Payroll processing can be a big headache. There are too many things to take care of. You could end up misclassifying employees or deducting the wrong amount of taxes. There could also be data entry errors. When it comes to payroll, small mistakes can prove to be costly for the company. Even minor errors have the potential to lead to major fallouts and attract stiff penalties.
Companies wishing to unburden themselves of the stress of payroll management have an excellent option in the form of payroll outsourcing companies which can ensure quality, cost-effective services provided by experts in the field. They perform all jobs related to payroll processing while allowing for a high degree of customisation to enable their clients to make the best use of their services.
Understanding Payroll Outsourcing
Payroll outsourcing is the farming out of that part of your business which deals with the payment of salaries to employees. The service provider performs all jobs such as calculating wages and salaries, maintaining employee records, computing allowances and bonuses, and generating relevant reports, to relieve the customer of the burden of payroll.
A key part of payroll outsourcing involves ensuring compliance with the relevant tax regulations. The different services offered by payroll outsourcing service providers is listed below. Clients may opt for all or a combination of services as per their needs.
- Calculating salaries, wages and bonuses.
- Distributing salaries to employees.
- Calculating payroll taxes.
- Making tax withholding payments.
- Filing compliance reports.
- Administering employee benefits.
- Calculating and making social security contributions.
Can Your Company Benefit from Payroll Outsourcing?
Outsourcing has become one of the most effective ways for companies to cut operational costs. Firms are outsourcing everything from finance and marketing to HR in a bid to economise without compromising on quality. In such a situation, payroll has become a popular candidate for outsourcing owing to the transactional (as opposed to strategic) nature of the job coupled with the need for a high degree of expertise and accuracy.
Payroll outsourcing brings four main advantages for your company in the form of time savings, cost-savings, and minimisation of errors. Being specialists in the job, service providers also bring a great deal of expertise with them that allows you to reap the benefits of advanced payroll solutions.
- Cost Benefits
Payroll management typically involves compliance issues. This means companies must hire skilled professionals with a good understanding of payroll which comes at a steep cost. It also requires the licensing of suitable payroll management systems. Finally, there are overheads in terms of office space, laptops, electricity, stationery etc. which add to operating costs.
A payroll management company provides all these services in lieu of a fee. The arrangement often works out cheaper than running your own payroll system. Do the math to find out if you, too, can benefit from payroll outsourcing.
- Time Savings
Apart from cost benefits, payroll management also requires the diversion of human resources to a non-profit generating activity. Most businesses would stand to gain if the same resources were employed in their core business area. Hiring a payroll outsourcing company can boost business growth by re-focusing your attention on the main profit centre.
- Minimisation of Errors
Although there is no concept of income tax in the UAE, employees are supposed to get benefits like health insurance. Emirati nationals are also required to enrol for pension and social security. Failing to properly classify your employees and make relevant deductions based on those classifications could land you in trouble with the authorities.
An in-house payroll team must have the necessary skills and capabilities to ensure that the compliance process is carried out flawlessly. This may require the company to recruit high-grade talent which comes with accompanying salary costs. On the other hand, outsourcing payroll processing and management to a professional service provider cuts risk of errors as the work is handled by a team of specialists who are highly competent in their field of work.
Owing to the specialised nature of the business, payroll outsourcing companies bring a lot of expertise to the job. Customers can access this talent and expertise at reasonable costs owing to economies of scale. Moreover, in-house payroll professionals seldom have the time to keep abreast of the latest rules and regulations. But outsourcing companies have separate silos for salary calculation, benefits, electronic onboarding etc. bringing efficiency to the process.
Payroll management is a complex job involving extensive communication and coordination between the client and the service provider. Data security is of critical importance under these circumstances. A good payroll outsourcing company will always have robust data security measures in place to prevent the leakage of confidential information. They will also have adequate safeguards against offenses such as embezzlement, identity theft, and fraud to provide a seamless experience for their customers.
Choosing a Payroll Outsourcing Partner
As payroll management is a sensitive operation, it is important for companies to exercise maximum care and watchfulness in selecting their outsourcing partner. Prior to choosing a partner, it is important to find out about their data security policies, measures to prevent fraud and misdemeanours, and so on. Below are some questions to ask companies that are pitching for your business. It is not an exhaustive list, but should give you a good idea of the line of questioning to follow.
- What services do you offer?
- How do you secure your business data?
- What measures do you employ to prevent embezzlement and payroll fraud?
- How many clients do you have? What is the average duration they stay with you?
- How do you calculate tax and benefits?
- How do you ensure you meet compliance requirements?
- How do you generate payroll reports?
- What is your pricing structure?
Many providers also offer specialised services segregated by company size or industry. Read the payroll agreement carefully for an insight into the responsibilities of both parties. Once you have selected your partner, you will need to transfer the relevant data to the service provider. Managed payroll solutions can provide important benefits to companies by removing distractions and bringing back the focus on business growth.
Looking for a reliable payroll outsourcing provider? We can help. Visit innovationuae.com to know more about our managed payroll solutions.