What are the elements of payroll for outsourcing?It is totally understandable that Outsourced payroll providers may be a really foreign concept to a lot of people and a lot of companies. They might want to know what it entails and what it basically stands for. We have provided a detailed itinerary of the different elements that the process encompasses. They are as follows:
1. Gross Salary of the employee –
Anyone who is familiar with the word ‘gross’ will probably find it easier to figure out what this stands for. It is basically the salary of the employees before any or all deductions (towards the different benefits provided by the company) are made. This is also commonly referred to as Cost to Company or CTC. It is calculated on a yearly basis.
2. Net Salary –
As most of you have already figure it out, net salary is the salary that the employees get in hand after all the deductions are made by the company. Investments towards benefits like Travel Allowance, Special Allowance, Leave Travel Allowance (LTA), Children Education Allowance, Housing Rent Allowance, Mobile and Telephone Allowance, ESI, PF, PT, etc. Are deducted from the gross salary before it turns into the net salary.
3. Ad-hoc pay –
These are basically the one-time payments that the company makes towards the employees, throughout the year. Some of the key components of this category are bonuses, leave encashment, festival advances, incentives, so on and so forth. Also, some companies provide wage-advance to their employees on a request basis. These are some of the payments that are categorized into Ad-hoc payments.
4. Benefits –
During the span of an individual’s employment in a particular company, there are certain benefits that he or she can enjoy, apart from the salary or the incentives they receive. Retirement plans, gratuity, family insurance and medical insurance are some of the long-term plans or coverage that is included in the benefits section. These benefits are generally settled when the employees resign.These are the four main elements of outsourced payroll services that you should be in the know of.
Reasons for new financial year changes in payroll servicesBusinesses or companies that have had the experience of dabbling in outsourced payroll services know that transitioning payroll services at year-end come with a lot of benefits that most people are unaware of. Here we have shed light on some of them so that small, medium and large-scale companies can make a well-informed decision:
1. Keep your mind at ease –
There are a lot of legal requirements and reports (of the company) that need to be handled and for a business to handle that on their own is just a waste of precious time that would otherwise help them be more productive. That is why, it is extremely beneficial for companies to switch to Outsourced payroll providers at the end of the financial year because then, the professionals are there to take care of those needs and the company can direct its resources to the more important issues.
2. Mid-year rolling over of the company data –
Perhaps one of the most intimidating and tedious work is to transfer and translate the current payroll data, in the middle of the year, to a third-party. It is an unnecessary hassle that can easily be avoided altogether. If a company transitions to outsourcing payroll services at the end of the year, then the payroll data automatically rolls over on 1st of January.
3. Makes sure your employees are content –
The sign of a stable and ever-growing company is satisfied employees and the way to keep your employees satisfied is by ensuring that they get their salaries right on time. By hiring a third-party for outsourcing payroll services, you can directly deposit the salaries into their accounts with the help of automated payroll processing service. This will ensure that the employees are happy with their work and you can start the New Year with motivated workers.
4. Free up your resources and direct them towards something more urgent –
A company’s work is to ensure that the employees have no reason to fret but that is not their primary objective. Their primary objective is to grow and increase turnovers. For that, a company will constantly require resources to be employed in different sectors and maybe even bring in additional staff members for achieving targets and fulfilling objectives. Outsourced payroll services will free-up these resources that you can in-turn employ elsewhere and get more out of the company.These are some of the key advantages that any company can enjoy if they choose to switch to outsourcing payroll services at the end of the year.
Challenges in payroll industry – What are the biggest challenges a company has to face when providing payroll services?Ideally, services like these are better left to the professionals (outsourced payroll) who have the means and the resources to get them done far more efficiently and economically. We have mentioned some of the most important challenges that a company has to face, when providing payroll services themselves. They are as follows:
1. Compliance with government laws –
Corporate governance is now given more importance than ever. An organization’s payroll system needs to be in compliance with laws of the country and all employee requirements. The providers of payroll services need to constantly monitor changes in the legislation and the laws, on different levels so as to not be in defiance. Non-compliance can and in all probability, will lead to a fine that is quite steep.
2. Really expensive –
People, who think hiring a third-party for payroll services is uneconomical, could not be farther from the truth. The amount of time, and resources that companies have to spend on providing payroll services internally far outweigh the costs that they have to bear when outsourcing payroll services. These Outsourced payroll providers are efficient and function optimally to ensure that the company doesn’t have to incur additional costs.
3. Accuracy –
The ultimate concern when it comes to payroll services is making sure that the data is absolutely accurate since there is a lot to process. The current information along with the past data needs to be taken into account. It can be quite overwhelming and can lead to a lot of errors. This is why, it is best to leave it up to the professionals to provide efficient and accurate payroll services.
4. Safety –
One of the biggest risks that you undertake when the company decides to handle its own payroll services is the loss or theft of sensitive, personal information of both the company and its employees. By outsourcing payroll services you reduce the chances of any such mishap by a considerable degree. The security of payroll date is of utmost importance and nobody understands that better than third-party payroll service providers.
5. Tax and Payslip calculations –
Tax laws and legislations are constantly evolving and changing. It is quite a task to keep up with the changes and modify the reports accordingly. Inaccurate calculations of payslips results in unwanted complications during the calculation of tax. This is a hassle that every company will want to avoid. That is why they opt for Outsourced payroll providers.
6. Pressure on finance team –
The finance team of a company exists to ensure that the costs of the company and the revenues generated are tallied and to take care of all financial needs with regards to the development and acquiring of future prospects. When the team is burdened with a task like payroll processing, it really brings down the overall efficiency of the company because the finance team is one of the most crucial regulatory wings of the company that should be used for their specified purpose only.
What questions should ask to Payroll service provider?If you decide that you are going to go with outsourced payroll providers in India and you have found yourself an appropriate payroll service provider, make sure you ask them and their team the following questions before you hire them:
1. What are the services included in their packages? –
More often than not, outsourcing payroll services comes with a lot of additional benefits as well. These third-party service providers have a number of different services that they provide, besides the standard tax accounting and payroll services. Make sure you know what you are paying for and what you are entitled to.
2. Check sample check stub –
Ask the company for a sample check stub before you hire them. This will allow you to figure out how they match up to the kind of services that you are expecting and will give you a fair idea of the way they process the entire thing. If they aren’t able to provide you with a sample stub, they aren’t the right option to go for.
3. Can they process various taxes? –
State and federal tax regulations can be taken care of but if you are under a different jurisdiction altogether, it is of paramount importance that you find out if the chosen payroll service providers in India can provide tax related services that pertain to the area that you are living in or based out of. Their services must be in compliance with those tax laws.
4. What is the time taken for making changes in payroll data? –
Mistakes can happen when processing a heap of information and that is alright. However, what you need to find out is how much time does the company take to troubleshoot and how flexible they are towards making the necessary changes.
5. Will you have designated specialist? –
It is easier to work with someone who is used to your ways and knows what needs to be done. That is why you need to ask your company if they will designate a member of their team, specifically towards your company’s matters. Otherwise, it gets really difficult to coordinate and work with a new person, each time.The above information is more or less everything you need to know about payroll outsourcing services and why they are so sought-after in recent times. No matter what the scale of your business is – by seeking the help of the best payroll service providers, you can increase your company’s efficiency by a great margin.