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Outsourcing global payroll benefits

Payroll is a process fundamental to any business. However, it can also prove a financial strain and compliance risk. Learn whether outsourcing payroll could benefit your company with our comprehensive guide.

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The modern world brings many possibilities for companies to improve efficiency – outsourcing is one of them. Not only can it save you time, money, and stress, but it also gives you access to expert knowledge. A common example is outsourcing payroll – 38% of companies choose to outsource their payroll to some extent.

Working with an outside service provider is a great way to manage your payroll responsibilities. They’ll take care of tasks like salary calculations, tax duties, and payments. They’ll also have a team of experts waiting to help with any questions you may have.

In this blog, we’ll look at the major benefits of outsourcing payroll, the risks and how to mitigate them, as well as how to know when it’s time to consider outsourcing payroll yourself.

What does it mean to outsource payroll?

Outsourcing payroll is the practice of working with an outside company to manage your workforce payments. A global payroll provider can streamline company efficiency by taking control of a number of your payroll duties, including:

  • Ensuring payments are made to avoid legal and compliance issues
  • Calculating and managing employee salaries and benefits
  • Handling tax matters
  • Ensuring employees receive payments on time

Outsourcing these tasks to experts in the field offers numerous advantages, including a massive time saving. Likewise, outsourcing payroll can save costs and increase compliance with employment and tax regulations. Overall, payroll outsourcing frees company staff to concentrate on more profitable business tasks, such as those concerned with global business expansion.

How does outsourcing payroll work?

Once you’ve decided to work with an outsourced payroll provider, you’ll come to an agreement over the exact processes and services involved.

A crucial first step is to decide how and when you’ll provide your payroll information. To get up and running, you’ll need to share some essential employee information, including:

  • Names of all workers
  • Salary information
  • Any daily or hourly overtime rates
  • Holiday entitlements
  • Expenses information
  • Staff timesheets and working hours.

You may also need to include other data involved in calculating your company’s payments. Much of this data would be classed as sensitive and identifiable, so you’ll need to protect it at all times. This includes your own data storage, in transit to your outsourced payroll provider, and their systems. It’s often a good idea to agree on data protection, security, and confidentiality before signing any contracts.

Next, you’ll provide them with your business processes.

  • How often are your staff members paid?
  • Does each member of staff receive payments on the same date, or are some different from others?
  • Who can sign off any additional payments, such as overtime or expenses?

These will help your provider get to know your company and provide the most seamless experience possible.

Finally, think about any other services you’ll require. Many companies use payroll outsourcing simply to calculate wages and pay staff – but others include things like business intelligence reporting and human resources services. If you need any of those, check that your provider offers them first.

Transparency is the best way to begin an outsourcing agreement. Once all parties understand their responsibilities and have the tools they need, work can begin.

Outsourcing payroll benefits

There are any number of reasons why a company might decide to outsource their payroll processes. Below we explore some of the key benefits enjoyed by businesses big and small, domestic and international, which partner with an outsourced payroll provider.

It saves time

The benefits of outsourcing payroll help free business owners and key staff to concentrate on essential day-to-day business tasks. Payroll takes time, and removing it from your (or your staff’s) to-do lists can bring many benefits in other areas of the business. You might spend more time finding new leads, developing products, or managing your company’s strategy. However you use them, time saved is one of the biggest advantages of outsourcing payroll.

Cost savings

Many outsourced payroll agreements help companies save money on their payroll processes too. There are the obvious financial benefits like avoiding hiring additional accounting staff, not having to purchase payroll software, and not maintaining any payments systems. But there are also hidden financial benefits like the competitive advantage you gain from spending the time saved on more actively profitable tasks.

Accurate payroll

When outsourcing, you’ll be working with expert providers who will help minimise any errors. This means a reduced chance of payment mistakes, missed deadlines, or compliance errors. Your bookkeepers, accountants, and staff will all be happy to know that an outsourced payroll is accurate and up to date – and knowing your payroll is correct is essential during an audit.

Comply with local laws

Outsourcing your payroll can also help you keep on top of compliance. It can be tough to understand local regulations and legal requirements surrounding payroll, especially for companies working in multiple countries or without in-house expertise. Outsourcing to an organisation with expertise in global compliance ensures you are compliant, saving you stress and avoiding the risk of costly fines and penalties.

Employee satisfaction

Payroll inevitably comes with questions. Accounting staff and directors need to know facts and figures, while workers may have issues with their individual payments. This can strain the in-house payroll staff’s time – especially if it’s just one person. Instead, an outsourced provider can answer queries promptly and correctly, keeping staff happy and avoiding any delays.

Advanced software and processes

Your outsourced payroll supplier will likely invest in state-of-the-art software and systems. This will not only help them keep all information correct and updated but can also give you insights into payment patterns or business financials. It will also provide excellent protection for your employee data security concerns.

Integrate data with other business processes

Your streamlined payroll process can impact other areas of the company. Many choose to integrate payroll data with human resources systems or time-keeping software, improving collaboration between departments. This helps avoid any data errors, and makes reporting and reviewing much simpler.

Streamline international payments

Companies with a presence in multiple countries may benefit from an outsourced global payroll expert. Staff payments can be made in different currencies according to local regulations, helping to save on currency transfer costs and increase employee satisfaction. It can also help when paying overseas workers.

Outsourcing payroll challenges and how to overcome them

As with any change to the way you do business, there are a few challenges which may arise when outsourcing payroll. Below, we discuss potential risks to outsourcing payroll as well as how to mitigate them.

Loss of control

Outsourcing your payroll can potentially leave you with less control over certain services. This is typically a benefit – outsourcing, by its very nature, means somebody else taking control over a service on your behalf. If you are concerned about surrendering control of a sensitive process like payroll to someone else, check that your agreement doesn’t impact any of your key workflows, and allows you to retain influence where you want it. If you need instant payroll access anytime, you may have to agree on a system with your provider first.

Passing on sensitive data

Payroll contains sensitive employee data. Depending on your location, you may be subject to strict data protection and confidentiality laws, so make sure that any outsourcing abides by those. Your payroll provider will understand their responsibilities in handling the data, but you’ll also need to protect it on your system and in transit.

Risks from lack of communication

Finally, outsourced payroll services are only as good as the communication between supplier and client. You’ll need to inform them of any processes, changes, or requests, as a lack of communication can mean errors in payroll. Once those communication channels are open and established, any necessary information can be passed over quickly and effectively. In order to overcome potential challenges in communication from the outset, take time to shop around for a payroll provider you can trust.

When should I outsource payroll?

Payroll outsourcing can help streamline processes for most businesses, especially those with operations and employees overseas. Knowing when to outsource payroll, however, is not always obvious. Smaller businesses may feel they’ve not yet reached a size at which outsourcing payroll would benefit them, whilst larger enterprises may be reluctant to transfer control of payroll having conducted it in-house for so long. Yet, as we’ve already explored, outsourcing payroll can benefit any size of company, at almost any stage of growth.

Below, we outline some of the signifiers indicating when outsourcing payroll to a global payroll partner can prove most beneficial.

Your company lacks the resources – financial, technological, or personnel – to run payroll efficiently and effectively

Depending on the extent of your payroll needs, conducting it in-house can prove taxing. Compliant and efficient payroll demands a dedicated financial team with the budget and technology to complete the process whilst adhering to any and all legal requirements. Smaller businesses can easily lack the requisite resources to run their own payroll effectively. Outsourcing payroll to a dedicated partner removes this resource strain completely.

You have been penalized for non-compliance and/or late or incorrect tax payments

According to the IRS, America’s tax regulatory body, 40% of small-to-medium-sized businesses regularly incur financial penalties for incorrectly filing their taxes, with fines on average costing somewhere in the region of $845 USD.

Compliance becomes an even bigger risk to businesses operating, or looking to expand, overseas. With the laws regulating employment and tax varying greatly from country to country, state to state, only dedicated experts in the field are properly equipped to stay on top of compliance throughout the international payroll process.

Whenever payroll compliance becomes a concern or diverts too large a chunk of your company resources, we would recommend contacting an outsourced payroll provider.

You find it difficult to meet requirements regarding data security and recordkeeping

As mentioned, payroll deals directly with sensitive information – the type which requires strict adherence to data protection laws, such as GDPR in the UK and EU. Moreover, risk-free payroll processing requires accurate bookkeeping, not only for the sake of compliance, but also in terms of time-management and employee-employer transparency. Third-party payroll providers are best equipped to maintain clear, compliant records on your behalf.

You divert time to payroll which could be better spent on other processes

Processing the timesheets of just 100 employees can take one member of your finance team more than 10 hours a month, not to mention the time you and they devote to all of the other, previously mentioned aspects of the payroll process. Outsourcing payroll frees this time for you to spend on other, more pressing or productive business matters. If you spend more time than you’d like on payroll, it could be time to consider outsourcing.

Your employee retention rate, especially among remote employees, could be improved

Lastly, it is well worth noting that the manner and efficiency with which payroll is completed has a direct impact on your employees’ satisfaction levels. Employees want to be paid promptly and transparently, with access to all of the information they desire regarding their pay packet. This is especially true for employees working remotely, unable to speak in-person with your finance or HR teams.

Employee satisfaction and retention are often directly correlated, meaning that if you are concerned by your company’s ability to retain employees, it may well be the time to consider outsourcing payroll to a team who can conduct it more efficiently. The time you win back could then be redirected to promoting employee engagement and wellbeing.

Working with the experts

Payroll can be a time-consuming process with the potential for errors in figures, deadlines, and compliance. Errors made can lead to costly fines and penalties, not to mention an unnecessary strain on company resources.

By outsourcing payroll, you leave the time-consuming, resource-heavy work of payroll processing to the experts – freeing you to concentrate on tasks that give your business a more competitive advantage.

To learn more about Mauve’s outsourced payroll services, backed by over 27 years of experience in the industry, get in touch today.