Payroll Insights
June 12, 2020

Outsourcing payroll: Supporting business continuity and reducing risk exposure

In an ever-changing business environment, payroll must keep up to speed. Organizations are facing a number of payroll-related challenges addressing legislative changes, fluctuations in demand, growth, and organizational expansion or restructuring. Outsourcing payroll to professionals can help organizations better navigate these complexities.    

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Today, the world of work is rapidly changing, and payroll must be able to keep up. As business environments evolve, and companies continue to scale, organizations must advance accuracy, efficiency, and visibility across all regions.

The COVID-19 pandemic has only underscored the importance of payroll’s critical function and the role it plays as the business climate evolves and organizations adapt to new realities. The payroll function has proven to be vital to business continuity – both to mitigate risk exposure and to support employee financial wellness.

Dated technology and payroll processes can disrupt business operations during periods of ongoing change. If organizations cannot effectively pay their people accurately, on time, and in adherence with various jurisdictional requirements, they put themselves at risk in a number of ways. Organizations can be subject to fines as a result of non-compliance in various regions, as well as class-action lawsuits filed on behalf of employees.

Without the right payroll solution, organizations are under intense pressure to limit risk exposure and support business continuity. Approximately 50% of organizations in Deloitte’s 2018 Payroll Operations survey outsourced local payroll processing and tax reporting to help mitigate the risks associated with global mobility payroll processing. That percentage is only increasing as more companies struggle to keep up with complex business environments. Outsourcing your payroll function to a trusted partner can help your organization stay on top of compliance while scaling back on in-house effort so you can refocus talent and resources to achieve business goals in a post-pandemic world.

Outsourcing payroll for business continuity today and in the future

Depending on the partner, outsourcing payroll services typically involves a team of professionals who act as administrators to process payroll, provide expertise, standardize processes, and administer benefits. An outsourced payroll team can handle employee requests, such as fielding questions about payments or providing assistance with benefits administration, while also helping organizations plan for and execute periodic activities, such as year-end filings.

Key considerations for outsourcing payroll

To understand whether an outsourced payroll solution is right for your organization, consider the following questions:

  • Does your organization have the right technology and expertise needed to help you respond to changing legislation across regions and jurisdictions?
  • Do you have plans for business expansion to new regions?
  • How much time does your team dedicate to researching, understanding, and applying applicable payroll tax laws for your organization?
  • What is the cost of payroll errors or inaccuracies to your organization?
  • Are you able to deliver pay to a dispersed workforce as employees work remotely?
  • Is your payroll team set up to conduct payroll activities from anywhere at any time as well as assess risks to continued payroll operations?
  • Are there succession plans in place to fill vacancies should your payroll staff become ill or leave the company?
  • Can the organization’s technical infrastructure protect against vulnerabilities and weaknesses when your in-house payroll team must work from home?

Organizations must determine whether they are prepared to address the complexities of changing legislation in multiple regions, deliver pay accurately and on time to remote employees, and fill talent gaps when people leave. If your organization is not well-positioned to address these challenges, outsourcing payroll may be a viable alternative to your status quo.

Benefits of outsourcing payroll

There are several key benefits to outsourcing payroll that can help organizations reduce risk and focus their time and effort on strategic, value-generating initiatives.

Mitigate risk and improve accuracy

In-house payroll teams must mitigate risk in the following areas:

  • Remaining compliant to reduce risk of costly penalties and fees
  • Keeping up with changing requirements from multiple sources including tax and employment laws, unions, and pandemic programs
  • Reducing the risk of inaccurate or late payments to employees
  • Avoiding inaccuracies in payroll tax filing and garnishment administration

For global organizations, risk exposure can be multiplied as legislation in various regions frequently changes. Preparedness to address these rapid changes is imperative for any organization, especially for those restructuring or expanding, as they will need to pay critical attention to the various tax obligations across new regions.

Unless an organization has fully trained, dedicated staff and leverages technology that can help to automate legislative changes, it can be difficult to stay on top of compliance. Payroll mistakes can be detrimental to the employer brand and can trigger fines wherever the company operates. Outsourcing payroll can help reduce risk by leveraging standardized processes across the organization. The right partner will help maintain best practices and quality assurance programs and follow published schedules with structured deadlines. These teams can also help maintain high levels of security, privacy, and compliance while reducing the risk of fraud.

Refocus resources on strategic initiatives

When a company is experiencing change or growth, the workload of the team can often expand and require additional headcount and resources. This is particularly true for organizations that are navigating the complexities of global payroll.

Having a highly trained payroll outsourcing team with in-depth payroll knowledge will reduce effort for in-house teams to administer payroll activities, as well as help address ongoing employee inquiries regarding payroll or benefits administration. Outsourcing payroll also provides the opportunity to redeploy or reskill internal payroll talent to support other areas of the business.

Scale your business more easily

As companies require new talent to take on increased payroll demands organizations will need to be prepared to scale their payroll function accordingly. Hiring for specialized roles such as a payroll professional can take a lot of time and resources. Often this need arises when the business is already consumed with a merger or acquisition, an organizational restructuring, or increased customer demand post-pandemic.

Outsourcing accommodates rapid growth or contraction, which can help you maintain your administrative processes and security controls throughout periods of change. In this way you don’t have to strain internal resources or continually right-size the payroll department to ensure these areas are covered.

Get complete visibility

Many organizations do not have complete visibility into their global payroll operations, but consider it critical to gain a better understanding of holistic operations. Outsourcing payroll can help centralize your people, processes, and data to get streamlined reporting across all operating regions. Organizations can get a holistic view of payroll using dashboard reporting rather than aggregating data from disparate systems across locations. This complete visibility is of particular value for organizations that are scaling or restructuring so they can have access to payroll data for all operating regions to make more informed decisions.

Rethinking critical business functions to address today’s world of work

Your ability to continuously pay people accurately, on time, and in adherence with legislation today and in the future will depend on your organization’s preparedness to take on various payroll challenges. If your company has yet to digitize payroll functions or outsource the function entirely, the business may face critical business continuity challenges as well as costly penalties and fines in the event of non-compliance.

While payroll is both a core part of the business and a vital part of growth, it can be complex, even for the most experienced in-house teams. Learn about how Dayforce’s Managed Payroll solution can help your organization focus more time and effort on the strategic initiatives of tomorrow.

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