Top seven factors when choosing a payroll model
With so many payroll outsourcing options available, how do you choose the best model for your business? One size does not fit all, so it is essential to understand the differences.
Every business needs to pay their employees, and all employees expect to be paid on time and accurately. Whether your company is global, local, large or small, you need to get payroll right, every single pay period, or run the risk of dissatisfied employees and even penalties for non-compliance.
Payroll can be executed in house, in country, through a payroll aggregator service, or through a customised payroll outsourcing model with local experts around the globe. There are advantages and disadvantages to using each of these models, and your ultimate decision depends on the type of support your business needs.
Based on many years’ experience of dealing with hundreds of payroll scenarios for companies around the world, TMF Group has developed a list of the seven top factors you need to consider when choosing the right model for your business.
The first task when looking for the best payroll model option for your business is to capture the essential requirements, by answering these questions:
- How many employees do we have?
- How many countries do we operate in?
- How complex are the regulations in the countries where we operate?
- Do we plan to expand into other jurisdictions?
- Do we have enough in-house payroll experts to process payroll?
- Which payroll platforms (middleware) can integrate with my business’s Human Capital Management (HCM) system?
- How much flexibility do I need from a payroll provider?
- Do I need consolidated reports?
- Do we have budget to outsource?
Small businesses operating in only one or two jurisdictions may be well advised to keep payroll in house. There are advantages to having someone on staff in the office who understands your business and can resolve issues on the spot. However, if you’re looking to expand in future, the in-house model is not ideal for businesses operating in multiple locations due to the lack of visibility and control and the risk of non-compliance. In this case appointing a payroll outsourcing provider is likely a better option.
When partnering with a payroll outsourcing provider, you are putting your trust in their ability to remain compliant with local regulations. While responsibility for tax compliance and other filings may shift to your provider, the penalties for non-compliance stay with you. It’s worth checking providers’ credentials to ensure they are reliable and certified to protect employee data, for example. Ask for case studies and references to learn more about how each payroll provider operates.
Payroll providers typically use technology known as middleware to deliver their services. Be sure your company’s HCM system is compatible and can integrate seamlessly with this middleware. Finding a payroll provider that uses a flexible system which works with your HCM can save your business money in the long run.
Technology can vary greatly; take the time to research the answers to these questions:
- How does the platform work and how will using it benefit my business?
- Does the platform use a ticketing system?
- Can employees use the platform to access their payslips?
- Does the platform provide analytics?
- Can our team access payroll details for all employees in every country being managed?
The in-country model can be a good choice for businesses to outsource payroll if they have no plans to expand their operations in other countries. In this model, the provider is headquartered in the country where your employees are located, and has knowledge about the local payroll rules, but does not typically have offices elsewhere or provide multi-language support.
The disadvantages of this model include: the need to hire a mix of providers; the need to manage these providers against a variety of Service Level Agreements (SLAs); and limitations in scalability if the business decides to expand into other jurisdictions.
If you’re looking for a single, global payroll outsourcing deal, using an aggregator provider may seem like the perfect fit. However, aggregators usually contract with third-party, in-country providers to execute payroll for global companies. This can result in inconsistent service levels, lack of control, and potential non-compliance risks.
It’s important to ask questions about how aggregators ensure compliance: how the process is tracked across suppliers, and how they communicate with the subcontractors.
Using a global payroll outsourcing provider with local knowledge ensures payroll is processed and delivered in country by local experts located in the jurisdiction where employees work. Many are able to integrate seamlessly with your HCM, allowing visibility and control over global operations, with local ticket-raising capability for local employees. Critically sensitive employee data does not cross borders. This centrally managed model is designed to deliver accuracy, consistency and risk minimisation.
Visit our Global Payroll and HR services webpage to learn more.