Payroll evolves with the way the workforce is hired and managed. In today's globalized, boundless world businesses don’t limit themselves to local talent pools any more, and venture out to source overseas. The new workforce approach is further complicated by the type of workforce that is being hired – part-timers, full-timers, independent contractors. The list of ways international businesses hire abroad can go on forever. It’s only natural then that a new approach to payroll developed. There are now providers that you can outsource your payroll operations to. The new article by EasyStaff discusses benefits and downsides of outsourcing payroll and what solutions are out there on the market.
Payroll Outsourcing Services. The Top-Level Guide for International Business
Key concepts
The concept is made up of two important parts. One is payroll, and it encompasses much more than is seen to the eye. Payroll may seem like all it is about is sending money to workers, whereas it refers to much more than simply mailing checks. ‘Payroll' stands for a wide range of tasks, from collecting employee data and processing payments and direct deposits to tracking hours, calculating wages, issuing pay stubs, and handling wage garnishments. It also involves managing tax-related information, including health insurance and workers' compensation claims.
In turn, ‘outsourcing' is ‘hiring away' business operations when it is cheaper to delegate a set of tasks to an outside party. Outsourcing is what opened the door for international hiring as opposed to strictly domestic recruitment. Today, anything can be outsourced from occasional design works to massive and even somewhat intimate tasks such as payroll.
In sum, payroll outsourcing is when a business delegates payroll operations to a third party. Once unthinkable, the practice is growing commonplace. According to a report by Deloitte delivered in association with the American Payroll Association (APA) and Global Payroll Management Institute (GPMI), 74% of businesses surveyed across LatAm, North America, EMEA and APAC, are already using or in consideration of using cloud-based services for payroll management. So sensitive data is voluntarily shared with payroll providers to save time and resources for core business operations.
There are degrees to outsourcing, i.e. how much data and operations are moved into a provider’s ownership. So ‘co-sourcing' blends in-house payroll processing with outsourced elements. This hybrid approach allows companies to maintain control over sensitive areas while leveraging the cost benefits of outsourcing. Some companies co-source to retain hands-on involvement in specific tasks, while others utilize external expert services for specialized functions, keeping the rest of the process internal.
The concept is made up of two important parts. One is payroll, and it encompasses much more than is seen to the eye. Payroll may seem like all it is about is sending money to workers, whereas it refers to much more than simply mailing checks. ‘Payroll' stands for a wide range of tasks, from collecting employee data and processing payments and direct deposits to tracking hours, calculating wages, issuing pay stubs, and handling wage garnishments. It also involves managing tax-related information, including health insurance and workers' compensation claims.
In turn, ‘outsourcing' is ‘hiring away' business operations when it is cheaper to delegate a set of tasks to an outside party. Outsourcing is what opened the door for international hiring as opposed to strictly domestic recruitment. Today, anything can be outsourced from occasional design works to massive and even somewhat intimate tasks such as payroll.
In sum, payroll outsourcing is when a business delegates payroll operations to a third party. Once unthinkable, the practice is growing commonplace. According to a report by Deloitte delivered in association with the American Payroll Association (APA) and Global Payroll Management Institute (GPMI), 74% of businesses surveyed across LatAm, North America, EMEA and APAC, are already using or in consideration of using cloud-based services for payroll management. So sensitive data is voluntarily shared with payroll providers to save time and resources for core business operations.
There are degrees to outsourcing, i.e. how much data and operations are moved into a provider’s ownership. So ‘co-sourcing' blends in-house payroll processing with outsourced elements. This hybrid approach allows companies to maintain control over sensitive areas while leveraging the cost benefits of outsourcing. Some companies co-source to retain hands-on involvement in specific tasks, while others utilize external expert services for specialized functions, keeping the rest of the process internal.
What is Payroll Outsourcing?
12/09/2024
#ForBusiness
Payroll Outsourcing Services. The Top-Level Guide for International Businessl
What is Payroll Outsourcing?
Payroll Outsourcing Pros & Cons
Less control over sensitive data
Weaker command of processes
It saves money
Unavailable in-house expertise
Time saved for core tasks
Payroll outsourcing and international teams
Challenge 1. Freelance workforce on demand
Challenge 2. International full-time staff
Solution
Conclusion
To hard-core ‘all in-house' business owners and managers, outsourcing is atrocious. To tell the truth, there are good reasons to maintain the attitude towards outsourcing sensitive business information and processes.
Less control over sensitive data
First and foremost, when businesses let in outsider services to manage its data, it invites data leak risks. Cloud-based solutions, although reinforced with encryption and firewalls, remain lucrative targets for hacker attacks. When such highly personal data, like banking details, names, addresses, etc., is kept in-house, chances of losing data are incomparably lower.
Weaker command of processes
Another risk caused by outsourced payroll is less oversight. Outsourcing payroll relinquishes direct control over certain processes, although the client company retains responsibility for setting expectations and monitoring the provider’s performance. While a reliable provider is crucial, the client company remains ultimately accountable for employee compensation and tax remittance. Any errors, whether caused by the provider or left unaddressed, ultimately impact the client company’s time and financial resources, leaving them liable for the consequences.
If payroll outsourcing is all risks, then why do companies, even huge multinationals, still go in for the practice? The benefits payroll outsourcing provides are immeasurable.
It saves money
Outsourcing payroll often proves more cost-effective than managing it internally. This is a major incentive, especially when outsourcing to regions with lower labor costs, significantly reducing expenses for the client company. Even domestic outsourcing can yield savings, as it avoids paying high salaries for in-house payroll staff in expensive cities. Using a lower-cost location for these functions reduces overall payroll costs.
Unavailable in-house expertise
Outsourcing leverages specialized payroll providers skilled in efficient management. For most companies, in-house payroll is a secondary function, unlike for specialized payroll providers who possess extensive experience and effective systems. Their task-specific training and advanced software minimize errors, leading to greater accuracy and compliance. While quality varies, many find outsourced payroll more efficient than in-house management. Preventing costly tax or regulatory mistakes makes outsourcing particularly beneficial for larger companies with complex payroll needs.
Time saved for core tasks
Core business functions—revenue-generating activities—should be the primary focus. While payroll is unavoidable, dedicating internal resources to it detracts from revenue generation and overall efficiency. Only payroll providers themselves consider payroll management a core function. Outsourcing significantly reduces this administrative burden, streamlining operations and freeing internal resources for revenue-generating activities.
Less control over sensitive data
First and foremost, when businesses let in outsider services to manage its data, it invites data leak risks. Cloud-based solutions, although reinforced with encryption and firewalls, remain lucrative targets for hacker attacks. When such highly personal data, like banking details, names, addresses, etc., is kept in-house, chances of losing data are incomparably lower.
Weaker command of processes
Another risk caused by outsourced payroll is less oversight. Outsourcing payroll relinquishes direct control over certain processes, although the client company retains responsibility for setting expectations and monitoring the provider’s performance. While a reliable provider is crucial, the client company remains ultimately accountable for employee compensation and tax remittance. Any errors, whether caused by the provider or left unaddressed, ultimately impact the client company’s time and financial resources, leaving them liable for the consequences.
If payroll outsourcing is all risks, then why do companies, even huge multinationals, still go in for the practice? The benefits payroll outsourcing provides are immeasurable.
It saves money
Outsourcing payroll often proves more cost-effective than managing it internally. This is a major incentive, especially when outsourcing to regions with lower labor costs, significantly reducing expenses for the client company. Even domestic outsourcing can yield savings, as it avoids paying high salaries for in-house payroll staff in expensive cities. Using a lower-cost location for these functions reduces overall payroll costs.
Unavailable in-house expertise
Outsourcing leverages specialized payroll providers skilled in efficient management. For most companies, in-house payroll is a secondary function, unlike for specialized payroll providers who possess extensive experience and effective systems. Their task-specific training and advanced software minimize errors, leading to greater accuracy and compliance. While quality varies, many find outsourced payroll more efficient than in-house management. Preventing costly tax or regulatory mistakes makes outsourcing particularly beneficial for larger companies with complex payroll needs.
Time saved for core tasks
Core business functions—revenue-generating activities—should be the primary focus. While payroll is unavoidable, dedicating internal resources to it detracts from revenue generation and overall efficiency. Only payroll providers themselves consider payroll management a core function. Outsourcing significantly reduces this administrative burden, streamlining operations and freeing internal resources for revenue-generating activities.
Payroll Outsourcing Pros & Cons
Challenge 1. Freelance workforce on demand
Let’s apple payroll outsourcing to a very specific case. Consider the company XYZ. They are a fast-growing digital agency who do marketing for multiple international clients. One serious hurdle they meet in their way to a global reputation is that they find themselves lacking necessary talents when delivering for foreign markets. For example, localising a creative requires someone who is a native speaker of the local language.
Therefore, XYZ has recurring, but not constant, demand for specific skill sets. They cannot hire a foreigner on staff because they cannot provide the necessary 5/2 work load for that person. Yet whenever a need comes up, XYZ needs to have a person at hand to get to work immediately. What’s more, that professional is remote, working from their home country. So paying them is associated with relatively low sums but potential tax issues related to international payroll, albeit occasional.
Challenge 2. International full-time staff
On the other hand, think about the international sales agency ‘We Sell’. They are a B2B partner for many businesses that want to streamline their sales operations and grow revenue. ‘We Sell’ has long established an international remote team of 50+ people. Each worker needs to be paid monthly, and at some point the company realizes that internal effort directed at ensuring timely payroll is too much and can be restructured. ‘We Sell’ then combs through available solutions on the market to find a cloud-based platform to take over internal payroll processes.
XYZ is a generic case of SMB looking to grow its staff on demand legally, and ‘We Sell’ is a Mid-Market business that wants to save money on payroll operations in-house, yet remain a reliable employer for its staff. What is similar about these two instances?
Let’s apple payroll outsourcing to a very specific case. Consider the company XYZ. They are a fast-growing digital agency who do marketing for multiple international clients. One serious hurdle they meet in their way to a global reputation is that they find themselves lacking necessary talents when delivering for foreign markets. For example, localising a creative requires someone who is a native speaker of the local language.
Therefore, XYZ has recurring, but not constant, demand for specific skill sets. They cannot hire a foreigner on staff because they cannot provide the necessary 5/2 work load for that person. Yet whenever a need comes up, XYZ needs to have a person at hand to get to work immediately. What’s more, that professional is remote, working from their home country. So paying them is associated with relatively low sums but potential tax issues related to international payroll, albeit occasional.
Challenge 2. International full-time staff
On the other hand, think about the international sales agency ‘We Sell’. They are a B2B partner for many businesses that want to streamline their sales operations and grow revenue. ‘We Sell’ has long established an international remote team of 50+ people. Each worker needs to be paid monthly, and at some point the company realizes that internal effort directed at ensuring timely payroll is too much and can be restructured. ‘We Sell’ then combs through available solutions on the market to find a cloud-based platform to take over internal payroll processes.
XYZ is a generic case of SMB looking to grow its staff on demand legally, and ‘We Sell’ is a Mid-Market business that wants to save money on payroll operations in-house, yet remain a reliable employer for its staff. What is similar about these two instances?
- Compliance. The two businesses want to remain compliant regardless of where and how much they pay. Their operations must be in line with local and foreign tax regulations and labor laws.
- Serious win in a trade-off. Why share data with a service that may cost just as much as your internal operations? There has to be a serious saving, either finance- or resource–wise, to justify sharing sensitive data and spending time on transitioning from the old ways. In the case of payroll outsourcing, it is time. Handing tedious work over to a service specializing in payroll is supposed to free up money and work time that is normally invested in it.
- Employer reputation. To grow, both companies need high quality human capital. To retain human capital, they need to have a reputation of a reliable and helpful employer that underpins their HR brand. Besides benefits and growth opportunities, the most basic expectation of any employee and contractor must be met – timely payroll.
Payroll outsourcing and international teams
Solution
These goals are achieved through partnering up with a reliable payroll solution. Let’s see how it works with EasyStaff, the international contractor payment platform.
EasyStaff is a B2B partner for the employer. This is established in the contractor that the client and the service sign. It sends invoices to the client and provides complaint closing documents once invoices are paid. The client tops up their balance in EasyStaff through a bank card or a bank transfer or even with cryptocurrency.
EasyStaff is the employer for a remote employee or a client for a freelancer. It sends money directly to the worker or the freelancer, and they in turn can withdraw money in any convenient way in any currency, including crypto. They also receive closing documents for every payment, so their income can be registered officially with local tax authorities. They pay income tax on behalf of their employees. This has two implications:
Last but not least, EasyStaff is flexible when it comes to commissions. Any payroll provider has its share from how much is paid through its resources. EasyStaff is more than affordable for any type of business it turns to. The default commission is 10% off of the amount paid, but it can be as low as 4% when monthly turnover becomes € 50 thousand. The minimum payment can be as low as $ 10 which makes EasyStaff especially valuable for smaller projects and businesses.
These goals are achieved through partnering up with a reliable payroll solution. Let’s see how it works with EasyStaff, the international contractor payment platform.
EasyStaff is a B2B partner for the employer. This is established in the contractor that the client and the service sign. It sends invoices to the client and provides complaint closing documents once invoices are paid. The client tops up their balance in EasyStaff through a bank card or a bank transfer or even with cryptocurrency.
EasyStaff is the employer for a remote employee or a client for a freelancer. It sends money directly to the worker or the freelancer, and they in turn can withdraw money in any convenient way in any currency, including crypto. They also receive closing documents for every payment, so their income can be registered officially with local tax authorities. They pay income tax on behalf of their employees. This has two implications:
- EasyStaff protects its clients from worker misclassification risks, as the service is officially the employer or the client for full-time workers and contractors the client chooses to hire.
- EasyStaff has access to a wide network of world banks that facilitate payment to virtually anywhere in the world.
Last but not least, EasyStaff is flexible when it comes to commissions. Any payroll provider has its share from how much is paid through its resources. EasyStaff is more than affordable for any type of business it turns to. The default commission is 10% off of the amount paid, but it can be as low as 4% when monthly turnover becomes € 50 thousand. The minimum payment can be as low as $ 10 which makes EasyStaff especially valuable for smaller projects and businesses.
- Modern businesses hire internationally and utilize diverse workforce models (full-time, part-time, contractors), demanding more adapted payroll solutions.
- Payroll outsourcing involves transferring responsibilities for tasks ranging from data collection and payment processing to tax and compliance management.
- From full outsourcing to co-sourcing (a hybrid model), businesses can choose the level of involvement they prefer, balancing cost savings with control over sensitive data.
- Outsourcing reduces administrative burden and allows companies to focus on revenue-generating activities. Using professional payroll providers also enhances accuracy and compliance.
- EasyStaff is a reliable solution that matches SMB and Large Business requirements. With its dynamic commission rates and secure and compliant payroll operations, EasyStaff helps businesses grow by taking the weight of payroll off of their teams.
Conclusion
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