Payroll Outsourcing: Why A Regional Payroll Provider Is Better

Managing payroll in Singapore is relatively less complex as compared to other countries. However, it is not without its inherent challenges given Singapore’s strict and ever-changing financial regulations. While Singapore-based companies may find it difficult to keep track of the evolving regulatory and tax environment when computing payroll for employees, companies with operations across Asia Pacific are likely to have a more difficult time.

When an organisation has operations in multiple countries, it is often the internal HR team that struggles. Payroll regulations, particularly those in the emerging countries, often change quickly and without any proper communication. The lack of updated information may inadvertently cause HR administrators to calculate payroll incorrectly and result in issues of non-compliance.

Under such circumstances, it is advisable for companies operating in multiple countries to outsource their payroll processing to a professional payroll processer. While individual HR employees may keep themselves updated with ongoing regulatory changes, when HR employees leave the organisation, payroll regulatory knowledge of a particular market is effectively lost. Payroll outsourcing, on the other hand, will ensure continuity in payroll processing as the knowledge is dependent on the payroll vendor instead of the individual.

What is payroll outsourcing?

Based on the definition from recruiting firm, Recruiter.com, payroll outsourcing is the process of exporting some or all of your payroll administration to a specialist third-party vendor. The payroll outsourcing package that your organization chooses is typically integrated with the business’ existing infrastructure and HR processes, ensuring that appropriate payroll services are delivered during each pay cycle.

Why outsource payroll?

According to PwC’s The 2018 Payroll Operations Survey, nearly all of the organizations surveyed outsource some portion of their payroll functions. The key motivations identified include cost management, skilled staffing concerns, and minimizing of highly administrative and paper-driven tasks.

Yet, when it comes to managing payroll processing for global operations, the majority of organizations surveyed (52%) typically pay employees in one country by processing payroll from a single central location. A smaller proportion of organizations (16%) indicate that they currently operate on a regional payroll-processing model.

However, organizations are recognizing the need and advantages of having a single payroll vendor to handle all their payroll needs globally. Results from Ernst & Young’s 2017 Global Payroll Survey indicated that more than half of organizations surveyed believe that there is a single vendor who can handle all their payroll needs globally, of which 43% find it very important to achieve global payroll delivery through a single vendor.

With an increasing number of organizations looking to reap the benefits of what a global payroll provider can offer, the international payroll providers are gradually beginning to deliver. Here are some reasons why a regional payroll provider can bring about significant benefits when considering payroll outsourcing.

Cost savings

One major benefit of outsourcing payroll to a regional provider is the cost advantages that it brings about. For organizations that have operations in multiple countries, engaging a separate payroll vendor in each location means paying separate package fees for individual locations. Engaging a single payroll vendor to manage the organization’s regional payroll allows for bundling of packages, which helps to lower the overall vendor fees.

Consolidation of employee data

Mobility of employees is particularly common for countries with regional presence. This is where engagement of a regional payroll provider comes in handy. Most regional payroll providers have a centralized HRIS database to store and manage employees’ data across multiple entities. Should an employee move to another entity and needs to be on a different payroll, this facilitates easy retrieval of the employees’ data for payroll processing.

Standardized payroll processing

Engaging a regional payroll provider helps to streamline payroll processes and ensure that there is a standardized payroll processing workflow across the various operating locations. One major issue that organizations struggle with is varying payroll packages that each country location purchases with the payroll provider. This creates unnecessary complexities given that the payroll team has to deal with multiple deadlines or requests from different payroll providers across the region.

Similarly, regional payroll providers also represent a way for the organization to quickly acclimatize to the business landscape by removing the need to constantly familiarize with changing compliance regulations. This helps to minimize the chances of non-compliance.

Security protocols

Given the sensitivity of payroll data, payroll outsourcing can be a long process as the organization will need to review the vendor’s security protocols to ensure that they are comfortable with their security infrastructure. Outsourcing to a single payroll vendor minimizes the need to conduct multiple security reviews for each payroll vendor as the terms and agreements would have already been finalized previously.

With the complex tax and labour regulations across Asia Pacific, it might be advisable for organizations who are looking to outsource payroll to engage a payroll vendor that has compatible resources to run regional payroll processing.

Over the years, payroll management has taken on an expanded functionality, offering client organizations a wide array of services while ensuring efficient management of payroll. Concurrently, payroll vendors have invested heavily in maintaining compliance and securing confidentiality of clients’ payroll data. Today, firms specializing in payroll outsourcing invest in advanced cloud-based software that enable them to store payroll data securely while allowing them to generate reports according to requirements from tax agencies and banks across multiple countries.

While payroll outsourcing may incur an ongoing expense to the organization, it essentially reduces the overall costs and drives operational efficiency. At the same time, organizations that outsource their payroll functions benefit from access to a centralized HRIS. Payroll processes are also streamlined across multiple locations, minimizing any payroll discrepancies. This frees up more time and resources, which can be spent on critical business functions.

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