Why do MNCs Outsource their Payroll?
Increased productivity, time management, lower costs, and flawless work processes are part of every company's vision. These are the major benefits offered by companies that outsource payroll. Payroll is a non-core administrative activity of a company, which is extremely time-consuming and expensive. If you have employees located in different regions of the world, the process is even more perplexing. Although it is a non-core activity, feeding your army with hassle-free payments on time is essential. Multinational companies have thousands of employees located worldwide and complex business administrations, which makes outsourcing payroll solutions all the more promising. Keeping track of changes in labour legislation of so many different countries is a mind-boggling task. Handling huge amounts of data worldwide is prone to errors, time-consuming, costly and can put your company at risk of non-compliance. Outsourcing payroll to lift the burden off your company and handing it over to a company whose core responsibility is to provide payroll services is a strategic move for small and large companies. Payroll outsourcing global market has shown uniform growth, and multinational companies have contributed maximum towards it. It is estimated that the global market for outsourcing payroll will reach $10336 Mn by 2023. A reputed newspaper claimed that 70 per cent of the Fortune 500 companies rely on outsourcing payroll. Several well-established companies outsource payroll solutions, such as Unilever, BP PLC, Target, L’Oréal, Walgreens, Unisys, Prudential Financial, etc. Unilever is the world’s largest goods company that has a global footprint. The company has partnered with an outsourcing firm that handles all its HR processes, including recruitment, payroll administration, reporting, performance management, etc. The company aims to create a positive work environment and drive productivity. Walgreens, the second-largest pharmacy store chain in the US, collaborated with a payroll service provider in India to outsource its accounting processes. This was a very strategic move taken by Walgreens to optimize costs and expand their business effectively. Goldman Sachs is an established leading global investment banking, securities, and investment management company headquartered in New York City. The company has approximately 6000 offshore employees located in Bangalore, India. These employees provide payroll services, IT support, and research for analyst reports to the company. There has to be a reason why these top-notch companies invest in outsourcing payroll processing.What are the Top 5 Reasons Multinational Companies use Outsourcing?
1. Complying with Laws and Regulations
Complying with various foreign governments' laws, regulations, and mandatory rules can be a challenging obstacle that every company needs to overcome. Apart from variations between countries, there can be regional and municipal variations in the laws and regulations within a country. For instance, in some countries, holiday bonuses must be paid whereas they may not pay in others. It is crucial for organizations to be updated with legislation and regulations that impact payroll.
Payroll service providers have experts that have deep knowledge about local, national and international laws. Companies can make the most of their in-depth knowledge about the laws and regulations of different countries. Therefore, avoiding the damage that non-compliance can trigger.
2. Lower Overhead Costs
Processing payroll in-house means investing in IT infrastructure, automation software, and training your staff. It is time-consuming and exorbitant. Errors in execution can add to your overall expenditure.
Outsourcing can help you secure a well-suited payroll partner which provides all the necessary payroll services and stays updated with tax laws and regulations.
3. Flourishing Productivity
Payroll processing services consisted of processing employee hours, collating data and generating reports, directly depositing funds, recruitment, tax withholding, and other aspects. Additionally, these processes are carried out weekly, every fortnightly, or monthly.
Payroll is a non-core responsibility of a company as it does not generate revenue. Delegating this major responsibility to a payroll service provider can redirect professionals from your company to focus on core responsibilities. This increases the productivity and efficiency of your in-house professionals.
4. Optimize Time
Generating reports, collating large amounts of data, compiling with tax laws and regulations, tax withholding, solving payroll discrepancies, and a team carries out many other responsibilities within your company. This process needs to be carried out weekly or monthly and is extremely time-consuming.
This process is even more tricky when you have employees all around the world. Hiring an outsourcing company can enable HR professionals to focus their attention on business functions and administrations.
5. High Security
Errors while processing payroll can spoil a company's reputation and cause an imbalance in the work environment. Such massive transactions must be done smoothly, timely, and without the fear of embezzlement.
A trusted and experienced payroll partner can provide high security, data privacy, good recovery plans, and data backups. They can also carry out the process error-free, which will impact the credibility of the employer.
How to Succeed in Outsourcing Payroll?
Once you have decided to outsource your payroll processes, it is crucial to still be involved with your payroll partner. The success of outsourcing depends on the relationship between your company and your payroll service provider. You need to be involved and updated with all the steps your payroll service provider is undertaking.What are the Major Reasons Outsourcing Fails?
● Miscommunication
● Not being proactive
● Errors and mistakes
● Selecting an incompetent vendor
● Errors while transmitting data
● Imprecise contracts
● Technological Incompetence
Below mentioned are some practices that help overcome these barriers and promises success rates of payroll outsourcing,1. Research and Filter
Empower yourself with knowledge about different vendors. Compare their services, experience, reviews, customer satisfaction, etc., and short-list a few vendors that best suit your purpose. Take to experts that help you weigh the pros and cons of outsourcing. A good vendor will spend more time understanding your business, vision, needs, and requirements.
2. Extend Yourself
Once you have short-listed the payroll service providers you are interested in. Get in touch with them and get a satisfactory quote. You can also compare quotes given by different vendors before choosing and selecting what is best for your company.
Ask questions and clarify all your doubts. A trusted payroll partner will satiate your curiosity and reaffirm your faith in them. Gathering all the insights before selecting your vendor increases your success rate.
3. Having a Single Point of Contact
Outsourcing payroll surely relieves you of many payroll responsibilities. However, you still need to have experts in your firm who have in-depth knowledge about payroll processes.
This person or department should be a single point of contact between the payroll service provider and your firm. Concerns and issues should be communicated between both the parties involved via this person.
4. Establish a Fair Division of Payroll Responsibilities
Payroll responsibilities must be divided clearly between the service provider and your in-house professional to ensure smooth functioning. All the necessary details should be mentioned in a contract for reference when the need arises.
Unambiguous contracts with a fair division of payroll responsibilities between your in-house expert and vendor minimise conflicts and ensure smooth functioning.
5. Open Communication and Accessibility
You cannot expect passing on all your payroll responsibilities to an outsourcing firm and expect magic to happen. Open communication is the key to a successful outsourcing venture. It requires both companies to work towards a common goal for long-term gains.
Conflicting ideas should be maturely resolved. Accessibility should be well established for faster communication to resolve issues, seek clarifications and approvals.
6. Effective Communication with in-house Professionals
Whether you have decided to outsource or co-outsource payroll solutions fully, you need to inform your in-house employees so that everyone is on a common page. This should be done to establish clarity about what work is done in the company and what is to be undertaken by the outsourcing payroll partner.
=If you decide to install a new payroll software, your in-house experts should impart proper training and knowledge.
To conclude, you are the client, and you are looking for the best payroll provider that will represent your company. Hence, leave no stone unturned before you approve and invest in your payroll partner.
Once you are sure about your decision, take proactive measures to keep in touch with your provider and stay updated with its functioning for long-term benefits. You should expect outstanding deliveries and measurable results when payroll functions are concerned.
