Is Outsourcing Payroll or Cloud Based SaaS Payroll More Suitable for my Business?

Payroll is the machinery that keeps a company’s human capital running effectively. Studies indicate that a timely pay-check is a vital requirement for staff satisfaction. In addition, flawed payment systems can lead to employees questioning the financial stability of the organisation which induces low employee morale and in severe cases, can land the company in legal trouble.

Despite the important role that payroll plays in a company, many businesses are still unclear on what solutions are available and how to evaluate them in order to determine the best fit for their needs.

In this article we cover two popular solutions, Outsourcing Payroll and the implementation of an all-in-one human resources management system (HRMS) software as a service (SaaS) solution, and the key consideration factors for making the most appropriate selection for your company to administer Payroll.

Outsourcing Payroll involves hiring a specialist payroll company to handle some, or all, of your payroll functions. An outsourced payroll provider offers a wide range of services, that allow businesses to select an option that best suits their specific needs. A full list of the various services a Payroll Outsourcing provider should offer are detailed below:

• Running of monthly payroll
• Reconciling claims
• Calculating monthly deductions
• Statutory reporting
• Various mandatory tax filing such as Mandatory Provident Fund (“MPF”) and Occupational Retirement Schemes Ordinance (“ORSO”).
• Provide multi-country payroll support
• Ensuring compliance with different country or state regulations
• Troubleshooting and help support

Outsourcing these administrative business activities has proven to streamline operations and create efficiencies for businesses, enabling a shift in resource allocation to revenue generating activities.

However, the choice to outsource your payroll will depend very much on your organisational requirements and what you want from a HR management system.

• Time-saving – Payroll is one of the core HR functions, yet also is a resource-intensive administrative function. Outsourcing it frees more time for your internal teams administering payroll to focus on other activities. If you are currently experiencing resourcing issues, payroll outsourcing could be a more effective solution for your HR processes and talent management than hiring new staff.
• Enhanced Security – In a world rife with data security fears, reputable Outsourcing Payroll providers will offer multiple servers, backups, and other security systems and processes that protect employee personal data to grant employers peace of mind. In addition, they will have robust internal processes that adhere to best practice personal data protection rules.
• Guaranteed Regulatory Compliance – Between countries and even within states of a large country, various regulatory compliance changes can be challenging for in-house HR teams to keep up with, leaving room for compliance risks. By outsourcing your payroll to a reputable vendor, you need not worry about ever being non-compliant to changing local regulations.
• Visibility over costs – One of the major benefits of outsourcing is that your costs don’t fluctuate significantly. You have complete visibility over how much you will be spending each month, and any additional hires will come at a pre-determined rate, meaning hiring costs can be more easily planned.
• Possible Inaccuracies in Data – Outsourcing payroll requires transfer & hosting of data off-site, which can result in errors if the correct systems are not in place. No system or process (no matter how technologically advanced) is 100% perfect, meaning when mistakes occur during data transfer it can take extra time to rectify and correct. To mitigate it, we recommend engaging a credible Payroll Outsourcing provider with an experienced team, robust processes and a consistent track record.
• Limits of Data Access – If cases such as sudden terminations or placement of staff on gardening leave occur frequently, businesses should be aware that the ability to immediately process information could be delayed even with automatic Cloud Connection systems between the payroll vendor and their client.

These are just some of the things you need to consider when thinking about payroll outsourcing. Ultimately, you will need to find the solution which best aligns to your business needs and processes.

Another common method of processing payroll is with an all-in-one HRMS payroll SaaS solution which allows a company to retain control of processing payroll internally, with the efficiency of having all the core systems in one ecosystem.

Most frequently adopted by small businesses, the cloud based payroll software vendor will take responsibility for data backup and managing software upgrades, whilst the business manages its employee database and payroll processing. The pricing models vary, but mostly the software vendor licenses the customer through a subscription in a ‘pay as you go’ model.

Many businesses choose an all-in-one HRMS SaaS solution because of the convenience and flexibility that this HR software option provides, and there are many human resource management systems on the market that may be equipped to do specific things your business needs.

As with outsourcing your payroll, your decision to select a SaaS HRMS solution should take into consideration your payroll complexity, business objectives and processes.

• Adaptability to Existing Systems – For companies using their own proprietary software it can be challenging to find a human resources management systems solution that integrates with their current software. If keeping your internal system is important, it’s critical you find an HRMS SaaS solution that adopts an open API framework.
• Data Protection – Reputable HRMS SaaS vendors often have strong measures in place to ensure that their clients’ personal data remains private. In countries like Hong Kong where data protection laws are strict, HRMS SaaS providers will ensure that their requirements fit with local regulations such as the Personal Data Privacy Ordinance (“PDPO”) to avoid hefty fines. It’s important any vendor you’re evaluating can demonstrate robust systems, policies and processes to ensure your employee data remains protected.
• User-Friendly – Technology has advanced at such a rate that any reputable cloud based payroll HRMS SaaS solution will offer a seamless user experience and user interface. They will also cater to changing habits of employees such as needing to access the HRMS on the go or from a mobile app, essentially offering employee self service.
• Automation of Processes – If your main business goals are efficiency and costs, a HRMS SaaS solution will help to save time and resources as manual processes are now done automatically via the platform which can greatly reduce the propensity for human error, whilst also improving human capital management.
• Strong Vendor Reputation – New platforms are everywhere as businesses hop onto the trend of HRMS SaaS solutions. With so many new entrants, credibility must not be overlooked for other attractive factors such as cost of implementation. Less reputable vendors can lead to wasted labour hours and potentially cause downtime which might impact the bottom line, resulting in greater long-term costs.
• Ability to Act Swiftly on Disruptions to Network – Can the company’s in-house staff react to downtime in its payroll system swiftly enough before it escalates? A HRMS SaaS provider often has its own dedicated team for quick response to downtime that not every business has in place which can reduce time needed for correcting any issues.
• Internal HR team Well-versed in Compliance – As companies will be handling Payroll internally, they will need to have a strong HR department that are highly responsible and aware of labour regulations. Whether a company is willing to gamble with that risk is often a deciding factor when choosing between payroll outsourcing which can manage compliance or engaging in a HRMS SaaS solution.