Payroll outsourcing service is hiring a third party for the management of all the payroll-related activities including salary, tax, deductions, bonuses etc. Outsourcing the payroll activities to an external agency is beneficial for all types of organizations ranging from startups, mid-range, as well as large payroll. Nowadays organizations are increasingly outsourcing payroll activities considering that they get away with the stress of hiring, training, and managing a large in-house payroll team, buy expensive software packages for payroll functions, and constantly strive to remain abreast about the complex tax regulations and labor laws.

Activities covered under payroll service

Payroll outsourcing activities generally include all the payroll-activities of the employees and the related functions associated with the department. These activities include maintaining employee records, calculating their salaries, taxes, deductions, bonuses, generating payroll reports, uploading of tax-related documents, and distributing payroll in compliance with the government taxation laws. The list of activities may include the following activities mentioned below-

• Manage payroll reports
• Add new employees
• Delete employees
• Manage reporting and leaving time
• View and manage invoices
• Create communication channel between employees
• View payroll reports
• Create customized reports
• Access and update employee information
• Compensation reports
• Upload employee tax documents
• Maintain tax records
• Update employee handbooks and other HR documents
• Keep track of PTO (Paid Time Off)
• Maintain employee database & document records
• Maintain training records
• Employees can update information
• Employees can enroll for benefit plans

Predicted growth of payroll outsourcing market in India

The global payroll services market is growing at an exponential rate. As per the latest “Global Payroll Outsourcing Services Industry” report, the US & China Payroll Outsourcing Services market is estimated at $4.8 billion in the year 2020, growing at a CAGR of 6.4% between the period of 2020-2027. Other noteworthy geographies include Japan & Canada with forecasted growth of 1 % and 2% respectively during the same period. India is not far from following the global trend. In fact, in India, it is at the stage of disruption. The HR outsourcing industry is witnessing huge growth and hence India also holds great potential for the payroll outsourcing market. According to a report, the Indian payroll outsourcing market will grow by almost 50% in the next five years.

In today’s date organizations want to focus on their core operations and revenue growth hence they are looking for cheaper and technically advanced options to outsource their support functions. Amongst them, one is outsourcing payroll operations. It is effective, cost-effective, and hassle-free. Also, organizations get rid of dealing with the complexities of dealing with an in-house team and related processes.

Many new players are entering the Indian market offering customized top-notch services. This is bound to increase the competition resulting in improved quality of outsourced payroll activities.

When to outsource payroll

If you are consistently facing the following issues, then you should seriously consider outsourcing the payroll services for your organization-

• Crashing pay deadlines every month. It’s a dangerous and chaotic situation.
• Cannot develop a clear and concise strategy for your short-term and long-term goals.
• Struggling to organize your financial resources for maximum ROI.
• Finding it difficult to focus on your core business operations.

The following issues shouldn’t be ignored for the health and growth of your business. It’s better to take a step before these problems began to bite. Conduct a serious assessment of your business goals and finances before investing time, effort, and money towards outsourcing the payroll services to an external agency.

Why outsource payroll

Payroll is a time consuming and complex function. If significant attention is offered to it every month, there are chances that core functions of business may suffer. However, neglecting this important activity isn’t a viable option. The compliance error can lead to costly fines from legal authorities. Faulty and missed pay can create discontent in employees and creates burden on the organization. It creates huge mental pressure on the closely connected departments such as Human Resources, Finance etc. as they directly bear the brunt of employee dissatisfaction.

At global level, the outsourcing of payroll services has even greater significance. It is a smart way to adapt your business to the new environment by reducing the burden to familiarize yourself with the new compliance regulations as your company is striving to establish itself in the market.

On the other hand, automation of payroll services makes the process error-free, easy, and simple. Managing all the activities helps to pay salaries to employees at the scheduled time. Besides, it supports the businesses to run the payroll concept smoothly and capitalize on technology. The employees and employers can easily access all the processes on their mobile within a few clicks. Additionally, customized reports can be generated for all stakeholders.

What payroll functions can be outsourced?               

The outsourcing of payroll functions depends upon a company’s requirements, which may include the following-

• Managing payroll related activities such as salary, tax, deductions, and bonuses
• Filing of mandatory government reports
• Managing employee benefits
• Managing employee’s social security and pension contributions
• Smart and automated management of payroll activities
• Keep a track of employee issues
• Seamless, timely, and error-free distribution of salaries.

Enquiries before outsourcing payroll

Whenever you are considering outsourcing payroll services to an external agency, you should make the following enquiries.

• Enquire about the system security and confidentially clause for data management.
• Is the company having any history of data breach?
• Company reputation in the market and list of clients on board.
• Data loss backups in case of any theft or system crash
• How often they update tax policies
• Team of experts managing the complex outsourcing functions
• Customer service policy and response time to resolve urgent queries
• Payment policy
• Technical setup and software used by the organization

Infotax a leading online finance and tax consultancy company provides comprehensive Payroll outsourcing solutions to organizations to catering diverse industries.