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Outsourcing Payroll: Why and What to Anticipate – HR in ASIA

The article discusses the reasons why businesses decide to outsource their payroll and what they should anticipate. Businesses may choose to outsource payroll for a variety of reasons, including cost savings, access to expert knowledge, and freeing up internal resources. When outsourcing payroll, businesses should ensure that they have a clear understanding of the services being provided, the fees charged, and the contract terms. The post will provide you information related to outsourcing payroll. 


With the rising complexity of a company’s HR function, outsourcing HR might be a viable option to assist the department execute their work better. Outsourcing payroll, in addition to other back-office tasks, might be one of the greatest strategies for streamlining financial management and allocating resources. Outsourcing payroll and administrative functions helps companies strategize their efforts to achieve long-term business objectives within less time. Some of the reasons why companies today increasingly feel the need to outsource payroll are as follows.

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. 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.

Avoid Legal, Tax & Compliance Risks

Employment laws, data and compliance standards, and tax laws are all complicated and subject to change. With rules governing provident funds, tax calculation, employee benefit programs, and staff rewards, it becomes difficult for companies to handle the precise reimbursements and salaries for each employee. Payroll is being outsourced by businesses of all sizes to take advantage of the capabilities offered by experienced, professionally managed payroll teams. Professionals in charge of a company’s outsourced payroll can stay informed on changing regulations and national needs, maintain detailed records, and produce payroll data and statutory filings precisely and on time.

In-depth Reports Provided

Payroll companies work towards delivering in-depth well researched reports and specific information with a cost-competitive advantage. Employees can directly contact the payroll experts employed by these outsourced payroll solution providers to answer employees’ queries either on call or by email. They further act as a single point of contact for your internal and external employees. Specialized training programs are provided by payroll outsourcing companies to staffers, in case of change in payment processes, taxation rules, employee benefit programs or CPF rules.

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However, outsourcing payroll also has some disadvantages that you need to anticipate.Here are some disadvantages that you should consider.

Losing Control

When you decide to outsource payroll in order to complete the task on time, you must be prepared to let go and sacrifice some control over the company’s financial information and data. You may lose access to certain data since the outsourced corporations want to retain it in their records. As a result, it is critical for businesses to establish appropriate guidelines controlling what aspects of payroll data may and cannot be delegated. 

Additionally, not only may you lose control, but you must also accept responsibility for any consequences that this course of action may bring. For example, if you have asked the outsource payroll to calculate and pay legal taxes and they are late to accomplish this task which is now beyond your control, then you must be willing to take full responsibility of the penalty for the delays.

Confidentiality Threats

The security of information and data is critical for every successful company. If sensitive company and payroll data is exposed to third parties, the business’s long-term viability is compromised. Nevertheless, payroll activities are intimately connected to employees’ personal and sensitive information. If such content is distributed or leaked to third parties, it may pose a significant risk of data leaks. As a result, businesses must take precautions to ensure that private data within the company is securely protected. To avoid future mishaps, businesses must engage into a confidential agreement with the third-party service provider on the penalty terms and circumstances before outsourcing responsibilities to them.

You have to pay extra

Although outsourcing HR might help boost a company’s operational efficiency at some point, it is important to ensure that the cost paid for the services provided is worth the improvements. Hiring an outsourced payroll service provider demands you to spend extra money on a function that could have been completed by in-house staff. Things might become worse if payroll firms offer all-inclusive packages that include things you don’t actually need. To resolve this concern, it would be best to deal with an outsource provider that can customize the service to meet the needs of the business. Upon signing a contract, make sure that there are no hidden costs that you will have to pay later on.

Payroll outsourcing may help companies in dealing efficiently with challenges posed by regulations regulating employee salaries, tax restrictions, and direct access to detailed information from payroll professionals, saving money and time. However, you need to also be aware of the cons and to avoid conflicts, conduct a thorough check on the performance of outsourced payroll work that always meets the needs of your company.

This content was originally published here.

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