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Exela Global HR

The payroll outsourcing market, as it stands today, is estimated to be valued at around 20 billion dollars. There are many providers in the market, and inversely, about 10 million businesses in the United States find themselves using third-party payroll outsourcing services every month. So, after all, why do so many businesses feel the need to partner up with payroll outsourcing companies?


Many businesses, irrespective of geography, face the same problems when it comes to payroll. Let us have a closer look at what some of these problems are.

  • Meeting Deadlines: This is one of the biggest problems for most businesses. Handling payroll in-house is a resource-intensive and demanding task because it requires highly organized and accurate data management. This data management further requires the timely cooperation of multiple team leads and managers across different office locations. This makes it harder for companies to process payroll on time.
  • Location-based Direct Deposits: If your company has offices in multiple states or countries, performing direct deposits each week or each month can quickly become a very cumbersome and expensive effort. Moreover, in case of reversals or breakdowns, it becomes even more challenging to solve each case separately.
  • Staying in Compliance: If your business is based out of a single location, staying in compliance is more or less a minor headache. However, if your business is operating out of several different states or countries across the seven continents, it is almost impossible to keep track of local laws and their modifications that might occur periodically in the future.

So based on these problems and many others that our clients have experienced over the last few decades, we have come up with a robust checklist for you to refer to whenever you decide to consider partnering up with a payroll outsourcing company.

  • Reporting and Information Security: Reporting and information security go hand-in-hand. In fact, this is the number one factor you must consider while weighing the pros and cons of outsourcing payroll. Firstly, you must realize that most of the sensitive financial data related to your company, like employee national identification numbers, employee phone numbers, employee bank account numbers, salaries, and home addresses, will be accessible to your payroll outsourcing partner. You must perform due diligence and create ironclad legal agreements that define how data will be used, and most importantly, how it cannot be misused. After that, you must make sure your payroll outsourcing partner has the proper technological infrastructure to store information. In 2018, the General Data Protection Regulation (GDPR) law was passed in the European Union related to data protection and privacy. A great payroll partner must be GDPR-compliant to eliminate risks associated with data security in your payroll system.

When it comes to global pay data reporting, it is always easier to access and process pay-related information if it is available in one place. Making informed decisions related to workforce spend data becomes easier when data is centralized. Therefore, when it comes to reporting, make sure you ask your payroll outsourcing provider what kind of reporting and analytics tools they offer. Otherwise, it can quickly become an undesirable situation where you have to swim through tons of different reports in multiple formats just to understand what’s going on.

  • Local Expertise & Compliance: Spending a considerable amount of time understanding what your payroll outsourcing provider is capable of will pay off in the future. In our findings, we found out that most businesses will work with a payroll outsourcing company to make up for their own lack of knowledge in terms of local laws, tax regulations, etc., and naturally so, because maintaining a legislative awareness for tens of different locations takes a lot of work and expenditure of valuable resources.

Speaking to your provider in great detail about this will give you a complete understanding of the features, benefits, value, limitations, and risks that the provider might offer in the future. If you notice a difference in pricing that multiple providers are offering for rendering the same set of services, more often than not, the difference will be experienced in the level of service and expertise in a particular region or domain. Always discuss and understand why they chose to set their pricing low or high compared to the average rate.

Also read: Human Resource Outsourcing - Helping Businesses Control Operations and Growth

  • Scope of Service: The most popular reason businesses choose to outsource their payroll is because of its cost-saving benefits. You pay for a set of services instead of paying a team of people to do the work for you. This brings down the cost drastically. But sometimes, companies in a hurry to outsource the extra burden of work fail to recognize what they are opting for. Firstly, you must understand your own payroll outsourcing needs. Then, after you finalize on your provider, you must confirm if they can process all your needs effectively and on time. Once finalized, you may discuss further opportunities of growth, like, for example, payroll services that the provider might be launching in the future that you may be interested in.

Ask if they have any extra service add-ons that might be included by default in the current service contract. Depending on if you want them, you may ask them to keep or remove those add-ons. Once you understand the full scope of service, you will have a concrete idea of how much you will be spending on outsourcing your payroll in return for the service you are getting. Eliminating unnecessary services can bring down your cost considerably.

  • Growth & Expansion: It is vital that you have a clear understanding of your company’s future. Only then will you be fully equipped to discuss growth and expansion strategies with your payroll outsourcing partner. When it comes to payroll expertise in different locations, bigger may not always be better. Sometimes, payroll outsourcing providers may offer their services in only a limited set of countries, and that could very well be because of the higher level of expertise they offer in those locations. Depending on your business’s growth plan, you can be specific with your provider about operating in a particular set of locations and understand their ability to provide their expertise in those parts of the world. You can also do a background check to be extra sure of their presence in those locations.

Unlike Exela HR Solutions, many payroll outsourcing providers do not offer a full suite of HR solutions to their clients. If you choose a provider that offers a full suite of HR solutions, you always have the option in the future to take the leap. For example, in a scenario where you decide to find an HCM provider or an HRBP services provider in the future, it would save your business a lot of time and resources to start hunting for a provider all over again, had you chosen a provider that offers all the relevant HR solutions to their clients. Therefore, making sure the payroll outsourcing company you choose is future-proof will save a lot of time, money, and resources for your business in the long run.

So now, while you lay down the pros and cons of outsourcing your payroll, don’t forget to factor in these important points. These might help you avoid costly mistakes in the future.

Exela HR Solutions is an end-to-end human resource solution capable of serving businesses of all sizes. With our professional HR experts handling everything from talent sourcing and global payroll processing to compensation management and HRBP services, Exela HR Solutions is the complete package for businesses looking to save cost and time by outsourcing some or all of their HR functions.

Get in touch with us today.

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DISCLAIMER: The information on this site is for general information purposes only and is not intended to serve as legal advice. Laws governing the subject matter may change quickly, and Exela cannot guarantee that all the information on this site is current or correct. Should you have specific legal questions about any of the information on this site, you should consult with a licensed attorney in your area.

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