Payroll outsourcing: How it works and how it can really benefit your business

These are tough times for many businesses. You need to get more done, with less. You need to work smarter. That’s why so many companies are turning to payroll outsourcing as a solution that ticks all these boxes, and more.

Running payroll in-house can be complex and time-consuming. A DIY approach and human error could also mean you’re running some big tax compliance risks, especially if you have a multi-faceted workforce consisting of employees, contractors, casuals and international remote workers.

That’s why so many businesses outsource their payroll. You not only benefit from additional specialist skills and knowledge as well as reduced costs and overheads, but your HR staff are freed up to:

  • Spend more time engaging with and supporting employees
  • Develop training and benefit programs to attract and retain top talent
  • Focus on strategic goals
  • Reduce the chances of manual errors
  • Make better decisions about the cost of labour – often your biggest expense


Payroll Outsourcing is a wise investment

In addition, payroll providers are generally able to do your payroll at a relatively low cost as they use the very latest software to automate many of the tasks involved.

More importantly, a good payroll outsourcing partner can keep you updated on many important, relevant issues; for example changing government legislation, proper documentation and record-keeping, worker classifications, compliance, health and safety training and obligations, contractor and freelancers entitlements, and more.

It’s great business insurance. Especially when you realise that a recent Forrester Consulting study found that large international companies investing in payroll outsourcing could save up to USD$1.8 million alone by avoiding penalties for regulatory non-compliance.


Choosing a payroll outsourcing provider

Once you’ve decided to outsource, then you need to select the right partner.

First, consider your needs. A small business with a few employees has very different requirements from a much larger company. In addition, some companies offer specific benefits and entitlements, superannuation and pension plans, while others don’t.

And if your business operates in more than one country, or employs people remotely cross-borders, you will require a payroll provider with comprehensive knowledge and services on an international scale.

Once a company outsources any part of its business functions it often entails becoming an employer of a hybrid workforce comprising employees and contractors. The two are quite separate beasts, especially in terms of payment/entitlement rules and regulations, employment classification and compliance.

This complexity is part of the reason why many businesses  – large and small – choose to outsource their payroll to a specialist service provider like CXC, which boasts in-country support and on-the-ground knowledge of employment laws and regulations in over 60 countries.

The specialised skills of a large international service provider like CXC also enables you to utilise payroll data and analyses to inform strategic decisions and better plan for the future. This could give you a real strategic edge since a recent global payroll survey found that 73% of companies surveyed did not have payroll data to do this.(2)


How Payroll Outsourcing Works

After selecting your provider you’ll need to liaise with them to determine the scope of services you require and then set up your account.

With all the relevant information in hand, the provider can now run payroll for your company, looking after details like compliance, payroll tax remittance, and reporting. Depending on the company, they may also disburse payroll funds from your account to make sure everyone is paid on time.


A Payroll Outsourcing Checklist

Payroll is a critical part of your business. To help ensure you choose the right provider here are just a few questions you may need to consider:

  • Have we contracted for the right level of service? Don’t pay for services you don’t need. Is there anything we can still handle in-house?
  • Are they automated?  Is your provider using software to automate the simple stuff? So you’re not paying high fees for basic jobs.
  • Are employees’ details checked regularly: Ask what processes they have for checking and updating employee information.
  • Is your business and employee data secure? What safeguards are in place?
  • What happens with off-cycle payroll? For example year-end bonuses etc. What is the process involved?
  • How are garnishments handled?
  • Can you manage benefits efficiently? For example, if employees want benefits like health insurance etc?
  • Can you track employees’ leave balances like sick time, vacation, and paid time off?
  • What type of reports are provided?
  • What other services do you have that could help me?
  • Is the software you use capable of automating payroll tax payments and filing?
  • How are payments to contractors handled?


There are many more, of course, but with a qualified provider on your side, payroll can be made simpler than ever; saving you time and money as well as helping to streamline your entire operation.

To learn more about how CXC can help you with payroll services and better ensure contractor compliance and overall workforce management, don’t hesitate to contact us today on.