Predicting the Future of Payroll Outsourcing

Over the years, organisations have moved to an outsourced payroll system to ensure compliance and reduce costs in the long term. In the HR industry, payroll outsourcing is a fast-growing segment. Now that the department has several tasks to perform such as talent acquisition, onboarding and relieving candidates, it prefers to outsource mechanical and repetitive tasks to companies that are qualified to do just that.

Coming to the present.

After the Covid-19 pandemic, businesses have suffered tremendous losses due to their traditional outsourcing system. The pandemic impacted economies across the world and business have now understood that core business operations need to be managed better.

Now that companies have started working again, can one expect them to adopt risk mitigation, build resilient frameworks and outsource crucial tasks to professional payroll service agencies to prepare better for such unforeseen events? What is the future of payroll outsourcing? Let us find out.

Benefits of outsourcing payroll services

Before anything else, let us have a look at a few advantages of payroll outsourcing:

1. Enhanced data confidentiality

Even though companies might believe that their in-house security system is secure enough, it is difficult to constantly keep up with malware, viruses and other threats involved. Payroll companies regularly upgrade their systems and maintain utmost safety when it comes to data.

2. Technology and compliance with regulations

As payroll companies constantly upgrade their security systems, they integrate the latest tools and technologies for payroll management. Unless companies have an in-house payroll team at hand, it would be hard to maintain the same effort.

3. Reduced costs

As mentioned, companies will not require an exclusive payroll department if the work is outsourced – that is less expensive than hiring a full-time team.

4. Better employee experience

Outsourcing payroll responsibilities frees up the human resources department for challenging tasks such as account statements, pay slips and tax deductions.

Effect of the Covid-19 pandemic on the payroll industry

It has almost been a year since the pandemic confined all of us to our homes, shattered the global economy, and businesses are still struggling with the after-effects. Companies are continuing to lay off and hire new employees as per their business demands, and there are still thousands of employees who are not receiving their full salaries. As of now, payroll systems have gone for a complete toss.

The pandemic has exposed severe limitations in the HR payroll system, forcing them to upgrade themselves to handle business functions better. Companies have found that there was no analytic or forward-thinking visibility in the traditional payroll system. However, the department now has insight into how they can improve productivity, efficiency and well-being among the workforce, and how they could combat such situations.

The future of payroll outsourcing should be every company’s priority as much of the workforce is still working from home, and systems must know how to run even with low manpower and generate smooth operations.

Future of payroll during the Covid-19 lockdown

The Covid-19 pandemic has affected every industry, which caused significant workforce and revenue loss. Due to the current work-from-home situation, outsourced payroll trends are the norm which was not possible for the HR department initially. Most HR employees were used to working from workstation and data centres, and could not manage the same remotely.

How has outsourced payroll supported organisations in the pandemic?

These are a few ways in which companies have utilized outsourced payroll:

1. Enhanced security

The pandemic has given rise to data malware and theft attacks, as the in-house system has little accessibility to remote servers that could cause a breach of data. Payroll service agencies have secure servers, which reduces the chances of hacking.

2. Contingency planning is important

The pandemic has tested every industry in every way possible, so companies will want to revamp the pricing structures and performance obligations as previously decided upon with the service agencies. They want assurance as to whether outsourcing would retain its efficiency in case of another high-impact situation in large-scale projects.

The demand for outsourced services as part of digital transformation will only increase, where steps would be taken to increase their resilience. Now that remote working will remain for a major part of the century, the organisation must adopt tight data security and information requirements within their outsourcing systems. They must plan a detailed chart as to how remote outsourcing will work, and how can companies manage their performance from a distance.

3. Customisation

Constant regulation changes are happening in the law when it comes to a company’s payroll sectors, which can be hard to keep track of. Service agencies keep themselves updated with the news, so the chances of mishaps are relatively less.

There should be multiple backup systems that can be quickly deployed in case of a second pandemic-like situation while ensuring continuity. Remote workforce remains a priority in this case and can be helpful in BPO arrangements.

Even though multiple locations are helpful in case of disaster recovery, it does not protect against a global lockdown. Therefore, companies must have mechanisms that promote working remotely and stress-tested regularly.

4. Tax compliance

The local, state and central governments changed the tax rates for corporates so that they can manage the financial loss. Deadlines were postponed, and companies had to find a way to smoothly run their businesses.

Governance mechanisms usually result in successful outsourced arrangements, as they depend on physical gatherings, shared working or the constant presence of the representatives. Organisations must find a way where they can remotely continue to interact with the members, which has been stress-tested for a similar situation in the future.

5. Quick and accurate payroll management

As payroll management can be time-consuming, there are manual errors at risk. Service agencies saved energy, money and time as they dedicated themselves to maintain a regular payroll system even during the pandemic.

What could be the issues in outsourced payroll?

As we talk about the positive sides of the future of payroll outsourcing, there are challenges to be resolved as well. The workforce now works from their homes, thus, managing teams and incorporating modern technology could sometimes be a challenge.
Rules change regularly, which is difficult to cope up with as organisations now operate from several locations at the same time. Several companies have shut down as they are unable to respond to and monitor legislations.

For now, outsourced payroll is the best way forward.

Since the pandemic, companies have realized that they must revamp their payroll systems to subsist in the current business world. Apart from saving time and money, they will save logistical issues due to compliance with government regulations.

Organisations must constantly upgrade themselves with the rest of the world, especially when it comes to the payroll system. If you are looking for an agency that understands the payroll system well, reach out to us at OLX People.