• Dhruv Parikh

Why Outsource Payroll Management?

Updated: Apr 30

For every function in a business, there is an option to manage it in-house or outsource to the right agency. Companies usually outsource functions which require technical expertise, infrastructure for operations, additional manpower or intensive operations. If the function is non-core, it can be outsourced. Some common examples are website development, accounting and auditing, IT hardware and software maintenance, legal advisory and recruitment. A very useful and less explored function which can be outsourced is Payroll Outsourcing Service.


While major firms like Aditya Birla Group, Schindler, Future Group and dozens of others have outsourced their Payroll Management to third parties, most large companies choose to manage it in-house. As businesses move towards a have a nimble workforce, we can expect a major move towards Outsourcing in the coming time. In this article, we explore the benefits of outsourcing Payroll Management to a suitable service provider.


Payroll Outsourcing

Let us first briefly understand what comprises Payroll Management. First of all, it includes the HRMS (HR management software) which stores the data and does all the calculations. Next, the Payroll Outsourcing Service provider manages the initial documentation while onboarding a new employee, full and final settlements of exiting employees, regular tracking of leaves/overtime/mis-punches, compliances including PF/ESIC/PT/LWF etc. and may include MIS/analytics as well.


The 6 benefits of outsourcing Payroll Management are:


Technology Implementation:


There are several dozens of payroll software available in the market. Each of them has different features, limitations, pricing and support. Most companies do not have the time or bandwidth to explore and compare these software. This is where the Payroll Outsourcing partner’s experience in the industry benefits the client organization. Getting the partner at the right time can help save substantial time and effort in choosing the right technology.


Infusion of Expertise:


Most junior HR executives and managers lack the knowledge of managing Payroll and Compliance. The Payroll Management partners have deep knowledge of their function. In addition to that, their experience in working with multiple clients helps each client get the same benefit. Best practices from multiple companies and industries are put together by the partner to help their clients.


Reliability:


Unlike HR functions in SMEs, where the operations are managed by a handful of executives or managers, the Payroll partner manages the operations through processes. This reduces the chances of errors and ensures smooth operations over a long period of time. It is also ensured that these processes are supervised by trained and experienced managers. They also know how to deal with contingencies and can provide strong support to your business.


Valuable Insights:


The Payroll partner can give you valuable insights about industry compensation standards, salary structuring, managing compliances etc. from their experience over the years working with multiple clients. They can analyze your data and provide feedback on areas of improvements. These mostly lead to a reduction in costs or risks.


Reduced Costs:


Outsourcing in many cases is cost-effective. Functions like HR are less often on the top priority of the organization. This leads to inefficient processes and wrong people being staffed for managing activities like Payroll and Compliance. A good Payroll partner can reduce costs of infrastructure (HRMS), overheads (IT and office space), supervision by the manager, and costs of mistakes. Sometimes, when the internal function doesn’t operate in a structured manner, the cost of outsourcing may be higher. But this is more often than not compensated by value addition.


Regular Updates:


Labour laws and income tax rules change quite frequently. Minimum wages, social security contributions, labour laws under the Factories act/Shops and Establishment act etc. are updated every year. For any owner or top management it is next to impossible to track these changes and evaluate the impact. A good partner acts as a consultant during such times, give the right advice and implement these changes in a cautious manner.


Companies that are thinking ahead will consider outsourcing some functions. With the help of a professional payroll service provider, the hassle and pain often associated with processing payroll is gone. One just provides the basic information, and the payroll partner takes care of the rest.


If even one of the above payroll benefits could improve profitability and efficiency in your organization, it may be time to consider outsourcing.

Tracking frequent changes in Payroll and Compliance can be time-consuming for growing organizations. At Tamãrõ HR we partner with firms to help them manage their HR functions in the right way. The team at Tamãrõ HR has experienced professionals to help you with all your HR needs from Consulting, Recruitment to HR Operations. To know more contact us - tamarohr@dcspl.com

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