Did you know that a large percentage of organizations use payroll outsourcing?

study by Statista revealed that between 2015 to 2019, approximately 38% of businesses co-outsourced or fully outsourced functions to a third-party payroll?


When a business is growing, its primary objective is to invest in activities bringing revenue and adding to the organization's financial stability. However, hectic payroll operations restrict your availability to some extent. As a result, this divided attention hinders the core business activity, such as software development, manufacturing, etc. 

Payroll outsourcing can become a go-to option due to its cost-effective and accurate results. It saves your valuable time, reduces costs spent on payroll management, and imparts accuracy and security to the business. 

Let’s explore how payroll management in India can be the best investment for your enterprise. 

Benefits of Payroll Outsourcing

From a business perspective, payroll outsourcing may surface as a cost-intensive option, costing you’re a fixed amount of money every month. However, strategically, payroll services for a large company or small company offer substantial cost savings. It helps you improve the accuracy of payroll and eliminate every hassle associated with in-house management.


Further, HR operations are particularly overwhelming with the level of compliance and management required. When you use third-party payroll outsourcing, your business can mitigate these issues and improve the payroll handling of the company.

Here’s how:

1. Cost-Effectiveness

It is widely known that payroll services for large companies and small businesses save money. Outsourcing labor for any business activity is cost-effective, depending on the type of activity you are outsourcing. 

In payroll outsourcing specifically, the Cost of management, HR department costs, mistakes, and hiring new people are mitigated.


2. Time-Effectiveness


In most small and medium businesses, one team member is usually wearing many hats. If you have a digital marketing head, this person is handling every responsibility. Similarly, if you have an HR manager, then you have one person managing everything. 

This is to say that it is not uncommon for businesses to assign HR or payroll responsibilities to one such employee. Initially, it is manageable, but as your company grows, this employee is burdened, and the time-effectiveness of payroll is lost. 

Payroll outsourcing helps you dedicatedly assign this responsibility to a third party and receive timely payroll details.

3. Experienced Advice

Sometimes, in-house you may not get the same experienced advice as from a third-party payroll provider. The difference we are trying to map here is the difference in experience and skills. The people you hire and subject-matter experts working with the third-party provider have different skills and expertise. 

With payroll outsourcing, you can get better advice and instant support for payroll management.

4. Pandemic Support

If you look at it, then the pandemic has made your employees more vulnerable to procrastination. There’s no face-to-face communication, and it is practically not possible to track every employee during office hours.

As a result, the pandemic has crippled the way we used to work. This time calls upon the HR to user experience for people’s management. If your HR manager is always engrossed in payroll or you don’t have an HR, how will you manage this? You can spare your HR from hectic payroll and allow her or him to use knowledge in managing and helping people of the business.

5. Risk Mitigation

Payroll management in India helps eliminate risks of quality. Your payroll provider has a team of experts working on your calculations. They also have advanced tech to support automation. All these things reduce the risk of inaccurate estimates, non-compliance, and delay in tax payments.


How To Use Payroll Management in India?

Payroll activities are important in every organization, which is why we need to outsource payroll carefully. We have discussed some important factors to keep in mind to correctly use payroll management in India.

Set Clear Expectations

Before you set foot in this landscape, it is best to set clear expectations. 

      • What services do you need?
      • How much can you pay?
      • What type of support do you require?
      • What kind of experience do you need?

Knowing services, you need from a payroll provider eliminates the chances of ending up with a vendor that can’t offer optimum support. Hence, sit down with your HR manager and make a list of services that are “must-have” and “good to have”.

Research – A Lot

You can’t simply know everything about a vendor. There’s no such thing as knowing too much about any business.

The only thing you can do to work with the right third-party payroll provider is to research as much as you can. You need to ensure that their services and your business needs align in the correct way. If you are not able to fulfill some of your payroll objectives, what’s the point of paying for such a service? While this service may be right for another company, you need to find a payroll provider right for your company. 

Hence, research everything about the third-party payroll provider.

Reach Out

Once you have clarified your requirements and found some good payroll outsourcing providers, reach out to them. You need to make a few calls and get a quote from several payroll management companies in India. 

Ask many questions from every third-party provider and clarify your doubts. The provider that is able to support your curiosity and educate you properly may be your answer. 

You need to be able to trust and rely on this provider to hand over your payroll responsibilities. So, carefully evaluate payroll services for large and small companies in this stage.

Signs You Need To Outsource Payroll

One of the major responsibilities of a business leader is to identify risk markers and take appropriate actions. Payroll outsourcing also has some markers, and as a business owner, you need to look out for these signs to take immediate action. 

Check when should you use third-party payroll:

1. Overworked Employees

One of the classic signs is looking for overworked employees. You need to listen to the people of your company. If they are raising their voices for the amount of work they need to do or they avoid your calls after office, take this as a sign. When you keep pushing your people for more, they eventually end up losing their productivity streak and make mistakes. 

Another way of knowing whether your employees are overworked or not is to look for errors. If they are making more errors, then you need additional support for payroll activities.

2. Time-Consuming Mistakes

There are two things that we can discuss here:

    • First, the ability to deliver payroll on time
    • Second, making mistakes that are time-consuming

If your employees are overworked or they are not properly trained to do this task, they need time to complete a task (that should be completed in much fewer hours, otherwise). That’s also one of the cues that you should look for.

The second thing is your employees are making time-consuming mistakes. This means mistakes that are recurring and progressive or mistakes that may cost your money (due to non-compliance). If these issues are common, you need a better way to calculate payroll – you need payroll outsourcing.

3. Employee Uneasiness

Sometimes, everything seems to be running smoothly, there’s no productivity dip or mistakes, but your employees are telling you something. They are clearly raising their voices for overwork or overtime. It may not be enough to compensate them. Eliminate this burden and allow your employees to focus on core business activity. Use payroll outsourcing to help your employees and HR department.

4. Technology Gaps

In many small and medium businesses, the main issue is the technology gap. The manual processing is too much and there’s no self-service for employees. This issue can be easily mitigated with third-party payroll services. A payroll provider will offer you accurate and automated calculations along with an employee self-service portal.

Key Components of Payroll Outsourcing

Payroll outsourcing helps us streamline the security and compliance of the payroll department. Here are some key components of third-party payroll to keep in mind:

Net Salary

Net salary of your employees is the money they get after government deductions, including ESI, PF, PT, PPF, Housing Rent Allowance (HRA), Basic Pay, Transport Allowance, Food Allowance, Dearness Allowance (DA), Children Education Allowance, insurance, etc.

Other than this, there are many components in the salary that your employees can select for quarterly, half-yearly, or annual deductions.

Gross Salary

The gross salary of an employee is the pay they receive before deductions. This is often compared to the Cost to the Company or CTC of the employee. It includes tax, provident fund, conveyance, ESI.

It is necessary to remember that as an employer, you need to contribute some amount to the PF apart from what is deducted from the salary of an employee.

Ad-Hoc Pay

Ad-hoc pay is occasional things, such as incentives, annual bonus, advance, or festival advance, etc.

*When you are using payroll outsourcing, these three components should be aligned in every payment cycle. It will contribute to healthy payroll functioning.

Is Payroll Outsourcing The Best Investment For Your Company?

There’s no doubt in the fact that payroll outsourcing is an optimum solution for small, medium, and large businesses. This investment helps you streamline your activities, reduce the load on the in-house team, maintain accuracy and compliance.

Paysquare is a payroll outsourcing provider in India with decades of experience. This third-party payroll provider has a team of experts helping businesses reduce payroll burden. Our subject-matter experts ensure compliance and accuracy in your payroll calculations. If you wish to use similar payroll management in India, connect with our team. We would get in touch soon!

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