Payroll management is a complex, yet critical part of team management — especially for larger projects. Outsourcing this function may be beneficial since it can save precious time and increase labour productivity. Payroll outsourcing also offers other advantages: simplicity, security, efficiency and better cost control. But before deciding to outsource payroll, it's good to be aware of the potential risk of losing control over its internal data. Moreover, the company should do its due diligence in finding the right service provider. Here, we give a clear overview of the advantages and points to consider when deciding to outsource payroll.
What Is Payroll Outsourcing?
Simply put, payroll outsourcing means tasking your team’s payroll management to an external service provider. This practice allows the outsourcing company to concentrate on more strategic activities. Moreover, it offers significant advantages that we will highlight in the next sections.
Payroll Outsourcing: Advantages
The person in charge of payroll management must dedicate time to it. He or she must be confident with understanding country-specific legislation, non-taxable and partially taxable allowances, tax exemptions and so on. If the company has several international branches, this can become a cumbersome and time-consuming task.
Simplicity & Efficiency
In-house payroll management means having a payroll software system that must be maintained, updated and secure. It is also necessary to regularly train the staff using this software. Thanks to payroll outsourcing, HR departments can devote more time and resources to training and recruiting employees. It allows them to focus on their core business: building employee development plans.
By outsourcing payroll, the company avoids multiple conflicts and issues that can be detrimental to its operating activities. Think here of:
• Possible disputes with trade unions and employees
• Errors on payslips
• Administrative audits
• Late payments
Calculating and editing payslips is not the only activity that falls within the scope of the payroll department. The payroll department must also make regular employee declarations to the statutory authorities. These procedures are very tedious and can take a significant amount of time to ensure that the documents meet the necessary compliance requirements.
As we have seen, payroll management is not an easy task. It becomes more challenging when you operate in countries where payroll management is known for its complexity, such as France, Germany and Italy. This is one of the main reasons why businesses decide to outsource their payroll to experienced professionals. The company avoids errors and late payments. Moreover, legislative and regulatory monitoring are often costly and tedious procedures. Hence, outsourcing this function to a payroll outsourcing company can save you time and money.
Calculating the cost of processing a single payslip isn’t as simple as taking the payroll manager’s salary and dividing it by the total number of payslips processed. To calculate the actual cost, you need to take into account: the price of the chosen IT solution, back-up fees and training. According to a study conducted by PwC, “The hidden reality of payroll & HR administration costs”, companies that manage payroll and staff administration in-house have costs that are on average 18% higher than organisations that outsource them.
The cost of outsourcing payroll is based on the number of payslips to be issued. This gives a simple and clear overview of the actual cost. By outsourcing payroll, the so-called “payroll budget” is managed and fixed on an annual basis. The variable costs related to staff training, hardware upgrading and software licence renewal are eliminated.
Payroll Outsourcing: Points To Consider
Choosing The Right Payroll Outsourcing Company
The aforementioned advantages are only relevant if the chosen payroll provider is an experienced professional that meets your expectations. You need to make a thorough benchmark of potential payroll providers based on: pricing, software solution, service, references, digitisation, scalability, data security. Hence, choosing the right payroll provider takes time and needs to be thought carefully.
Loss Of Internal Control And Competencies
When deciding to outsource payroll, there is a potential risk of losing control of information, knowledge and other internal competencies. As a consequence, you become highly dependent on your payroll provider. In order to mitigate those risks, conduct your due diligence carefully and establish a detailed benchmark list as we’ve seen above. Ask yourself what tasks you want to retain and discuss how the payroll provider protects and handles sensitive data.
How Brunel Can Help
Brunel offers a comprehensive payroll outsourcing solution to the Oil & Gas, Mining, Life Sciences, Renewable Energy, Infrastructure and Automotive industries. Thanks to our experience with more than 100 branch offices in 44 countries, Brunel is able to handle day-to-day payroll operations for large companies and projects.
Want to learn more about payroll outsourcing or other workforce services? Reach out and start a conversation with us today.
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