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Lower cost, higher quality – the positive imbalance of payroll outsourcing | weBlog

January 12, 2023

How to shift the potential of payroll processing towards a more strategic function? The solution lies in the many advantages of outsourcing.

Companies across the world may have different natures, goals and structure, but when it comes to business processes, decreasing the operational costs is quite the common desire. Outsourcing is often seen as a traditional method to stay within the budget, and while there is an emerging trend of putting more emphasize on value and innovation, the costs still remain as one of the most crucial factors when choosing a partner.

However, lower costs should not be the winning aspect when it comes to such sensitive functions as the payroll processing. When the vendor is chosen wisely, payroll processing can be shifted towards a more strategic, high-quality function of the company. Thanks to outsourcing, companies can gain access to unlimited possibilities for automation, best-breed IT solutions, continuous innovations, reduced risks and added-value solutions not only for the HR management team but, most importantly, for all employees.

These aspects gain more relevance when it comes to multi-country payroll processing projects – and their outsourcing with a payroll vendor. The most common challenges both the company and the vendor need to tackle, in all their complexity, are:

Streamlined and effective payroll processes with high level of automation

Standardized processes with accurate local and international reporting

Legislation compliance via system maintenance and local-specific customization

Business continuity, top-level security and data protection

Added-value, innovation-driven solutions for all users – HR teams and all employees

Cutting costs on multiple levels

The decrease of costs that outsourcing brings to companies is a benefit on its own, but there are further notable mentions. Overhead costs are one to contemplate, mainly when considering all the expenses related to the maintenance of an internal payroll staff – their salaries, holidays, sick leaves, education or back-up services. A payroll vendor can unload this financial burden by processing the whole agenda, while in the meantime, the client benefits from economy of scale, saving time and money with the optimization and automation. Moreover, as the payroll vendor is responsible for monitoring the payroll-related legislation and informing the client about respective changes, the financially demanding training of in-house staff is no longer necessary.

Other advantages are related to more technical aspects, such as the licensing fees for payroll processing engines. In this case, the majority of the costs are borne by the vendor. Unless the client requires access to the system, there are no further expenses related to the maintenance and implementation of changes initiated by the rather frequent updates of payroll-related legislation.

Full accountability and compliance with legislation requirements

Touching upon the topic of legislation, a powerful telling argument for outsourcing the payroll function is full accountability and compliance, given that the agenda handles sensitive and confidential information. With the extremely challenging legislative requirements and frequent changes in the legislation related to payroll and labour law, shifting the responsibility to outsourcing is a safe bet for most companies. The payroll vendor is generally accountable for monitoring the local changes related to the provided services, incorporating them into day-to-day processes and maintaining the systems in 100% compliance with the current legislation – accurately, on time and with minimum possible costs.

While regular companies are very much dependent on the provider of their payroll engine whenever a change in legislation happens or a system customization is required, in case of outsourcing the payroll agenda, the vendor usually operates an internal IT team that is very familiar with the system functions and can process all complicated set-ups or advanced customizations internally, no matter the nature of projects or the volume of headcount. The amount of time and costs saved is very significant, considering that the delivery chain is simplified. Therefore, outsourcing not only diminishes the administrative burden of the client, but also eliminates the potential risks of non-compliance and resulting penalties from local authorities. The fact that the vendor is often liable for any damages caused by e.g. late payments of wages, via professional and extensive services covering the professional liability claim, may be considered as a convenient bonus.

Business continuity with reduced risks

Payroll outsourcing, besides all the mentioned qualities, can guarantee the continuity of processes under all circumstances, to distribute salaries on time and keep the level of employee satisfaction intact. Vendors have complex teams specializing in payroll, offering the possibility to back up another team member in case of unexpected absence. In addition, they have formalized business continuity and recovery plans, analysing and measuring different risk factors regularly and developing solutions for different situations. These precautions make sure that confidential data is safeguarded and can be retrieved even in case of natural disasters. The related processes are often certified and audited by internationally recognized certificates for quality and IT security management, such as ISO or ISAE.

Technology-driven solutions, customer-friendly experience

In conjunction with the added value, payroll outsourcing must be designed in a way so that it can fully replace the internal payroll department, with streamlined communication and ad-hoc support while maintaining the level of comfort employees and the management got used to, when having their payroll team onsite.  That is when the self-service functionality of the payroll and HR system comes into the spotlight.

As a part of the service delivery, the self-service portal offers the freedom to employees to handle numerous tasks on their own, without the need to ask for assistance their HR team. By granting login credentials to all employees, information about payslips, training materials, requests and many others become easily accessible. The portal also provides direct contact to a payroll accountant, who is ready to answer any incoming questions – liberating the internal HR team from the tasks  involved, enabling them to take up more strategic roles.

Shifting the focus to core company capabilities

The rocket science of business growth lays in the elimination of administrative burden and shifting the focus to core company capabilities. A self-service portal for employees and HR teams offers more efficient automated processes with higher transparency, with access to payroll and HR documents in a secure environment, access to pre-agreed payroll calendars and customized real-time reports, alerts and notifications, easing the management and supervision of the whole company.

Enhancing privacy compliance measures

Data security is a topic with always increasing significance, as technological advancements require a competitive system to keep sensitive information safe from inappropriate exposure. Notably, data breach is quite common and mostly caused by an internal team. The self-service portal limits the access to confidential materials and ensures extra security by hosting them on the systems of the payroll vendor. The access management is a strictly transparent and documented process, enabling a regular review of all accesses and actions.

The outsourcing of payroll processes reinvents the functions of vendors and companies. The responsibilities of service providers reach beyond the accurate, compliant and efficient exercise of the agenda, as they are taking up the role of innovators and leaders of new strategic values. Businesses, on the other hand, are expected to make the wise decisions and liberate their management from operations than can be fully automated, with more security and precision – for a lower cost.

Ready to take your company to the next level, unlocking the potential of your payroll processing with outsourcing?

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