Salary day is the single most important day in any given month for an employee, a time when they can go and splurge the money on conveniences and feel free. Employees look forward to their salaries with bated breath every month, and employers want to fix this. The solution: outsourcing the payroll to a third party.
A Payroll is the list of all employees in the company maintained for the purpose of crediting their salaries, which includes any compensation or benefits due to them, including insurance. It could also refer to the total amount that the company must pay its employees. Payroll management is one of the most crucial responsibilities of an organisation. Payroll is often confused with salary. Salary is the amount that is paid to each employee for the work that they have done, and payroll is the system that manages this salary credit and the tax deductions at the source, also considering the compliance requirements too.
Using an external organization to handle payroll administration and compliance is referred to as third party payroll. This is more effective for organizations who want to devote more time to strategizing and planning their HR activities. This way recruitment teams get more time to create better job posts and for social media listening and analytics, for instance. This can prove to be a game-changer for organizations, moving them into the league of big players.
Let us now look at some of the benefits of third-party payroll. It starts with simple cost cutting and moves to better business development and ends with better customer service for your employees.
A third-party payroll services allows organisations to cut back on resources and the infrastructure necessary to enable the administrative and compliance functions of payroll. Since the employees are not hired on the company payroll, they need not be paid as much as their regular employees. They also need not be providing vehicle allowance and other benefits, which leads to additional costs for the company.
The process of payroll management is a long and tedious one, especially if it is done manually and if the person or people managing it need to be updated with changes to legislation. When you outsource to a third party, it saves so much time for the organisation as they will be familiar with ways to automate the repetitions and find ways to streamline the process itself.
When the payroll is outsourced to a third party, and the costs are reduced, the business can devote more resources for business development, which has a direct impact on the company’s ROI.
Technology may not be easily accessible to everyone, because of the prohibitive costs of setting up and monitoring it. When you outsource payroll to a third party, then the onus of using the most up-to-date technology falls on them, which they can fulfil too.
The HR team has more time to get creative with job descriptions, read them again for clarity and even plan the entire recruitment process better.
Third party payroll will know how to handle payroll administration and compliance without deviating from established laws. Income tax slabs and other compliance laws are change by the government from time to time. If the third party is aware of these laws, as most are then it allows the company to navigate the legal landscape with ease and prevents lawsuits.
Third party payroll service providers have great expertise in the field as they have been managing payroll services for so many years. They can also decide which parts of the payroll must be automated as they have a better idea of this. In this way, they can manage payroll administration and compliance a lot better than an in-house team.
Third party payroll service providers take great care of employee data. They secure it with industry-grade encryption. This ensures that there is no theft or loss of data at any time.
Third party payroll providers have a lot of industry experience, and they understand that the payroll handling varies from industry to industry as some may provide certain allowances while others may not.
Handing over your payroll administration and compliance to a third party ensures that the customer service experience is great. This also means that you need not spend time trying to resolve queries that your employees may have. It will be handled by a third party.
A third-party payroll service provider may also undertake a few HR activities also, such as recruitment and staffing, thereby reducing the pressure on the organization to manage all these.
1. A third-party payroll agency is well paid to look after the payroll of the company availing the service. And there are several key responsibilities that it takes on. A third-party payroll agency manages all aspects of attendance, tax deduction, report generation and other activities associated with payroll. Let us look at these in more detail.
2. Integrate timesheets into payable salaries and account for tax: The timesheets are aggregated for each employee and the salaries payable are calculated based on that. The total tax liability is also accounted for.
3. Generate reports on how the payroll is being managed: The third-party payroll agency also generates reports, using special software, on attendance, leave balance, upcoming holidays, and salary paid to each employee etc. This can then be presented to stakeholders to garner valuable insights.
4. Manage tax deducted at source, tax filings, and deductions: Manage how much total tax is deducted at the source, decide when the tax filings must be made, and calculate other deductions.
5. Manage any payment discrepancies: Understand why there are payment discrepancies and manage missed payments, overtime due etc. as per the HR rules of the company and the guidelines from the government.
6. Manage any wage alterations or ad hoc requirements: Does the organisation need any changes made to the wages? Is the organization implementing a new pay structure?
Third party payroll is highly beneficial for your company for all the reasons mentioned in this article. But whether it is good or bad comes down to your need. If you do not need a third-party payroll, it might not be necessary. Bit third party payroll is a game-changer for bigger companies, boosting their ROI, employee satisfaction and their brand reputation.
Third party payroll services can be hired by any company that is worried about employee engagement and satisfaction levels. Teams that are short-staffed or which do not have resources adept at managing payroll can also outsource payroll to a third party.
A timely salary credit can make a world of difference to your employee satisfaction. Your employees will spread the word and your organisation will find glowing reviews online, and offline by word of mouth. To achieve this with ease and accuracy, you need a third-party payroll service provider. Talk to Alp Consulting. We have not only been managing payroll but every aspect of HR since 1996 and are champions of this realm.
To begin with, congratulations, you have a chance to get a job! If you get such a call, then you must consider the pros and cons of such an undertaking. If you are a fresher and looking for experience, this may be the perfect offer for you. If you are a manager, analyse whether you are okay with the pay that has been promised and if the brand name of the larger organization would compensate adequately for the slightly lower pay.
Companies have realised the benefits of third-party payroll service providers. These payroll service providers help reduce the costs and provide access to technology that will not only help automate certain tasks but streamline the entire payroll process, making it easy to administer.
Employers who can’t manage their businesses, need more time to focus on their teams and interactions within and between them and those who are currently unable to pay their employees on time due to delay in payroll processing are some of the businesses that must opt for a third-party payroll service provider.
The following industries are most suited for a third-party payroll service: IT Companies (both software and hardware), BFSI companies, non-IT companies (pharma, retail, and construction) and the BPO sector (voice and non-voice customer care).
The oldest recorded salary is from the neolithic period of 10000 – 6000 B.C. In Mesopotamia, there is a record of rations given to workers as early as 2500 B.C. and by 5th Century, the Greeks had a system of maintaining their business books. But it was not until 1799, with the introduction of income tax in the U.K., that the modern system of payroll came into being.