Use Payroll Outsourcing to Bring Down Costs & Regain Business Momentum

Like what you’re reading?

Share it on your social feed:

Apart from being a major public health concern, the novel coronavirus pandemic has turned out to be an unmitigated economic disaster. The UN estimates that the global economy will shrink by 3.2% in 2020 with major economies like the US, China, UK, Japan and Germany expected to register negative growth. The UAE, too, will feel the brunt of Covid-19 with the economy expected to contract 3.6% this year according to the central bank.

Given this situation, businesses will need to curtail costs to ensure their survival in a pandemic scenario. Already, many businesses have begun cost-cutting measures including making difficult decisions like enforcing pay cuts and letting people go. However, the easing of lockdown restrictions in the UAE in recent weeks has come as a huge relief for companies which can now start thinking about resuming operations and reviving their earnings.

Cutting Business Costs

Nevertheless, businesses must tread carefully given the fact that Covid-19 cases are very much on the rise and a definite cure or vaccine is still elusive. Having had to bear the brunt of the lockdown, the future doesn’t augur well either with the threat of a second wave of the epidemic and another spate of lockdowns still being well within the realm of possibility. It is in this context that businesses will need to operate frugally in a bid to conserve their resources for future emergencies.

While there are many ways that businesses can curtail costs, one of the most effective strategies involves outsourcing. There is virtually no function or sphere that cannot be outsourced in today’s globalised world—from marketing to R&D. However, there are certain functions that lend themselves better to outsourcing, such as:

  • Administrative tasks (including scheduling, travel arrangements, data entry, typing etc.)
  • Lead generation and customer support
  • Finance and accounting
  • IT services
  • HR services

Payroll Outsourcing: An Excellent Cost-Cutting Solution

Payroll outsourcing is a subset of HR outsourcing dealing with the farming out of all payroll-related processes including salary calculation, statutory compliance, accounting, payouts, reporting etc. It is a cumbersome and highly specialised activity requiring precision and accuracy due to the demands of statutory compliance. As a result, companies are compelled to hire highly skilled employees that have no real contribution to the core business or the profit centre, making payroll a prime candidate for outsourcing.

Payroll outsourcing is an effective cost-cutting solution that companies may resort to in a recessionary environment due to multiple gains associated with it. Here we will discuss some of the benefits to see how it can help businesses in the current scenario.

  • Cost savings

Payroll outsourcing can lead to significant cost savings if used strategically. The economies associated with a strong process governance framework and increased process standardisation linked to working with a specialised service provider ensures lower costs compared to running an in-house operation. Importantly, reduced costs associated with outsourcing payroll operations do not mean compromising on quality standards. Indeed, it is likely that your service provider will be able to deliver better results than the in-house team given the tools, expertise and resources at their disposal.

  • Expertise & reliability

A specialised vendor focussed exclusively on payroll outsourcing will be able to offer superior quality services and expertise emanating from the experience of their employees and access to better systems and processes including the latest software. It can help you save costs by curbing errors, but also by ensuring proper regulatory compliance thus reducing the likelihood of fines and penalties, which can be a heavy drain on resources especially at a vulnerable time like the present.

  • Refocusing attention on the core business

Being an essential non-core activity, payroll processing consumes a great deal of resources without contributing to the growth of the business. Outsourcing allows businesses to shift the responsibility of payroll to an external vendor, freeing up employees that can contribute directly to the main profit centre. In other words, it enables the optimisation of resources by allowing you to divert more resources to the core business activity. You can refocus your energies on the really crucial aspects of the business-enhancing the scope for growth in a difficult economic environment.

Choosing a Vendor

A successful payroll outsourcing initiative begins with the selection of a suitable vendor that has the capacity to fulfil your needs. A good way to begin shortlisting likely vendors involves asking your peers and colleagues for recommendations. Be sure to pose the right questions to the service provider during the pitching process. Click on this link for some useful hacks on selecting the right outsourcing partner.

Fee Structure

Since payroll outsourcing service providers work with multiple clients, they are in a position to offer attractive rates arising from more effective systems and processes, and economies of scale. Payroll vendors generally follow a fee structure which includes a basic package with extra charges for add-on facilities. The basic pay package is calculated taking into account your company’s payroll process, the number of employees, jurisdiction, the complexity of the process, and so on. Add-on amenities may include sophisticated services like pre-paid cards, salary garnishings and so on.

The cost of outsourcing is also affected by the frequency of payouts, with higher frequency resulting in higher billing. So, an effective way to bring down costs arising from payroll outsourcing is to reduce the frequency of payouts if possible.

Looking for a reliable payroll outsourcing partner? We can help. Visit to get in touch.

Speak to our team today

Ready to take the next step? Discover how we can help you with staffing and recruitment solutions tailored to your business needs.

Company inquiries only.