exercises it, such as: reducing costs, greater efficiency, higher quality in the products, greater concentration in the own business of the company and also allows receiving innovative ideas for improving the business, products, and services, among others.
Likewise, today, the outsourcing of payroll processes is one of the most attractive businesses. This phenomenon generates new jobs for many countries. Which means a substantial force in the market for them.
3. Advantages of outsourcing the company’s payroll function
Beyond the characteristics of a payroll outsourcing service, the advantages that they would bring to the organization must be taken into account.
3.1 Allows you to focus on what is important
Not worrying about one issue allows you to focus on the rest. It can be a determining value when it comes to achieving better results. Putting all efforts into developing the core service is a competitive advantage for any organization.
In this context, payroll outsourcing emerges as an alternative that allows accounting and finance departments to focus on activities that add value and delegate to a specialist provider those that they do not do it.
3.2 Cost minimization
Although it may not seem like it, hiring this service can help you save both time and money. There are many expenses arising from the management or optimization of the company’s resources.
3.3 Allows prioritizing the activities of the company’s human resources department
By freeing the human resources Department of your company from an activity as exhausting and as responsible as payroll. This will allow them to give importance to other key business activities.
The systems you use will be state-of-the-art, without having to spend more money than necessary. Your payroll control systems will be able to automatically adapt to the new criteria in this matter and you will not have to pay for extra licenses.
3.5 Increased competitiveness
The internal processes of the company will be less. And the execution of actions of the company’s strategy will remain primarily in the hands of its highest authorities. It is a way to gain competitiveness. Since the entire organization will deal with the main activities of the company.
3.6 Problem reduction
In this way, you can ensure that the company will be focused on avoiding risks. By leaving the management of your payroll in the hands of another company, it is less likely that you will incur back payments to workers and other similar expenses. This allows for more transparency in payroll costs.
3.7 More information
Although it may seem otherwise, with payroll outsourcing you will have more information about your payroll. The company you hire must periodically send you a report detailing the status of your company’s payroll. What will allow you to make decisions and actions in this area.
For its part, there are many systems that manage the payroll process. This makes your company at the forefront and will make your business more competitive. This decision is very important since everyday digitization gains more strength in all areas and your company should not be left behind in terms of technology.
3.9 Experts will handle your payroll
The companies that are dedicated to these tasks are widely trained and are capable of carrying out their work at a very high level. Also, in case of having to solve adversity, it is likely that they know what is failing or what needs to change in management.
In general, every business must handle its payroll internally, but there are firms that specialize in this area and that can do it better and at a lower cost. Then, the hiring company provides basic information about your personnel and the contracted firm is in charge of calculating the payments and making the drafts.
Therefore, this is cheaper since it is avoided having a whole department in charge of the payroll, social security payments, and electronic transfers of installments by flat file to employee accounts, which are things that do not generate any real benefit to the company. Thus, as previously mentioned, it gives the human resources department a greater margin of time to carry out activities that are true of benefit to the company.
4. Disadvantages of outsourcing company’s payroll function
Once you have seen the advantages of having payroll outsourcing, let us now analyze the cons of hiring this service. It seems that all roads lead to contracting a payroll outsourcing service. However, the negative part of having an external company in this business process must be valued. Not everything is perfect, and if the relationship with this external source is not well controlled, it can lead to problems.
Below we will present the main cons of hiring a payroll outsourcing service:
4.1 Control of expenses
The cost savings may disappear. Make sure that the service you contract does not require additions outside the contract. Sometimes, outsourcing can end up costing more than the management of that task within the company.
4.2 Difficulty in changing contractor companies
If you already have this service externally and want to switch from one company to another, try to control how much the transfer between companies will cost you. These processes can be very expensive financially and in a matter of time. These variations directly affect your production, since your business is not focusing on its main activities.
4.3 There must be constant contact
Likewise, it is true that outsourcing serves to relieve the organization of a burden, but do not forget to be aware of whether it is being carried out correctly. The execution must be correct and precise.
4.4 You will have to deal with the mistrust of your employees
On the other hand, when external services are contracted, you make your employees believe that they, or the company itself, cannot take care of those functions. It is vital to make the reasons why outsourcing is contracted very clear so that everyone understands that it is a matter of improving the situation and not because there is no confidence in certain positions.
4.5 Your company’s payroll information will be in the hands of third parties
To manage this type of service it is necessary to provide personal data of your employees. This information may be used for other purposes if the company you have hired is not reliable. In general, it is difficult for this to happen, but it is not impossible for it to happen.
4.6 Announce the salaries
In many countries, depending on their culture, it is not to the liking of many people that others find out about their salary. Therefore, leaving this information in the hands of a third company can be an element of mistrust and discomfort on the part of your workers.
To avoid all these disadvantages, it is best to look for a company that gives you confidence. From there, it is possible to build a relationship that limits errors as much as possible and generates good results. To achieve this, you have our Professional Employment Organization solutions, your best option for this kind of service.
5. What should you consider when hiring a payroll outsourcing company?
Many banks offer the possibility of managing payroll. However, the main recommendation is to leave this process in the hands of a trustworthy company. Value contracting this service to companies that specialize in this matter. Surrounding yourself with experts is always a safe bet with which we can minimize errors that in the long term can have more severe consequences.
Information is also a factor when hiring this type of service. You must investigate the possible companies that you can hire; in addition to knowing exactly what is the service that you will be requesting. It is necessary to make it clear which procedures are contracted and which are not, the point of control that we want to have over outsourcing, as well as the feedback with the external company.
Once you have analyzed these situations, the outsourcing of some services, including payroll, can be a relief for the different areas of a company. Sometimes, it is the trigger to focus on the objectives and the key to success to start standing out in your sector.
6. How can we help you outsource your company’s payroll?
If you are looking to hire contractors or you are searching for payroll outsourcing companies in Dubai, who can handle this delicate part of any company, so you can dedicate your time to activities that generate money for your business EOR Middle East will be your best choice.
We have high training in payroll outsourcing services. We have many years of experience handling important areas of extremely important companies in the region. Also, we offer you the best remote workers and EOR services for your business.
If what you are looking for is to position your company in this market, the best thing you can do is hire our payroll outsourcing services. Likewise, our organization is a reference in this matter specifically in some of the following countries:
If you want to hire our payroll outsourcing services or have any questions or doubts about it, contact us through our email: [email protected]; or call us at +971 43 316 688. Our staff will be happy to help you resolve any questions you may have about our services or organization.
Also, if you want to work in a high-level company in the Middle East, such as EOR Middle East, send us your CV at thetalentpoint.com. In the same way, you can send us your CV through the next email: [email protected]. Thus, we will be able to locate the job for you in our company that is most compatible with your skills and requirements.