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.
What is Outsourcing Payroll? How does payroll outsourcing work?
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.
Key considerations for Payroll Outsourcing
- 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.
Businesses Most Suitable for Outsourcing Payroll
A general trend of companies that tend to adopt this service are organisations that exhibit the following characteristics:
- Non-complex Pay Runs – Standard payroll calculations for companies mostly consisting of full-time monthly salaried staff or casual labour typically find outsourcing payroll to be immensely beneficial as costs tend to be lower than having a full time equivalent (“FTE”).
- Expanding Businesses – For businesses like technology start-ups or food & beverage chains where growth can be exponential, good Outsourcing Payroll services and providers can keep up with dynamic and fast changes in staff numbers.
- Multi-Jurisdiction – These companies benefit from outsourced payroll as they can redirect the resources of the HR team into other business generating activities when they spend lesser time ensuring that they are familiar with the different laws across several countries/states.
- Compliance Worries – Companies that operate in markets with complex labour laws and regulations such as Malaysia and China might have a lack of access to expert knowledge necessary for them to operate with a peace of mind. Outsourcing payroll to a reliable vendor can help lift the burden of worrying about fines or potential lawsuits resulting from a misunderstanding of the complicated payroll requirements.
Of course, this is not an exhaustive list and there are exceptions. As every business is unique, an excellent Payroll Outsourcing Service provider should have the ability to customise and advise you on the best solution to meet your needs.
What is a cloud based Software as a Service (“SaaS”) Human Resource Management System (“HRMS”)?
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.
Key considerations for adopting an all-in-one HRMS SaaS solution
- 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.
Businesses Most Suitable for an all-in-one HRMS SaaS Solution
There is no one size fits all workforce management solution when it comes to Payroll, however, we often see companies that exhibit the following characteristics benefiting most from the adoption of an all-in-one human resource management system SaaS solution.
- Start-ups – A HRMS SaaS model can provide a no-frills solution to process payroll for growing companies. An all-in-one HRMS SaaS solution can also offer efficiencies for busy companies, automating and connecting many of the key modules needed to administer payroll such as leave, claims, and benefits administration, as well as performance management. Modern HRMS SaaS solutions such as a human resource management software will also cater to the mobile nature of our world and offer a mobile app and the ability to access the system anywhere, anytime.
- Companies using Offline Administration Methods – A HRMS SaaS model can help alleviate administrative burden for HR teams running manual payroll processing, especially ensuring data accuracy and calculations as the system will do this automatically.
- Companies with Complex Legacy Systems – Usually companies seek a HRMS SaaS solution when they have a legacy system that is unable to retrieve real-time data efficiently. Modern HRMS SaaS models provide real-time reporting capabilities, ensuring that businesses can leave behind clunky legacy systems and streamline to a more efficient mode of payroll reporting.
- Businesses with Complex Payroll Processes – The adaptability of a HRMS SaaS software ensures that even the most complicated and complex pay runs can obtain a customised solution, should they select the appropriate vendor.
There is a wealth of options for processing payroll. The correct solution will boil down to what is most suitable for your business. Your companies’ size, growth strategies, compliance requirements, existing HR management systems, and operating model will all influence the path you choose. Whatever your choice, whether a human resource management system software or other payroll outsourcing provider, always ensure that your solutions are in line with your objectives.
BoardRoom – Regional All-in-One Payroll Outsourcing Services & HRMS SaaS Solution Provider
Our regional presence with offices in Singapore, Malaysia, Hong Kong, China and Australia and experience in dealing with various regional and international clients makes us one of the trusted Payroll Outsourcing partners in the APAC area. Contact our Payroll experts to see which payroll solution best suits your business.
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