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Onboarding New Payroll Outsourcing Vendor: Major Precautions and Steps

Client Advisor Team Leader
January 5, 2022

Companies now focus more on their strengths while leaving other mundane tasks like payroll management to specialised service providers . The findings of a report by Beroe Inc. points towards a steady growth in payroll outsourcing. It estimated the global market for payroll outsourcing to reach $10336 Mn by 2023 at a CAGR of 4.4%. The market growth is uniform across all regions, with the maximum growth coming from multi-country payroll contracts.

Payroll outsourcing has become a popular choice owing to the time-consuming nature of tasks that need to be handled by HR and payroll departments. Organisations now prefer to either automate the repetitive tasks or leave the entire strategic task to payroll service vendors with industry experience. Payroll service providers have been efficiently changing the payroll processes by using intelligent software solutions and radical technology. Letting an experienced vendor handle the payroll management challenges has many perks.

Pros of outsourcing payroll to an experienced payroll outsourcing vendor


The collection of payroll data takes up a considerable amount of time each month. Outsourcing it to experienced service providers helps as it creates a centralized system for gathering payroll and attendance information. Automation and deployment of specialised resources make the process easier. This allows the organisation to focus on its core strategic initiatives.

Compliance Assured:

With payroll norms and regulations becoming stricter, it becomes important to be aware of the changes and implement them on time. Organisations usually pay a lot towards employment tax penalties owing to errors. A payroll service vendor/partner takes this concern off the plate by taking care of tax filing and payments under the tax regulation changes.

Reduced Cost:

Cost becomes the standard determinant that often drives organisations to pick one solution over the other. A Payroll outsourcing vendor helps in saving the cost incurred in running a monthly process that is labour intensive. Outsourcing also helps in reducing the cost that goes into paying penalties and reduces the potential errors.

No maintenance cost and better data security are aspects that make payroll outsourcing interesting too.

Deloitte, in its 2021 Global Shared Services and Outsourcing Survey Report, found that SSCs or outsourcing are most leveraged by the payroll function. A finding that shows the popularity of payroll outsourcing.

Finding the right payroll outsourcing vendor often takes time. It begins with understanding the organisational requirements and shortlisting vendors with the expertise to fulfill those. Once the selection process is done, establishing the relationship becomes crucial and hence a proper onboarding process is essential.

Onboarding New Payroll Outsourcing Vendor

With a good vendor in the picture, establishing a trust-based partnership becomes necessary. In recent times, remote onboarding has gained popularity. It is safe to assume that it would apply to new vendor onboarding too. Irrespective of how onboarding a new payroll outsourcing provider is quite similar to employee onboarding. It involves setting the expectations straight by exchanging information and clarifying the practices, processes, and compliance regulations that both organisations follow.

An onboarding checklist should ideally cover:

1. General Rules:

Covering the internal, local, and global regulatory and compliance norms that bind the business.

2. Evaluation and Understanding:

Clearly understand how the selected vendor proposes to assist your business. This criterion is one that probably influences the final vendor selection, too.

3. Contract/Documentation:

Having a simple record of how the partnership works and what protects each business from interference and risk are aspects that must be covered. Drawing a contract essentially helps in safeguarding the organisation’s interests.

4. Leadership agreement:

The support of the top management and key stakeholders is essential for the onboarding to go smoothly.

5. Support Team:

Create a team that can handle the onboarding process, assign a point of contact, think about aspects like access and control.

6. Shared but Secure Information:

It is always important to know what needs to be shared during every stage of interaction. Establish communication but with the measures to safeguard sensitive information.

Steps for Onboarding a new payroll outsourcing vendor for your business?

The vendor onboarding process should ideally cover the following steps. While we can break each down into sub-steps, these generally cover the overall aspects of getting the new payroll vendor onboard and aligning the function with other operations. Onboarding typically begins right from when the vendor is finalised and all the legal aspects are taken care of.

1. Initiation:

Onboarding begins with adding the vendor to the organisation’s database. This process involves document gathering. It is hence essential to partner with an established vendor with defined processes and documents in place.

2. Document Verification:

Collecting the documents alone doesn’t suffice. As done during employee onboarding, the documents need to be verified. It is a standard process that ensures that the vendor information and documents match the organisation’s regulations.

3. Sharing Expectations:

While the vendor may be an expert in payroll management, it is still important to discuss what the organisation’s expectations are. This step involves discussing the standard processes, policies, and workflows. Clarity at this stage can allow the vendor to build a new payroll management process in congruence with the same.

4. Login Credentials and Communication Channels:

The vendor may either work on an independent system or one that’s integrated with the operational systems. Sometimes, the IT system may have additional requirements for adding the new vendor to the system. This stage of onboarding also includes establishing a communication channel to ensure that information sharing can be done effortlessly.

While not in the context of payroll outsourcing, the importance of verifying the authenticity of a vendor is emphasised for all sectors. In the words of Dr. Ray Carter, Director of DPSS Consultants, “Deficient evaluation constructs begin with poorly defined specifications, which then feeds into the procurement process and award criteria and the selection of suppliers that lack the necessary expertise or resources.” This applies for new payroll vendors too.

Successful onboarding of a new payroll outsourcing vendor is the start of a high-performance partnership. However, there are certain the precautions that must be taken while onboarding payroll outsourcing/service vendors.

Precautions to be taken while onboarding payroll outsourcing vendors

Record Keeping:

While it need not be elaborate, onboarding helps in creating a substantial record. Lack of it on the other hand can leave your organisation at a loss in the face of an unprecedented issue.

Fill Communication gaps:

Establish right from the start how communications, feedbacks and routine checks work. Having a clear structure can help in reducing the bottlenecks in the process and hence ensure better efficiency.

Thorough Verification:

While this may be a step that comes to the fore during vendor selection too. After a few meetings, the onboarding team should check and verify all the documents. Mishandling or overlooking certain aspects at this stage can end up in chaos later. It is better to be careful than sorry, as they say.

Payroll outsourcing is a booming sector. The number of vendors has been on a steady rise too. It may often be a tough task to find the right vendor, but with the right approach, it can be tackled easily. Establishing a relationship, however, would depend on interactions. Hence, a formal onboarding process becomes essential. Good payroll service vendors would use this for understanding their client’s quality metrics and delivery demands. The onboarding process would also help them gain an understanding of the customers’ needs and create strategies to implement those requirements.

Be it an On-site or offshore partnership, a well-planned onboarding gives payroll vendors a clear understanding about the workflow, timeline, payment, compliance, and regulatory needs. A good and lasting partnership with the payroll outsourcing vendor hence depends on how well you relay the organisation’s goals and vision to the vendor and align the processes with the same. And on the long run it all depends on vendor relationship management and on how the partnership is nurtured and sustained.

Why TopSource Worldwide?

With over 20 years of experience as a trustworthy payroll outsourcing company, we offer compliant, on-time payroll processing and more. Our seamless onboarding process allows us to handle your payroll processing and employer of record responsibilities  within a few weeks. Right from fully managed payroll service to PAN India e-TDS and statutory returns filing for PF, ESIC, PT, LWF, to employee self-service, our expert team can handle it all effortlessly, allowing your organisation to focus more on the core functions.


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Nena Petrovic
Client Advisor Team Leader
Nena Petrovic is the Client Advisor Team Leader at TopSource Worldwide, a leading Global Expansion services provider. She oversees and guides a team of client advisors, who communicate and collaborate with clients effectively. She is responsible for ensuring the accurate and timely processing of client invoices and payroll, as well as developing strategies and maintaining a client-centric approach.

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