Larger companies have long relied on outsourcing for repetitive tasks like payroll. But, with the proliferation of cloud computing and SaaS, smaller businesses are jumping on the outsourcing bandwagon, too. HRinAsia recently reported that, in a survey of payroll leaders, 25% of the respondents said that they spend 50% of their time on day-to-day payroll tasks. That’s time that could be better spent on core competencies, especially now that HR is playing a much more strategic role in many companies. Here are a few other reasons that businesses are choosing to outsource their payroll functions:
The Asia-Pacific region is extremely diverse: multiple countries, each with their own laws, culture, and languages. A Towers Watson report on the state of HR in Asia stated that, “Labor costs, technology infrastructure, governance and legislation, decision-making processes, work practices, culture, and, of course, language, all differ markedly from country to country.”
That requires a tremendous amount of expertise that some organizations, especially smaller businesses, might not have. In fact, for many employers in the region, payroll processes are still paper-based. Third-party suppliers with multinational clients are well versed in the complexities of the region’s diversity, which gives them an edge when it comes to providing a universal payroll solution that’s viable across the entire region. That’s one reason why Asia’s fast-growing companies are turning to outsourcing for their payroll functions.
Fines for regulatory non-compliance add up fast. For example, the IRS (the agency responsible for collecting taxes in the United States) issued employers almost seven million penalties in 2013 – and those penalties added up to $4.5 billion. The complexity of doing business in the Asia-Pacific region raises the stakes even higher. Third party providers have a vested interest in staying up-to-date on compliance issues. Many of them, in fact, will pay fines that result from their mistakes.
Outsourcing payroll functions provides an additional layer of protection against things like embezzlement, fraud, and falsification of timesheets. Many providers have embedded alerts to notify their clients of things like rate abuse and phantom workers. In addition, since payroll records contain so much personal information, third-party providers typically harden their systems against identity theft and other forms of hacking.
With the resources of a third-party provider, employees are often able to resolve their own payroll issues and questions. In addition, reputable providers will have a backup plan and other resources for getting employees paid if something in the primary system fails – which is important in that accuracy in getting paid is a critical part of employee morale.
Another benefit of outsourcing payroll is the flexibility a third-party provider can deliver. Seasonal employees, varying hours, rapidly changing staffing needs, opening new locations, etc., can all be handled easily by experts who specialize in the intricacies of managing payroll.
As with any other type of outsourcing, there’s a cost associated with outsourcing payroll. But, between the highly repetitive nature of most tasks and the intricacy of others, many businesses are making the decision that outsourcing payroll is a business imperative.