Top 5 things that make outsourcing Payroll Function a wise decision


As a business owner or employer, have you been spending hours worrying about payroll processing and payroll management

Routine operational tasks like sorting and screening profiles, conducting assessment tests, background checks, compensation packages, statutory compliance and taxes in pay, different pay models, etc. take up a lot of management time and effort. 

Time you would rather spend in formulating business strategy and building competitive edge. 

business strategy

Let’s analyse the pros of outsourcing the payroll function.

What is Payroll Outsourcing?

It is transferring the routine operational matters, regarding payroll management, to external experts who specialize in these areas.  Outsourcing the payroll function ensures that the statutory compliance and basic procedural matters are taken care of.

According to smallbusinesstrends:

‘There are the obvious legal requirements, such as tax reporting and remittance. There are requirements around withholding taxes from the employee’s pay, and also calculating the employer’s portion of taxes.  In some cases there are electronic filing requirements. You need to also know when to file — at the federal, state and local levels.’

This clearly brings about the importance of payroll outsourcing.

Why Outsource the Payroll Function?

  1. Routine hiring tasks like advertising vacancies, getting applications, sorting candidate profiles, and conducting interviews and tests are time-consuming. Once you outsource the payroll function, your agency takes care of these tasks.
  2. The payroll agency you engage takes care of hiring, compensation packages, maintaining attendance records, legal and statutory obligations, tax deductions etc.
  3. Outsourcing payroll can also help cutting costs and limiting risks. Today, businesses with a minimum number of employees can outsource payroll at minimal cost.
  4. To ensure that you are up-to-date with the current technology and can access employee records anytime. states that “…without the proper knowledge of payroll procedure and access to a sound payroll program, it’s easy to make mistakes. Employees as well as federal, state, and local tax collection agencies need to be paid in full, on time, and in the proper manner. Usually, late payments are the cause for monetary penalties.”

Therefore, it’s costly for business owners to err in tax and pay package calculations. You stand to lose financially, besides the loss of reputation. 

Some FAQs About Payroll Outsourcing

-> What Are the Major Headaches of Workforce Management?

Payroll management is one of the key operational aspects of a business. Computing payroll involves multiple activities including monthly payroll processing, compliance management – PF/ P.TAX./ ESIS/ Taxation returns filing, other activities like Full & Final settlement, Investment proof checking and auditing, Form 16 generation, Default notice management received from the Income-tax department etc. 

According to a survey conducted by Deloitte, North American companies “noted time and attendance systems as the primary component of their workforce management strategy. Labor scheduling was a distant second followed by budgeting, forecasting and productivity systems.”

Further,year-end processing, defining withholding responsibilities, and reporting income locally were the greatest challenges or risks facing organizations with a mobile global workforce.

workforce management

-> What Percentage of Companies Outsource Payroll Globally?

The Deloitte Survey observes that 60% of respondents had a Payroll Shared Service Center with 91% having one located in North America. 33% of respondents manage responsibility for global payroll processing regionally while 27% manage by country.

50% of respondents outsourced tax reporting to help mitigate the risks associated with global mobility payroll processing.

These statistics show that outsourcing the payroll function is definitely a wise decision.

-> As a Medium or Small Business Owner, Do I Need to Outsource Payroll?

Large organizations, with number of employees running into thousands, would obviously benefit from having a part of their workforce on external payroll.

The cost differential between companies that outsourced payroll versus those using in-house payroll was 9% for mid-size organizations (100-1,000 employees) rising to an impressive 27% for larger organizations (1,000+ employees). 

Do I need to outsource payroll

However, even organizations with 50 employees or less can benefit from outsourcing payroll. Given the amount of time and effort required in internal payroll maintenance, it’s obviously more sensible to hire an expert agency.

Deloitte reports that regardless of an organization’s payroll operating model, nearly all organizations outsource some portion of their payroll operations to help reduce cost, manage risk, exposure, skilled staffing concerns, and highly administrative/paper-driven tasks.

By outsourcing payroll processing services, Indian companies can streamline their entire payroll processing process and ensure accurate and error free payroll. They also get access to advanced reports and powerful Management Information Systems, which helps them in important decision making. 

-> How to Ensure Confidentiality and Reliability?

The selection of a reliable payroll outsourcing agency is of utmost importance, as sensitive information regarding employee profile, pay grade, benefits, insurance and tax deductions are handled by the agency. Further, as a business owner you must have data related to employee joining/pay/ benefits/pay deductions/leave information at your fingertips when you need to make important decisions. 

Looking Forward

It can be safely stated that outsourcing the payroll function to a reliable, technologically superior external agency like PaySquare makes utmost business sense, and effective time management.  Being the partner of choice for 800+ clients globally, PaySquare with its team of expert professionals will be the right fit for your organisation.