Payroll Processing Outsourcing in Asia: The Highs and the Lows

As globalization rapidly evolves, driven by innovation and technology, business must adapt in order to remain relevant and competitive. Physical goods, for example, were once shipped from one country to another but can now be produced by a third-party within the destination country. The same is true in the case of payroll processing. What was usually a process performed within a company’s office can now be handled by an expert outsourced team in another country on the opposite side of the world.

A 2018 survey showed 10% of US companies outsourced their full payroll operations to the Asia-Pacific region; and 60% of financial services, consumer, and industrial product companies outsource their payroll functions.

For some, the thought of entrusting payroll processes to a third-party company seems risky for the business. However, the increasing number of companies relying on outsource partners demonstrate that the advantages far outweigh any assumed risks.

To get a better understanding of how outsourcing payroll services can benefit business operations, here’s a quick rundown of its advantages and disadvantages.

The Benefits of Outsourcing Payroll Processes

1.   Say Goodbye to Time-Consuming Tasks

Payroll processing can be time-demanding, because of the various steps involved from the thorough computation of salaries and wages to complicated tax requirements. Furthermore, the amount of time spent accomplishing these steps is relative to the size of your company.

Such tasks take up valuable time from managers who have other pressing and urgent tasks that require their attention. Outsourcing payroll functions is a solution for businesses to improve efficiency.

2.   Save Financial Resources

With in-house staff handling payroll, you are paying for resources such as electricity, equipment, the payroll team’s salary, benefits, and training to perform an important but still a non-core function for your business.

Outsourcing payroll processes frees you from the responsibly of hiring and managing a payroll department. Once payroll services are outsourced, you can rest easy knowing that this business critical, but not core business function is being taken care of by a trusted third-party partner, freeing up your limited time and resources to focus on critical core business functions.

3.   Minimize Tax Penalties

Say goodbye to scrambling to meet the deadlines of payroll-related requirements, and avoid penalties due to tax-related issues. Human resource administrators and managers may face penalties and sanctions imposed by their respective governments due to non-compliance. Such responsibilities, when left unattended, cost an organization.

A third-party service provider has the necessary expertise and experience to help an organization meet submission deadlines and compute tax requirements accurately.

4.   Take Advantage of a Professional Team of Experts

Creating your own payroll team, usually consisting of accountants, bookkeepers, and tax lawyers, takes time and resources. Established third-party companies have these teams of experts who can offer you payroll services with professionalism and unparalleled level of expertise. 

Moreover, third-party service providers have invested in equipment, software, and tools to guarantee accurate, speedy, and efficient service delivery. This way, a provider can even customize payroll solutions to specifically suit your organization.

5. Access to Different HR Services

Payroll processes and HR functions are complex and really require a team of experts, working in tandem, to ensure that all is being taken care of consistently and accurately. For instance, if you hire an in-house accountant, you can’t expect them to have an in-depth understanding of the legal significance of an employee-employer contract, nor can they automatically be tasked to process and pay the employees benefits.

An exceptional third-party provider has a full team to manage payroll, and other HR administrative functions.

The Risks of Outsourcing Payroll Processing

1. Lack of Internal Control

The lack of face-to-face interaction between employees and the essential focal persons may pose some issues. This may include possible errors that may not be easily addressed and essential information no longer readily available.

Nonetheless, this can be easily addressed in your agreement with the payroll solutions provider. Examples of which can cover explicit conditions or shared access to Cloud technologies to an in-house administrator.

2. Threat to Cybersecurity

Every piece of information online is vulnerable to hacking and other forms of cyber threat. Cases of online identity theft are a cause of concern for employees, so businesses need to watch out for these cyber-attacks and take the necessary prevention measures.

Established third-party providers emphasize their services to be rooted in security and data privacy. Only trust third-party providers that are reputable, trusted and are proactive in their measures against cyber security threats and hacks.

Outsourcing Payroll Services in the Philippines

Dubbed the “BPO Capital of the World”, the Philippines began providing outsourcing services primarily focused on customer service roles. As the industry and business needs evolved, the country has also become a top choice for outsourcing services in finance, human resources, and IT.

The Philippines continues to rise among Asia-Pacific countries in terms of outsourcing with $50 billion revenue from the IT-BPO industry alone. A report from the World Trade Organization (WTO) indicated that outsourcing in the Philippines generated 1.2 million full-time employees.

With an increasing number of business choosing to employ and outsource payroll solutions, there is no doubt that the Philippines will keep up with the trend. There are numerous companies in the country such as Sprout.ph, Justpayroll.ph, and ADP.ph, who offer payroll services to organizations, big and small, worldwide.

If you want to know more about how you can partner with a third-party payroll solutions provider in the Philippines, you can message us through our channels or read our free resources here.