Growing businesses are learning that outsourcing their payroll functions can free up man hours for value-adding activities and fuel effective business growth.

 

The recent years of economic recession have reminded us that constant changes and greater uncertainties will be characteristic of the global socio-economic environment for many more years to come. Singapore, with its small population and open market economy, will continue to bear the brunt of global economic woes.

 

Business owners have seen how changes have permeated every part of their businesses and respective industries. In a global arena where talent has become one of the scarcest commodities, growing businesses with limited resources find themselves competing for the same talent pool that large organizations have better access to. That simply means that growing businesses have to do more with less - making every person in the organization contribute even more effectively to the growth of the business, and staying focused on building up the key capabilities of the organization.

Growing businesses should consider using time as a competitive advantage. While many of them do not have deep pockets, the amount of time that they have is no different from any larger competitor. It is a time to be nimble; a time to be quick. If everyone in the organization has only eight or so hours every day at work, then business owners should analyze how employees are spending their time, and if the time spent is helping the organizations to create greater economic value.

Take for example payroll processing activities. When the business is small, payroll processing is typically handled by the business owner or someone trustworthy. As the business grows, the staff profile and HR benefits become more dynamic, and the instinctive approach is to hire or appoint an internal payroll “expert” to process the payroll. However, the number of employees in the organization is not yet large enough to warrant a full-time payroll or HR specialist to handle payroll eight hours a day, every day. Many growing businesses may not even have the luxury of having a full-time payroll specialist.

 

On the other hand, hiring a non-payroll expert may result in the business having to pay a penalty for non-compliance or paying more than what is required. Keeping up with rapid changes in statutory regulations is already a challenge for in-house staff.

 

With payroll outsourcing gaining greater popularity among organizations globally, it is certainly timely for growing businesses to consider this as part of their business model. Unless payroll processing is a major competency of the business, it is in fact an essential but non-core business function for most companies. So why not use the time spent on payroll processing for more value-adding economic activities for the organization?

 

Payroll outsourcing vendors are experts in the combined fields of HR, employment laws and taxation. The economic reality is that there is a premium placed on functional specialization, and it means vendors usually have very highly skilled and experienced staff dedicated to meeting their clients’ payroll and HR needs.

 

Reputable payroll outsourcing vendors typically process thousands of payroll transactions every month and have vast experience spanning various industries. Organizations that have outsourced their payroll are doing it for the sake of expediency, accuracy, timeliness, control and confidentiality.

 

Contrary to common beliefs, business owners do not necessarily need to give up the confidentiality and control of the payroll process when they outsource. Vendors are bound by their professional conduct and ethics to uphold client confidentiality. A few vendors are even certified to stringent worldwide standards, such as SSAE16 or SAS70, so that business owners get piece of mind when they outsource. Vendors act on specific instructions by the business owners or authorized management representatives, and payroll processes can be controlled as tightly as the business requires it to be, whether in terms of the time for funds release or the frequency of payroll cycle.

 

For growing businesses, cost is very often at the top of business owners’ minds. When viewed on its own, payroll outsourcing is seemingly costly – there is an additional cost element attached to every employee’s monthly payroll, though it is probably less than a dollar per employee per day on the average*. However, if seen in the context of time, accuracy, confidentiality and control, the benefits far outweigh the cost of outsourcing.

 

If any business desires to grow and excel in today’s dynamic and turbulent world, there must be a shift in management thinking about how time, as a limited but valuable resource, can best be deployed in the organization. Payroll outsourcing is one of the proven and viable alternatives for managing the scarce talent resources in growing organizations. It is the right time to consider payroll outsourcing now.

 

* This assumes a typical payroll outsourcing fee of SGD600 per month for a 20-persons company. Fees per headcount are usually on a reducing basis, cheaper for organizations with larger headcount.