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What is Payroll Outsourcing?

Concepts & Definitions Payroll

Payroll Outsourcing refers to a business contracting a third-party provider to handle the company’s payroll management.

While some small businesses take advantage of outsourcing their payroll’s convenience and security, this is often an ideal solution for multi-country organisations who can rely on their payroll provider’s regional and country-specific expertise to simplify payroll management.

What activities are included in payroll outsourcing?

Businesses who decide to outsource their payroll may choose to hand over some or all of their payroll management tasks, such as:

  • Calculating salaries and wages
  • Withholding taxes and lodging payments with local government agencies
  • Submitting bank and payment processing files
  • Printing and delivering cheques
  • Direct deposit to banks
  • Generating reports

Through all the activities, payroll providers are in charge of software maintenance, meeting stringent privacy regulations and local legislation compliance.

Payroll outsourcing models

  • Hybrid model – a blended deployment of onshore and offshore resources, depending on the business’s different parts.
  • Fully managed model – end-to-end payroll responsibilities are fully delegated to the payroll management support team.
  • Comprehensive services model – payroll provider also provides payroll management helpdesk support on top of end-to-end processing.

Why outsource payroll?

  • Reduced costs – no need to hire and train in-house payroll staff and maintain payroll software maintenance
  • Reduce risk through improve legislation compliance – payroll provider is responsible for monitoring and cost-effectively complying with any payroll legislation.
  • Increased employee engagement – employees care about their pay and outsourcing payroll to ensure everyone gets their pay correctly, reducing risk to disengagement and turnover. Furthermore, shifting the time-consuming, complex payroll tasks to experts can help the internal HR team to focus on strategy, training, and work/life balance.
  • Simplification of processes and vendors – Moving to an outsourced payroll model can help organisations review, optimise and standardise their processes. For multi-country organisations, outsourcing payroll for all countries they operate into one payroll provider can simplify the landscape by dealing with fewer contracts, vendors, and languages.
  • Improved business continuity – payroll providers have their business continuity plans to ensure that they meet service level agreements for their customers in case of a crisis. This gives companies the peace of mind as it means that employees will still get paid no matter what happens.

 “By outsourcing the payroll function, managers can allow their team to grow and focus on other, more complex tasks that might be critical to the core of the business and stay in control.”

Learn more about payroll outsourcing and other payroll technologies in our free ebook, The Ultimate Payroll Solution Buyer’s Guide for APAC.