Outsourcing Payroll Processing: Yes or No? What’s the best option?

Salary processing outsourcing can be your greatest ally. Salary processing is unavoidable. Any company has to do this, every month in a short period of time, which cannot be anticipated or postponed. Here are the advantages of subcontracting.

Being a process that, having to exist, has little added value when executed internally, the best option is to outsource the processing of wages to specialized companies. It is an excellent option as it brings together services, Human Resources management software and process automation.

HR outsourcing companies can perform tasks more effectively and efficiently and with fewer errors than performed internally, freeing their resources from these boring tasks with no added value for their business, giving them time for decision-making and management of operations.

Immaculate payroll processing makes employees – a company's most precious resource – happy, increasing their satisfaction and reducing the likelihood of leaving the company.

By the end of reading this article you will know:

• What is the outsourcing of Human Resources services;
• In what situations should companies resort to outsourcing, namely for salary processing;
• The advantages and benefits of subcontracting payroll processing;
• What needs does this subcontracting respond to?
• How much time can you save by outsourcing payroll processing tasks

Outsourcing or subcontracting HR services is the use of external services to manage all or some of a company's human resources tasks. Generally, companies resort to outsourcing to manage functions not related to the business.

HR outsourcing is one of these functions and has gained significant space in the business fabric in recent decades. This way of adding value to the business eliminates internal cost centers by transforming them into an external service, at reduced costs, which allows companies to free up human resources to perform tasks related to operations, such as providing products and services to customers or make decisions about which employees to hire or let go.

If you think about your own business, who better than your company to produce or provide services in your sector? Nobody, right? Why? Because your company knows the market, it is aware of new trends, new legislation and the most recent specific innovations. And also because it wants to serve its customers better.

Well, HR management outsourcing service providers, in particular salary processing, are experts in these matters, dedicating time and resources to developing the best solutions to provide and keep customers satisfied.

Historically, organizations only subcontracted services with little added value, but they quickly began to contract more agile and flexible services, in short, which allow them to manage resources more effectively and efficiently. Today, outsourcing has already conquered its space, and it is common to outsource some or all HR management processes:

• Salary processing;
• Management of employee benefits;
• Talent acquisition.

The applications available on the market have evolved a lot and are now more ambitious, integrating more functions, processes and technology at the service of talent management.

In short, HR services outsourcing companies, including payroll processing, are moving from being just another supplier to becoming true business partners.

Read also: Salary Processing Outsourcing – Uniksystem

Companies should consider outsourcing processes with less strategic relevance to the business and at the same time with less risk in the following situations:

• When time spent on HR tasks is disproportionately high compared to other business needs;
• When you already have court cases or anticipate having them as a result of failures in wage processing;
• When you don't have the budget to hire new employees or pay and cover the benefits of internal HR employees;
• When HR tasks are dispersed among employees in different departments;
• Lack of HR employees in companies to provide a balanced response to hiring and employee management needs.

But it is not just to “put out fires” that you should resort to this type of process outsourcing. Subcontracting should also be considered when companies are not yet big enough to have an internal HR team.

Payroll processing is probably the most outsourced service within HR functions.

Salary processing is time-consuming, entails responsibility and requires great attention to detail. Specialized companies can execute them better than anyone else. After all, the investment in the development of solutions, automation of salary processing and employment contracts or integration with social security amounts to millions of euros.

By outsourcing payroll processing you will save money because the annual HR outsourcing bill is less than the average salary of an in-house HR employee. If you need additional services, the savings compared to what you would pay with another system will be even greater. In addition to the service being more economical, you will avoid paying taxes on wages and benefits administration costs.

Another notable advantage is the possibility of reducing benefit premiums for its employees without harming them. HR outsourcing companies usually have trusting relationships with benefit providers (insurers, banks), so your company can take advantage of this stronger bargaining power: more benefits with less investment.

Finally, you're saving time, as someone else is handling payroll, freeing up internal employees who previously handled those tasks to perform their core activities, increasing your company's productivity and efficiency.

Furthermore, calculating the deductions and withholdings for each employee is complex and errors must be avoided. It is necessary to calculate benefit premiums, salary deductions related to garnishments and taxes. Mistakes in these calculations can lead to problems with courts and finance. That's why many companies choose to outsource payroll processing to professionals: To avoid problems and keep employees happy.

Let us then look at a summary of advantages of outsourcing payroll processing:

• Save money;

• Reduce benefit premiums;

• Save time;

• Transform fixed costs into variable costs;

• Have access to new technologies, processes and specialized people through payroll outsourcing partners;

• Automate processes;

• Mitigate errors, fines and fines associated with non-compliance or non-compliance

• Ensure compliance with labor, tax obligations

• Assess the compliance of legal and accounting processes;

• Reinforce employee confidence and satisfaction;

• Ensure data security and confidentiality, in accordance with the General Data Protection Regulation and other legislation;

• Sharing business risks with external partners (contracting quality and performance levels);

To respond to other current challenges, salary processing solutions can also be accessed anywhere and at any time, also resorting to the participation of employees who, autonomously, can enter their own expenses, justifications for absences, among other documents.

Finally, with the outsourcing of wage processing to specialist companies, you are placing these tasks in the hands of companies specialized in wage processing, which accumulate knowledge and experience, also benefiting from economies of scale.

Even if you can only benefit from one of these advantages, it means that outsourcing payroll processing can be a solution for your company.

Get to know: Employee Portal – Uniksystem

Practically all companies, national or multinational, from all sectors of activity, from technology to hotels, including financial institutions, can take advantage of outsourcing payroll processing.

• The national business fabric typically seeks salary processing solutions that allow employees to contact the company at a distance through solutions such as the Employee Portal.
• When they are multinationals, they can look for payroll processing outsourcing solutions because they don't have human resources departments in Portugal.
• Accounting firms also outsource payroll processing to provide services to their clients.
• Like many other technological solutions, with the pandemic, the demand for payroll outsourcing services has increased and will continue to evolve.

The salary is the value that the employee receives in exchange for the work performed. In addition to the base salary, the salary is made up of several components that together add up to a different amount each month.

By outsourcing salary processing, you can rest assured in these and other processes:

• Collection, registration of inputs and launch of monthly variables (attendance, overtime, etc.);
• Release of monthly variables: overtime, attendance, etc.;
• Layoff management;
• Retroactive calculation and Account Closing;
• Registration of expenses and allowances;
• Processing validation;
• Release of changes/corrections and respective validation;
• Issuance of salary receipts and remuneration maps;
• Issuance of Monthly Remuneration Statements (DMR) and for Social Security;
• Issuance and validation of files for Caixa Geral de Aposentação (CGA) and personnel expenses (SIGO);
• Issuing and sending bank files, meal subsidy and insurance files to the Tax Authority (AT);
• Closing of the month;
• Sending files to the competent external entities, within the defined legal deadlines (Social Security,
• TA, Unions, Funds, Lien);
• Provide informative maps and defined indicators;
• Issuance of IRS declarations;