Outsourcing Payroll for MNCs – A Winning Strategyadmin
Between April and June of 2021, there was a surge in the number of companies that were established in India, with over 17,200 companies being formed. Also, according to the same data from the Ministry of Corporate Affairs. 13.7 lakh companies were active during this period. Given the hyper-competitive nature of organizations, most companies have opted to go in for payroll outsourcing which can reduce the toll it takes on managers and employees and focus their efforts and energies in areas that can be growth opportunities.
Using payroll services has become a norm around the world. Technavio’s report on payroll outsourcing markets stated that the market share of the payroll outsourcing industry would increase by USD 6.15 billion from 2020 to 2025, with a CAGR of 5.72%. Since multiple organizations work across locations and sectors, transferring payroll processes becomes a more viable option than taking on additional burdens. Some of these processes include:
- The maintenance, verification, and updating of employee documents and company data
- The calculation of wages, bonuses, deductions, social insurance and taxes of employees. This must be done as per their designation and their place in their company hierarchy and those of employees who are on a temporary or contract basis and ensure that wages and payments reach employees on time.
- Payroll services are also in charge of employees’ pension-related contributions, medical benefits, holiday pay, and other payments.
- Providing employees clear and accessible instructions, channels, and systems for the payment of their salaries, deductions, benefits, etc.
Providing relevant records of transactions and documents to authorities if necessary and ensuring that payroll compliance is upheld.
Here are some reasons why major multinational organizations prefer to outsource their payroll processes.
- Compliance: An essential aspect of payroll processes is the aspect of compliance or adherence to certain rules and regulations. Third-party payroll can take over compliance-related tasks of an organization and execute them effectively while reducing the stress an organization goes through to ensure that they are compliant. Multinational corporations must deal with multiple compliances stretched across cities, states, and countries. Third-party payroll services also provide that all compliances are up to date, given the changing nature of laws, rules, and regulations.
- Reduced Costs and Labour: Handling payroll-related tasks require a lot of time and resources from managers who handle payroll in-house. These resources costs and time can be drastically cut down and directed elsewhere by outsourcing an organization’s payroll.
(Read more: Payroll Solutions: A Profit Maker!)
- Security: According to IBM security, the average cost of a data breach in India in 2021 was roughly 16.5 crore INR. Given the staggering extent of loss due to a single data breach, security has become prime importance. Ensuring that company records, employee documents, and other sensitive data are protected will become the job of a payroll service if an organization decides to outsource its payroll processes. This removes the stress of maintenance and data security from an organization, allowing them to realize their potential.