Advantages of Payroll Outsourcing- Why is it so popular?

Payroll outsourcing is the process of engaging a third-party service provider to manage the payroll requirements of the employees of an organisation. 

Payroll Outsourcing Services is the most popular choice adopted by organisations across the world due to the following disadvantages in in-house payroll processing:

  • In small organisations which operate with limited manpower, the business owner or proprietor generally takes care of the payroll functions, which more often than not takes away the valuable time, which otherwise could have been spent to focus on business growth.
  • When companies do not have a proper in-house human resource (HR) department and an accounts department to take care of the payroll functions of its employees, even though payroll is a critical aspect of business which cannot be ignored.
  • For calculating payroll, organisations need to keep a track of their employees’ salary, medical insurance, contribution to the retirement fund, attendance and leave records including other reimbursements and income tax deductions at source. Payroll processing is typically a back-end job in an organisation, the work which does not contribute directly to the growth of business and profitability. The cost of recruiting a dedicated manpower resource for payroll management is not only an expensive and time-consuming affair, but also increases the fixed cost of operations. 
  • In absence of an in-house payroll management team, organisations do have a choice of recruiting a payroll expert to look after the payroll function. However, the cost of hiring an expert is very high which many organisations may not be willing to spend.
  • In some cases, the complexity of local laws and regulations on employment and withholding in a host country could be quite overwhelming for an organisation doing business in a foreign location.  

The advantages which an organisation gets by deciding to Outsource Payroll Services in India are as listed below: 

  • Savings: Third-party payroll outsourcing service providers have a basket of services to offer and charge only for the services they provide to their clients. Thus, the cost of engaging a service provider works out to be much cheaper than in-house recruitment of employees or hiring an expert for payroll processing and management. Moreover, due to the devalued exchange rate of the Indian currency in comparison to the USD, hiring a payroll service provider in India is much less expensive. 
  • Guidance from experts: Professional third-party service providers in India have experts who are well conversant with the federal laws and regulations in different countries. By taking help from such experts an organisation can ensure compliance with rules and regulations related to employment and withholding.
  • Use of software: In-house payroll management in an organisation is done manually as most organisations refrain from buying expensive software tools. The software licence also needs to be renewed periodically by paying a licence fee. Third-party payroll service providers use updated software for their clients for recording payroll-related data and calculating payroll for employees every month. Updated software helps to record all data without any errors and omissions, thereby saving on the need to pay penalties for wrong tax calculations. The process is extremely fast and efficient and the organisation through outsourcing can get the advantage without actually buying the software. 
  • Report generation: Since payroll service providers store their client’s confidential data on the cloud, retrieval of data to prepare real-time reports can be done extremely fast. 
  • 24*7 Service: Organisations engaging payroll service providers in India can take advantage of the time zone difference to get service round the clock.  

Any Indian Outsourcing Company of Payroll has the expertise to offer the following payroll services:

  • Manage payroll calculations and withholding tax very efficiently without any errors and mistakes.
  • Making payments to employees directly.
  • Deposit the withholding tax deducted from the employees to the statutory authorities on time, thereby saving on late payment surcharge and penalties besides legal complications. 
  • Prepare statutory reports for submission to the government authorities on time.
  • Promptly address issues raised by employees concerning their employee benefits, payroll calculations and records.
  • Administer social security and pensionary benefits of all employees working in their client’s organisations. 

Organisations can also engage outsourced payroll service providers to create a legal entity known as an Employer of Record (EOR) to take care of all employment-related tasks and compliances besides payroll when placing employees in foreign locations. The EOR can support an organisation to comply with all the legal and regulatory requirements including payroll management and administration of such employees in a foreign location. 

Before finalising the Best Payroll Outsourcing Company in India, an organisation should check the credentials of the service provider to understand the following:

  • The basic basket of services offered by the service provider and their ability to offer specialised services, if any.  
  • The systems and processes adopted by the service provider to manage and protect confidential payroll data of their client’s employees. 
  • The list of clients the payroll service provider is engaged with and if possible, take feedback about their services from some of their clients. 
  • The ability and expertise of the service provider to calculate withholding taxes of employees individually. 
  • The ability of the service provider to generate tax forms for each employee and help the organisation to file the taxes. 
  • Understand the charges payable to the third-party payroll service provider – whether they would be charging their clients on a per-employee basis or whether they can offer a comprehensive billing package irrespective of the number of employees they serve.
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