More than half a decade back, only 8% of organizations were fully, and 9% were partially using HR and payroll outsourcing. However, in 2019, the number increased to 38% of organizations either fully or partially using HR payroll outsourcing services. In just a few years, we have experienced a huge shift towards HR and payroll services in India. The simple reason behind this revolution is the ease of executing HR functions and the feasibility of avoiding errors.  The pandemic has definitely improved these numbers because ever since 2019, companies have shifted to a home-based setup, wherein HR is more engrossed in managing people. Therefore, naturally, it seems best to outsource other HR and payroll activities.  In this post, we will explore how HR and payroll outsourcing offer optimum results when compared to in-house HR. 

Importance of HR Activities

HR and payroll are crucial for the success of the business. One of the critical aspects of every organization is its people. To ensure higher employee performance and complete employee satisfaction, smooth human resource management is unavoidable. Let’s first explore the importance of HR activities in a small, medium, or enterprise-level business.

Training and Development

HR managers significantly contribute to training and development tasks. These play a role in improving employee knowledge and employee-employer relationships. This overall ensures employee growth inside the company, leading to employee productivity and satisfaction.

Strategy Management

The human resource department of the business is responsible for developing a strategy for business goals and performance upliftment. They contribute to corporate and business decisions, employee assessment, future predictions, and process modifications for optimum results. An HR manages business productivity, resources, and efficiency according to business requirements and the external environment.

Conflict Management

As the HR of the business, this person is also responsible for conflict management. Whenever there are issues or communication gaps between different employees, two managers, or an employee and manager, the HR resolves conflict, encourages communication, and finds a solution to create a positive workplace.  They push employees and employers toward better engagement and communication, nurturing business partnerships and internal relationships.

Payroll Calculations

The HR manager also calculates payroll and dispatches it on time. They collect details throughout the month to collate and offer correct salaries to the employees at the end of the month. These complex calculations include payroll, deductions, bonuses, tax payments, etc.


HR professionals are invested in the company’s compliance. They need to maintain records, accurately calculate payroll, and handle tax compliance. Overall, they keep abreast with new rules and regulations to avoid penalties and fines on the business.

Impact of HR and Payroll Outsourcing On The Business

Human resource functions involve a series of activities, including various strategic and calculative responsibilities. When using HR and payroll outsourcing, businesses generally consider outsourcing the following calculative responsibilities:
  • Payroll and compliance
  • Recruitment
  • Employee onboarding
  • Labour law compliance
  • Employee training
There are many other strategic initiatives taken by HR involving talent development, employee management, performance support, work-from-home engagement, etc. Understand how these internal and HR payroll outsourcing functions impact an organization:
  • Your HR team can focus on your people and core strategic roles in place of repetitive and erroneous calculations. Every activity, from operational to administrative to transactional to strategic, is streamlined and aligned as per the needs of the business.
  • HR and payroll outsourcing improves the budget assigned to this department. Apart from the cost-effective solutions offered by the HR and payroll services in India, the department's entire budget is managed in a hassle-free manner. You make fewer mistakes and spend less time on calculations, which ultimately improves the HR and payroll budget.
  • You receive better operational efficiency with the best HR and payroll outsourcing company in India because HR functions are their core competencies. This offers efficiency in a challenging startup or small business environment.
  • An important factor of HR and payroll outsourcing is a clear understanding of payroll and HR compliance. While small and medium businesses struggle to make ends meet with these complex rules and laws, compliance is easier for India's HR and payroll services. As a result, collaboration makes understanding compliance simpler in the future.

How To Implement HR Outsourcing?

When you are finally implementing HR and payroll outsourcing in your business, some of the golden rules that you need to evaluate are:
  • Take time to choose your partner. There’s absolutely no rush. The more research you do, the better results you get.
  • You need to have a limited HR and payroll department in the office. Of course, you can call upon the expertise of the HR and payroll services in India, but you need to have some technical, legal, and organizational knowledge. For this, having even one HR can prove beneficial.
  • Focus on outsourcing every low-value producing activity in your SLA. Although payroll calculations and employee recruitments are crucial, these activities don’t really offer as much value as strategic peoples’ support. Hence, HR and payroll outsourcing companies can easily handle these non-strategic roles.
  • Further, you need to understand the distinction between strategic and non-strategic HR and payroll activities. This means that fundamental payroll is imperative but not strategic. An example of a strategic activity is a company’s performance.
  • Closely collaborate and track specific tasks and performance. For example, payroll accuracy and efficiency.

Benefits of HR and Payroll Outsourcing

Are you wondering about the benefits of HR payroll outsourcing? Here are some advantages of HR and payroll outsourcing that you need to understand before handing over these tasks to a payroll provider.


You will realize that your HR and payroll department is not really productive at the end of the day. This is an unprofitable unit of the business that doesn’t generate revenue by creating or managing services and products. This department doesn’t offer value to the core functions. However, this department is important for every department contributing to product and service development. As a result, we still need this department to be efficient and cost-effective. The only way to improve the efficiency of the HR and payroll department is to use HR and payroll services in India. Reduce the time and money spent on these activities to improve resource efficiency and productivity of HR and payroll.

Optimum Hiring

Optimum hiring is included in HR and payroll services in India in two ways. It involves hiring the right HR and payroll officers. With HR payroll outsourcing, you don’t need to do this hiring. The outsourcing provider has already hired experienced professionals to provide efficiency and expertise. This also involves recruitment. When you are choosing talent, there’s just so much to do. Find relevant resumes, shortlist them, and interview people. An HR and payroll outsourcing company can help you organize a major part of this lifecycle. They can find the best talent or help you with listings, which will reduce your burden.

Better Compliance

We have already discussed how compliance is a crucial function of the HR and payroll department. It is, in fact, imperative for the business as well to avoid penalties arising from healthcare, employee classification, taxes, and safety violations related to employees. HR and payroll outsourcing providers have experts who understand new and old rules and regulations, which makes avoiding fines and consequences hassle-free.

Advanced Tools

HR and payroll services offer you advanced payroll and HR tools. For a small business, especially, it may be difficult to use advanced tools due to various constraints. With HR payroll outsourcing, you get these tools along with an employee self-service portal to handle employee-related queries without any hassle.

Subject Matter Expertise

The best HR and payroll companies in India offer subject matter expertise. They have people and members who specialize in HR and payroll activities, which offers you expert advice in times of need as well as accuracy in payroll, HR, and compliance operations.

How Outsourcing Changes The HR?

HR and payroll outsourcing brings a series of changes to your HR and payroll department. Of course, we have already discussed the benefits and impact of these activities. But, there are some important changes that you may experience over time in the long term.
  • Improvement in employee satisfaction in some time. This is because of streamlined strategic and fundamental roles.
  • A system and order in every single activity in the HR department.
  • Ability to resolve employee issues and business problems quickly than before.
  • Simpler, more streamlined management processes that define the efficiency of the future payroll department.
  • Systematic storage of payroll and HR records for future use, and the ability to draw upon these insights for efficiency, productivity, and better performance.


Are you ready to use HR and payroll outsourcing? In this discussion, we have discovered the benefits, impact, challenges, and activities of HR payroll outsourcing. If you have noticed the pattern, then you may have realized that the biggest benefit of HR and payroll services in India is consistency. There’s consistency in payroll accuracy, HR management, productive outcomes, and every other activity. If you are looking forward to in-built this consistency in your organization, Paysquare is the best HR and payroll outsourcing company in India. The company has developed result-driven, data-nurtured, and productive processes over the decades. You can easily draw upon this experience to organize the payroll and HR operations of your business.  

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