A Payroll outsourced service can manage the employee’s salary, social benefits, taxes in a foreign or domestic location. All of this can be done at ease with help from a payroll outsourcing service provider.

Payroll outsourcing is a simple term that means assigning your company’s payroll management process to a third party.

Payroll outsourced service is a complex yet crucial part of team management in today’s time. The payroll management process can be done at ease if it is outsourced as it saves up on time and employee productivity.

The timely payroll management process is one such area that is critical for businesses and companies, especially in these times when the world is facing a critical challenge. These times require timely payment of employees.

What is payroll outsourcing or third-party payroll services? 

Payroll outsourcing is using a service provider to handle the administrative and compliance functions related to paying employees.

Payroll outsourcing is one way of paying workers in different locations through a third party.

It is significant to note that payroll service providers do not provide local employers. This means that local incorporation is required, and experts must handle the other aspects of employing workers.

When should one get into a third-party payroll service?

The decision to hire a third-party payroll service depends on various factors, such as the number of employees on assignment, local entity, and the local rules of the area.

Depending on their functionality, a company can customize its third-party payroll services.

The main role of the third-party payroll service provider is to:

  • Run payroll, pay employees and withhold taxes
  • Deposit of funds or issuing payment
  • Calculating and deducting taxes
  • Filing necessary government reports
  • Administering employee benefits

Around 37% of companies are developing global strategies to transform their payroll services. 

Why is a third-party payroll service important? 

Running an in-house payroll can be challenging for smaller businesses or companies.

Companies choose to outsource for particularly these primary reasons:

  • It is cost-saving
  • Ease of ongoing administrative payroll through changes in personnel, reduction or increase in compensation structure.
  • It helps to avoid mistakes and tax compliance penalties.

Advantages of third-party payroll services

The advantages of third-party payroll services for small and large companies are numerous and are used by many businesses.

  • Cost and time saving
  • Filing of reports and avoiding compliance issues 

Advantages of payroll in foreign markets where tax rules are unknown. 

Adopting a global strategy in payroll is the foundation for an organisation’s long-term success.

The process involves technology with well-defined rules, allowing organisations to complete the payroll task. Companies that have moved to cloud-based payment have built resilience. Virtualizing a global payroll ensures continuous payment.

How do third-party payroll services boost efficient payroll management processes for businesses?

The key benefits of hiring outsourced payroll services are:

  • They save on employee’s time
  • Payroll service provides leverage technology to drive efficiencies.
  • Putting time back into your business

Performing payroll in-house is an administrative task that scales as your business grows and is not directly tied to profits. Payroll processing, ensuring compliance, timesheets, and pay conditions, along with handling employee queries and preparing reports, are all services provided by payroll providers.

Payroll outsourcing frees up administrative time for your employees.

Having an outsourced payroll service gives you experts who can handle employee queries, ensuring that the staff is focused on business operation and not payroll.

  • Realising the cost-benefit

Processing payroll in-house has a direct business cost.

For example, a payroll benchmarking report 2019 stated that a business with between 50-199 staff has an average cost of $69.57. For a business with 100 employees, this would equate to directly paying monthly $83,484.

  • Payroll compliance 

The modern-day business operates with a workforce that is a mix of full-time, part-time, contractor and casual employees requiring payroll services to maintain minimum pay rates pay conditions.

By outsourcing your payroll, you not only gain access to experts who can provide advice and ensure compliance against changing legislation but provide access to payroll software with perks such as modern awards, time and attendance, employee self-service.

  • Efficient leverage 

Pure cloud-based software has kick-started a global revolution in employment. Remote working and flexibility are a growing need of the hour.

Small and medium businesses are a major benefactors of this change cycle.

Outsourcing payroll function compounds this advantage. Since payroll software is commonly coupled with HR software, employee onboarding can now be managed digitally.

Points to be considered when looking for outsourcing payroll services 

A few questions that should be considered when looking for a payroll management process are:

  •     What are the services that are offered? 
  •     How can payroll transformation improve your overall position?
  •     How will it drive value for the investment? 
  •     How will they be securing your confidential data? such as employee data
  •     Their past and current clientele and the services they had provided
  •     How do they withstand taxation for each employee? 
  •     Their payment structure for each employee 
  •     How do they assist with generating tax forms for local tax filing purposes

Services to look for:

  • Integration of payroll and HR process
  • Payroll automation
  • Improving payroll compliance
  • Real-time analytics
  • Flexible employee pay

Current payroll outsourcing trends to look for 

Payroll outsourcing has become an integral part of the business. A well-planned strategy can transform your business.

Payroll becomes part of the big conversation. 

Payroll is no longer the poor relation when it comes to important conversations at a broad level.

A more holistic approach to the benefit of payroll outsourcing 

Companies have started considering the long-term benefits of outsourcing payroll rather than just focusing on businesses.

Outsourcing to a service provider can be costly hence a more holistic approach is advisable.

A planning approach is carried forward 

Businesses are growing through this approach.

Recently, companies have started adopting strategic planning methods to avoid last-minute payroll challenges.

With the change in times as companies are adopting cloud-based systems and adopting a global strategy, it is necessary to build strategies and adapt better services.

More than just offering payroll services

There is a more comprehensive solution for running a foreign payroll through a GEO.

The employer record (EOR), known as the local employer of record, is a third-party that is hired to take responsibility for all the employees.

The employer of record is a legal entity that

  • Does the employee arrangements like visas avoid any delays
  • Provides registered entity
  • Meetup with all the host country labour laws
  • Directs the client towards required notice periods
  • Act as a medium between the host country and employees.

Different payroll platforms-bridging global and local platforms

Payroll outsourcing services in India have opened-platform models that have emerged over the past few years that are ideally suited to support and create a bridge between global and local priorities. This is achieved by layering transparency over the top.

The key benefit of the global team is speed and transparency.

Traditional global aggregators spend too much time ripping out local payroll platforms and services and replacing them with those traditional aggregators.

TopSource Worldwide – leading payroll service provider 

TopSource worldwide is one such payroll outsourcing services in India which offers end-to-end payroll outsourcing services to SEMs, a mid-sized and large organisation 

Services that TopSource Worldwide provides

  • Salary dispatch
  • Legal process
  • Deductions and tax filing
  • Accurate payroll processing services
  • Standardised workflow
  • Expense management

TopSource worldwide is a skilled, professional, and knowledgeable third-party payroll service provider.

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Published On: March 20th, 2022Last Updated: March 24th, 2022

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About the Author: Sachin Disa

Sachin heads the India Payroll business unit and is responsible for global sales into India, India domestic sales and delivery, and local finance support in India. Sachin has over 17 years of experience with the company, his previous roles include head of UK payroll operations, head of accounting support services, head of sales in India and VP of finance.