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Process for payroll in Saudi Arabia

Process for payroll in Saudi Arabia

Payroll is a receipt document in which the company accredits the payment of the different amounts of money that make up the salary of a worker. In other words, payroll is the document that certifies that the company pays the remuneration to its employees. This is a process that is usually complex. For this reason, many companies choose payroll outsourcing.

In this article, you will learn all about the payroll outsourcing process in Saudi Arabia.

  1. What is payroll?
  2. What is payroll outsourcing?
  3. Advantages of payroll outsourcing
  4. How does a payroll outsourcing process work?
  5. Do I need a payroll outsourcing service for my company?
  6. How can we help you find a payroll outsourcing company?

1. What is payroll?

Payroll is a document that indicates the amount of money that a company pays each worker. This document is proof of payment to certify that an organization complies with the remuneration of its employees. 

Likewise, this is a tedious job for companies but it is also of great importance for companies. Payroll is a document that has legal repercussions since its mishandling can lead to sanctions by the labor authorities.

Payroll is not only important from the legal point of view, but also from the accounting point of view. Since it allows us to identify how much money comes out of the business in the payroll area. Therefore, if there is any inconsistency, human resources together with the company’s management may act accordingly.

Therefore, due to the importance of payroll in any company, many choose to outsource this work. This is because it is something that takes a lot of time away from the Human Resources departments of companies and, in turn, because it allows this department to focus on the company’s productive matters while leaving this task so important to another company complex.

2. What is payroll outsourcing?

Payroll outsourcing consists of delegating everything related to payroll to another company through a service contract. That is, this company will be responsible for paying the workers, and their withholdings, in accordance with the law. This is in order to streamline this work through a third party and optimize the performance of the organizational structure of any company.

As with any task that is outsourced, one of the primary objectives is to leave this work in the hands of another company that specializes in the area, in this case in the payroll area. So that the company dedicates itself fully to the activities that generate cost-effectiveness.

Generally, this service is in-house or it can be off-house outsourcing. The first determines that the service will take place in the facilities of the main company as if it were one more department of the company. While the second modality consists of the execution of the service outside the work center.

Regardless of the modality, it is important to determine that the payroll service provider is a company that has experience and quality in the market. And even more so if they are international companies that intend to establish themselves in a new market such as Saudi Arabia.

Likewise, the data of the company’s workers must always be protected. Therefore, not only in the field of data protection but in any field of this service in general, it is important to establish the scope of the services that the external company will provide. So that payroll management is carried out effectively.

3. Advantages of payroll outsourcing

By making use of this practice you can have a better and broader approach to the company. Another benefit is access to personal world-class that can have a better performance compared to the direct employees of the company.

As well to these, there are many advantages of payroll outsourcing services, among which are:

3.1 Money and labor savings

Through this subcontracting technique, companies have been able to waive certain obligations to employers, which has brought savings in the costs of the companies that hire such services to allocate that resource to improvements in the company or production.

It is cheaper to hire payroll outsourcing services than to organize your own team within the company that is in charge of payroll. In addition, there will be a disconnection from the main company with this arduous and complex work.

Generally speaking, payroll is a time-consuming process. By relieving the Human Resources Department of this task, employees in this area will be able to concentrate on other key areas of the business, such as the development of financial strategies that strengthen the company’s competitive advantage, among others.

3.2 Error minimization

By hiring professionals whose sole responsibility and focus is payroll, you minimize the chances of errors, deadlines, omissions, and more. 

This is an advantage unlike having this work within the company. Since payroll is just one of the tasks that the entire Human Resources Department has to take care of. Therefore, the chances of errors due to work overload increase. Meanwhile, the external company will only deal with payroll. Which minimizes the risk of committing errors and therefore legal sanctions.

3.3 Increased productivity

As the activities of the company become fewer, due to the outsourcing of payroll, the Human Resources Department will be able to carry out tasks that generate greater productivity for the company.

3.4 More information

Although it seems the opposite, you will have more knowledge about your payroll. Payroll outsourcing companies periodically send reports that allow detailed information about payroll management they are carrying out. This is a great advantage because if an inconsistency is detected, you will be able to make the necessary decisions to resolve the corresponding situation.

3.5 Creation of a new corporate culture

The expert team in payroll management will turn your company into a better place to work, thanks to the implementation of new and better administrative practices. For its part, it will not be possible to carry out the healthiest and most correct administrative practices, if the subject in question is not known in depth.

Likewise, if you decide to do this alone, and even more so if the goal is to establish yourself in a foreign market, it is most likely that you will run into obstacles specific to each country. Since each country has different legislation and these companies know this legislation because they are specialists in this matter.

3.6 Avoid legal sanctions by government authorities

It is obvious that by leaving this complex task to companies with experience in this matter, they will already know how to act to avoid labor sanctions for their client due to mismanagement of payroll.

3.7 A summary of the advantages of outsourcing payroll

All the advantages of outsourcing payroll are related to each other. Since mainly what the employer intends is to relieve his company of the task of payroll by hiring another company to take care of this activity. This in turn will bring greater advantages. Because the main company will be able to dedicate itself completely to the activities that truly generate economic profits.

On the other hand, there will be peace of mind because payroll will be handled correctly. Therefore, labor sanctions will be avoided.

4. How does a payroll outsourcing process work?

Once the company decides to hire a payroll outsourcing service, it has to define guidelines to correctly ensure this strategy. This will let the external company know the scope of the service it will provide to its client.

The first thing the parent company should do is set up an information transfer system. Companies that contract this service must share essential information about their workforce with a payroll outsourcing company, such as names, salaries, hourly or daily rates, time sheets, vacation and sick days’ policies, expense allocations, and any other data from payroll for its correct calculation.

For its part, because the information to be shared is sensitive, the company must also ensure that the payroll provider agrees to protect that information and to obey a security and confidentiality agreement, in addition to a data protection policy. Also, this must be established in the service contract. So that there is no doubt that the provider of this service knows that it has a duty to protect the information of the workers.

Once the system is coordinated and the processes are established, the expert payroll company can use the information to deliver its service. They can also be in charge of compliance, and payroll taxes. For which they must inform the client company of their work on a regular basis.

This does not mean that in-house payroll professionals can be dispensed with in the payroll outsourcing process. It means that these professionals can focus on other important accounting tasks, such as reviewing financial reports and resolving any accounting problems that may arise in the company.

5. Do I need a payroll outsourcing service for my company?

Companies, regardless of their objects or any other characteristics can take advantage of having a payroll outsourcing service. However, they must consider the quality of service and the technology to perform these functions.

Payroll outsourcing will be important if your company has the following conditions:

  • It does not have its own department in this matter.
  • You need the finance and administration team to focus on strategic tasks other than payroll.
  • • It operates in several countries but does not need experts in this field in each of these countries.
  • It requires agility in payroll management and does not have a good information retrieval system.
  • You are uncertain about compliance with the labor legislation of the country in question.

Although these reasons have their specific weight, each company has its particularities. Therefore, they must deeply study the internal situation in order to select the correct supplier. These considerations include the following factors:

  • The number of workers in relation to the number of people who perform payroll functions within the company.
  • The consequences for the workers who performed these functions in the company, that is, if there will be transfers, and dismissals, among others.

  • Whether or not the company has payroll knowledge and experience.
  • If the strategic decision to transform the costs associated with payroll functions into a variable cost proportional to the size of the workforce makes sense for the company.

All these are factors that employers must consider when making the decision to outsource their company’s payroll or not. In general, this is a decision that is positive, especially for companies that intend to enter foreign markets.

6. How can we help you find a payroll outsourcing company?

If you are looking to expand your company to new markets such as Saudi Arabia. The best decision is to resort to payroll outsourcing in Saudi Arabia and offload that concern to a quality company with years of experience in this market is to hire EOR Middle East services.

There are many payroll outsourcing companies in Saudi Arabia but EOR Middle East will be the best ally for the management of your company’s payroll. Since we have worked for large companies in this country that can guarantee the quality of our services.

EOR Middle East is the leading business advisory firm in Saudi Arabia. In addition to working with companies in Saudi Arabia, we also provide our services in:

If you want to communicate with us, you can do it through: [email protected]. In case of doubts about our services, our organization, or any other requirement you may have, our staff will assist you kindly and resolve all your requests efficiently.

On the other hand, if you dream of working for a large company in the Middle East, such as EOR Middle East, this is your moment. You can send us your CV on thetalentpoint.com. Or through the email address: [email protected]. We are looking for the best remote workers and we want you to be part of our team. Our recruiters are ready to review your CV and find a job for you at our company.

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