Should your small business outsource payroll or DIY?
HR departments often have high administrative workloads and are unable to boost the productivity of their organization. In addition, this increases the possibility of errors and legal sanctions. All this has a cost that is difficult to measure. To outsource payroll is one of the activities that take the most time in the HR departments.
In this article, we are going to analyze whether small businesses should outsource payroll or do it themselves. Let us observe:
- What is payroll outsourcing?
- What are the advantages of outsourcing payroll?
- Factors to be taken into account to outsource payroll or not in a company
- Why companies should outsource payroll?
- How can we help you outsource your company’s payroll?
1. What is payroll outsourcing?
The payroll outsourcing services of a company consist of contracting the service of third parties. Therefore, they are in charge of carrying out the process related to the salary of the employees. This means delegating administrative management. Which requires time and constitutes difficulties at the legislative level, to be able to concentrate on the development of the business as such.
In other words, outsourcing is simply the hiring of a third party. Which is normally a company, which obviously and preferably is a specialist in the field of payroll management. To take charge of directing and replacing the contracting company, control and manage all administrative, legal, and other processes related to the payroll of the contracting company.
Many companies have doubts, especially small ones, about whether they should outsource their payroll process or not. Everything will basically depend on the number of workers and the efficiency of your human resources department.
But as the company grows, it will have no alternative but to turn to outsourcing; so that the human resources department can focus on important business activities. Instead of being basically a department that only handles payroll.
In summary, there are payroll outsourcing companies, which are in charge through a contract of providing the payroll management service of another company. One of the objectives of the payroll outsourcing companies is to alleviate the workload of your HR department.
2. What are the advantages of outsourcing payroll?
Hiring the services of a professional employer organization to carry out a certain complex task is usually a good idea. Therefore, here are some of the main advantages of outsourcing the company’s payroll:
2.1 Comply with current regulations
Depending on the labor legislation of each country, normally if the payroll is outsourced, the labor responsibility is also being transferred to the provider. Therefore, the employer is exempt from any labor or tax liability. The same happens with the fact of payroll outsourcing in Dubai and the UAE.
Likewise, the supplier takes care to avoid being sanctioned. It sends the contracting company the work contracts and wage sheets that comply with current labor regulations. Which takes into account all variables such as dismissal or bonuses.
2.2 Development of the main activities of the business
Running a business is complex. Saving time thanks to the outsourcing of payroll allows you to dedicate it to facing other professional challenges such as:
- The development of business strategy.
- The advancement of business processes.
- The deployment of the marketing strategy, etc.
Consequently, the time lost in properly managing payroll can be invested in growing the business. And also, carrying out activities that are important for its development. Subsequently, leaving in the hands of an expert third party the realization of this complex and demanding activity.
2.3 Simplify business processes
Choosing to outsource payroll from payroll and social security software can be convenient. Especially, in terms of fees, simplification of management, and improvement of interpersonal relationships. In this digital world in which we currently live, the business area does not escape this.
That is why companies, in order to remain obsolete according to their economic possibilities, progressively digitize all their processes, including a process as important and complex as payroll.
2.4 Increased competitiveness
The end result of following an outsourcing strategy is for the company to adopt a good position in a competitive market and in a global environment. Outsourcing allows you to reduce your company’s costs, achieving greater productivity in a flexible way.
3. Factors to be taken into account to outsource payroll or not in a company
For this, there are a series of factors to be able to determine with precision whether or not it is convenient to outsource payroll. In this sense, we present some of the most important factors to take into account:
3.1 The workload in the human resources department
As mentioned at the beginning of this article, an important factor in determining whether or not to outsource payroll is the workload of the human resources department. Let us remember that every human resources department has as its main general function the relationship that exists between the worker and the company and that this is carried out on good terms.
People management is one of the key elements for business success. However, it is a task that many human resources departments do not devote enough attention to because they have to focus on time-consuming administrative duties that divert them from their main function.
If the human resources department is unable to perform functions that add value to the organization, it is time to outsource administrative processes. We can recommend doing it with an employer of record as they will give you a compehensive service package for an affordable price. If, on the other hand, the department is already working on functions such as talent attraction, staff analytics, and performance evaluation, in addition to efficiently dealing with payroll, then this situation can continue.
3.2 Lack of specialization and lack of legislative control
Legislative changes are common and sometimes it is difficult to be aware of the current regulations. Depending on each country, payroll can be more or less complex. To manage the entire process of remuneration, quotation and communication require a degree of specialization that you will only find in a provider with experience in the matter that guarantees the compliance and validity of your actions.
This is especially important in entities that have prior administrative sanctions for errors in contributions or taxation of employees. This should not happen anymore. Therefore, you need to outsource payroll management to avoid future penalties, ensure accuracy in calculations, and ensure objectivity.
3.3 Need to promote digital transformation
For an organization that is in the process of digital transformation or wants to start it, its priority must be to optimize processes. That is what digital transformation is about. It is about minimizing the cost of a process, either through automation or outsourcing. Companies must understand that digital transformation is not optional. If they do not promote internal change, they run the risk of disappearing due to the appearance of more efficient competitors.
Likewise, by outsourcing payroll, the human resources department can focus on much more productive activities for the business. Here outsourcing plays a fundamental role, not only in payroll, which is the most exhausting within the functions inherent to any human resources department.
This is why, starting with outsourcing payroll, the human resources department will have the freedom to dedicate itself to innovation, collaboration, internal communication, implementing new ways of working, attracting new talent, etc.
3.4 Financial analysis on outsourcing payroll or handling it internally
For its part, we must not forget that the economic factor is a decisive factor when making such an important decision for a company. Therefore, the company must evaluate the cost-benefit ratio. That is, you must evaluate if it is cheaper to hire an external provider or form an internal team to manage the payroll.
When we talk about small businesses, which is the case at hand, we talk about a company with a small number of workers, therefore a low workload regarding payroll. If the human resources department can spend a reasonable amount of time on this task and does it efficiently, there is no reason why it should outsource this area of the company.
Therefore, as the company grows and increases its number of workers, it should think about outsourcing this process. Remember that the HR department is a productive area and really deals with the areas of importance to the business, such as remote worker hire and other workforce sufficing tasks.
4. Why companies should outsource payroll?
It is clear that outsourcing payroll has financial, operational, strategic, and many other advantages. If we add to this that the legislative and technical requirements have increased, more organizations choose to use this strategy.
It is true that to outsource payroll some organizations think it twice when hiring a provider. And although the rates vary from one to another, it is important to take into account that the provider offers security guarantees in its service through a contract that covers all the needs and expectations of the contracting company. And of course, verify that the supplier has sufficient expertise to efficiently carry out the management entrusted to him.
In the end, the decision to outsource payroll must be made between the general management and the finance, HR, and technology departments. Placing on the table the workload, the objectives of personnel management, and digitization, in addition to trying to assess the current internal costs.
Obviously, the size and budget of the company are factors that determine whether or not payroll can be outsourced. If you are a very small business and your human resources department can efficiently manage this process, it is convenient to leave this responsibility in the hands of this department for the time being. Until the company has the financial resources necessary to hire a provider of this type of service.
4.1 Reasons to outsource payroll
Every entrepreneur knows that in addition to dedicating himself to developing the main activity of his business, he must also deal with legal, and administrative matters, etc. Thus, in order not to deviate from what really generates profitability in the business, choosing to outsource payroll is usually a good option.
Each company is unique, with particular problems and it is often difficult to provide in your area of payroll, advice, and timely solution to the requirements of its employees, given the lack of knowledge and specialized personnel in the area described. Therefore, payroll outsourcing in the UAE or payroll outsourcing in Dubai is the trend used more frequently by large companies
Likewise, payroll outsourcing is one of those processes that many companies, regardless of their size, end up entrusting to a third party, given the complexity that characterizes it.
One of the big problems that small businesses have in the area of payroll, is that they do not have access to state-of-the-art software, processes, and procedures in this area that are not standardized. Causing them not to perform best practices.
This is presented as not having specialized and up-to-date personnel in matters of labor regulations that respond to the needs of the company. Causing a high risk that could generate labor demands and high business costs.
6. How can we help you outsource your company’s payroll?
Do you have doubts about outsourcing your company’s payroll? For this, you can count on the best advice in this matter. If you need the payroll outsourcing service from an outsourcing company. EOR Middle East will be your best ally to grow your small business.
We are a leading company among all the payroll outsourcing companies in UAE and all the payroll outsourcing companies in Dubai. Which has helped small businessmen to convert their companies into highly competitive and profitable organizations. Thanks to the contribution we have given them with the advice offered in different matters, among which payroll outsourcing service.
There are many payroll outsourcing companies in UAE or payroll outsourcing companies in Dubai. However, we are the best one for you.
Likewise, EOR Middle East also offers its payroll outsourcing services in:
Do you want to stop worrying about having to deal with a matter as complex as payroll? Focus on the important things that will make your business grow and leave in our expert hands the direction, control, and management of your payroll. And dedicate yourself to making your business profitable.
You can contact us at: [email protected] or call us at +971 43 318 886. If you have doubts, our agents will assist you in a cordial manner and will quickly process your request.
On the other hand, if you want to work in a first-class company send your CV to: thetalentpoint.com. You can also send us your CV via email through the following address [email protected]. Our recruiters will analyze your profile and try to place you in a job within our company.