Cheatsheet for Outsourcing HR and Payroll Successfully
The crisis and the necessity to move to remote in 2020 have highlighted the challenges of integrating and managing workers within the organization. The level of complexity depends on how well the internal control procedures are established, as well as the responsiveness in solving problems that arise. An enterprise can avoid these issues by passing them on to an outsourcing firm.
HR BPO companies take over the management of internal operations of tax administration, payroll, accounting, personnel management, or legal compliance. Some organizations prefer to outsource these services as early as a business start-up phase to ensure that all processes associated with the financial feature are correctly organized.
Other enterprises rely on outsourcing HR and payroll and other BPO to free up internal resources and dedicate them to major business tasks. For example, they outsource routine functions such as internal auditing, accounting and payroll, and reporting, focusing staff work on other tasks that add value to the business.
The decision to outsource, as a rule, is based on a variety of factors, from the desire to reduce expenses to the demand to utilize the services of qualified personnel. Therefore, among the main reasons for the decision to outsource is the access to a team of specialists trained in daily practice.
Outsourcing payroll and HR will save you from unnecessary tasks. Specialists will help you to simplify personnel processes at your enterprise, thereby increasing the efficiency and simplicity of administrative and managerial work in general. You will be able to focus on business development, solution for production tasks, and promotion of the company on the market. The outsourcing company will take care of the core of our business: payroll and HR administration in your company.
Such companies have specialists who thoroughly follow the development of labor, social, and tax legislation. They guarantee that payslips, payroll, and various reports related to labor remuneration will meet all requirements and come in time.
PEO HR Outsourcing
Outsourced payroll and HR are taking the functionality of the relevant specialists outside the company. Pluses for business are working with a contractor; it’s a contract job.
Practically any organization requires an HR team. Though by no means do all businesses require it on a permanent basis. This is why many companies rely on outsourced HR and payroll services. Any of the HR tasks can be delegated to an outsourcing company.
Management of large companies often believes that their staff of HR specialists is handling all the tasks, so there is no need to outsource the functions of these specialists. But is this really the case?
Payroll and hr outsourcing is when companies hire other companies to manage their human resources, outsourcing strategy, health benefits administration, and pensions. As well as hiring, training and legal expertise. It is also possible to outsource a particular area of HR, such as talent retention practices, or a particular project, such as restructuring.
The trend in favor of outsourcing is also observed among IT companies. IT professional, no matter how progressive in matters of his own business, has no desire to dive into the nuances of accounting, HR management, and personnel recruitment. There are professionals on the market who can do it much better.
A study by the Society for Human Resources Management identified the most common reasons why organizations choose to outsource HR. Among them:
- Cost savings (26%);
- Opportunity to focus on strategy rather than routine (23%);
- Increased employee satisfaction (22%).
The McKinsey & Company 2017 study demonstrated that HR still spends about 60% of its time and resources on transactional, bureaucratic work, even though there was an opportunity to outsource it and finally focus on key business processes. After all, the HR profession is increasingly focused on business results. When an in-house HR specialist focuses on business, on employees and becomes a full-fledged partner of a CEO, the efficiency of the company increases and, with it, the profits. Possession of the basic technical skills of the profession, which used to be sufficient, is now only a basic requirement for HR-specialist hiring. If he is focused on operational and bureaucratic processes, he simply does not have enough resources for strategy.
Moreover, HR outsourcing PEO reduces the fixed costs of this function, which would have been performed by regular HR specialists. So by hiring an HR company, the business saves time and money.
HR outsourcing service is needed in a number of situations:
- With the active development of the organization and the inability of human resources teams to handle the increasing workload;
- When there is a limited timeframe for hiring specialists;
- Increasing the performance of the corporate business operations by outsourcing minor issues to outsourcing providers;
- In the absence of qualified personnel to resolve HR problems, for instance, in the recruitment of IT employees;
- For launching programs that require an HR expert temporarily;
- To boost the work rate of internal recruiters.
Types of Outsourcing in HR
The Entire HR Department
This option is not the most common and does not suit every company. First, it requires a serious financial outlay, and secondly, it will not be easy for employees to resolve any issues promptly. Of course, external specialists will be in touch, but not everyone is comfortable spending time searching for them. In addition, finding a competent performer for all personnel processes is not an easy task. Another disadvantage is difficult communication and control over the executing companies.
The company outsources some HR processes to a recruiting agency, which includes recruiting and hiring personnel. The duration of such projects may vary from 1 month to a year and in the end, the company receives professional advice on business processes. Sometimes outstaffing is outsourced on a permanent basis.
A common model in which personnel is outsourced from the organization. In other words, a specialist or team enters into a contract, not with the company whose functions it performs but with an intermediary organization, an outstaffer.
The client company is only responsible for the employees’ tasks, while the intermediary company is a direct employer: it controls the process, pays the salary, and provides the equipment.
This removes administrative and paperwork for the company, as well as reduces costs. The disadvantages are difficulties in communicating with the team and responsibility: for outstaffing to work, competent management is necessary.
Training and Development Function
With such outsourcing, a company keeps the basic functions of HR: recruitment and personnel administration, and personnel development and training are outsourced to external specialists.
If the company employs up to 200 people, a full-time coach or staff evaluator on a permanent basis is not always needed. That’s where outsourcing comes in handy: for one-time training and assessment centers, it’s better to turn to outside resources.
So the company saves the budget and, at the same time, does not lose an important HR function. However, a business trainer must be immersed in the corporate culture and processes, so it is better for companies working on HR-brand to form their training department.
This includes HR administration and document management. A small company of 50-100 employees can do with a few remote employees and not hire a whole staff.
Such outsourcing is common in foreign companies, so they optimize the work of the HR department, reduce costs and focus on business tasks.
However, there must be an employee responsible for organizing work in the office: receiving letters, ordering stationery, controlling expenses for office needs. Usually, this is handled by the office manager, but if there is no office manager, tasks can be delegated to the human resources department.
How to Find the Most Reliable Outsourcing Company? What Qualities Should a Successful Outsourcing Company Have?
The outsourcing company should ensure the profitability of outsourcing and win in competition with other similar companies. The outsourcer should ensure that the cost of the functions it takes on outsourcing is reduced. To do this, it should perform the functions entrusted to it more cheaply and with higher quality. There are specific opportunities for that due to: specialization in a narrow area; the effect of scale achieved when performing one type of operations simultaneously for many customers, the use of the latest technologies, and high personnel qualifications.
The client company in the developed outsourcing market has the opportunity to choose those outsourcers who have the greatest experience in this area.
The future potential of every business and its rivalry in its economic sector hinges, among other things, on the efficiency and responsiveness in solving various tasks. Usually, the main emphasis is placed on improving core business operations, which are fundamental to the organization and are specifically targeted at gaining income. Nevertheless, there are yet several functions associated with the support and maintenance of core activities. Calculating the salaries of the firm’s employees is one of these tasks.
HR payroll outsourcing includes:
- Calculation of remuneration under civil law contracts;
- Calculation of compensations for sick leave, vacation pay, compensations for unused vacation upon termination of employment, severance pay, and other compensations stipulated by law;
- Preparation of payroll;
- Preparation of consolidated statement on payroll-related taxes;
- Preparation of payroll documents for income payment, as well as for the transfer of taxes and fees;
- Preparation of import files for transfer of calculation results to accounting systems;
- Submission of statutory reporting forms to the relevant state authorities. Checking reports with the Client’s Chief Accountant;
- Reconciliation of accounts with tax authorities and non-budgetary funds;
- Preparing individual payslips for employees;
- Registering employees for personalized accounting in the Pension Fund, preparation of requests;
- Preparation of documents for reimbursement of money paid as temporary disability benefits and other allowances from the Social Insurance Fund;
- Preparation of bank statements for settlements on payroll and taxes and fees in 1C: Company Accounting;
- Accrual of in-kind income, other income, deductions from wages, including writs of execution;
- Preparation of any management reports by agreement.
Without bringing direct profit, payroll calculation still consumes the company’s organizational, labor, and financial resources. Optimization of this work and minimization of costs associated with it is one way to increase the company’s profitability as a whole.
Payroll is ideal to outsource because the process is predictable and regular. For the decision of this and other similar problems worldwide is widely practiced, the transfer of non-core functions to outside organizations – outsourcing. When outsourcing is used, all work on calculations is entrusted to a firm specializing in this area.
Overcoming the Challenges of Payroll Outsourcing: Navigating the Complexities and Maximizing Benefits
Payroll outsourcing is becoming increasingly popular among businesses looking to streamline their operations and focus on core competencies. However, this process is not without its challenges, particularly when outsourcing to different countries such as Ukraine. This article explores the challenges of payroll outsourcing and offers insights on how to overcome these obstacles and maximize the benefits of BPO payroll services.
- Compliance with Local Regulations
One of the primary challenges of payroll outsourcing, especially when working with a payroll outsourcing Ukraine provider, is ensuring compliance with local labor and tax regulations. To overcome this challenge, it’s crucial to work with a BPO payroll service provider with in-depth knowledge of the local laws and regulations. This ensures that your business remains compliant and avoids potential legal issues or penalties.
- Data Security and Privacy
When outsourcing HR and payroll functions, businesses must entrust sensitive employee data to a third-party provider. This raises concerns about data security and privacy. To mitigate these risks, work with a payroll BPO services provider that implements robust security measures, such as encryption, secure data storage, and access controls. Additionally, ensure that the hr & payroll outsourcing contract includes clauses addressing data protection and privacy.
- Integration with Existing Systems
Integrating the BPO payroll services provider’s system with your existing HR and accounting software can be challenging. To ensure a seamless integration, choose a provider that offers flexible integration options and can work with your existing software. This will enable your business to continue using familiar tools while benefiting from the expertise of the payroll BPO provider.
- Communication and Coordination
Effective communication and coordination between your business and the payroll outsourcing provider are crucial for success. This can be particularly challenging when working with an HR outsourcing Ukraine provider due to potential language and time zone barriers. To overcome these obstacles, establish clear communication channels and protocols with the provider and ensure that they have a dedicated account manager or team that can address your concerns promptly and efficiently.
- Customization and Scalability
Every business has unique payroll and HR requirements, which may change over time as the company grows or evolves. Therefore, it’s essential to work with a BPO payroll services provider that offers customizable solutions tailored to your specific needs. Ensure that the provider can scale its services to accommodate your business’s growth and changing requirements.
- Ensuring Quality and Accuracy
Errors in payroll processing can lead to employee dissatisfaction and potential legal issues. To ensure the quality and accuracy of the outsourced payroll, choose a reputable provider with a proven track record in delivering accurate, timely, and compliant payroll services. This may involve reviewing client testimonials, case studies, and industry certifications.
While payroll outsourcing presents challenges, such as compliance with local regulations, data security, and communication, these obstacles can be overcome by partnering with a reliable and experienced BPO payroll provider. By carefully selecting a provider that offers secure, customizable, and scalable solutions, businesses can reap the benefits of outsource HR and payroll functions, such as cost savings, increased efficiency, and improved compliance.
Benefits of Payroll Outsourcing
- Reduced costs for maintaining the accounting department, payment for training seminars, and software upgrades.
- HR outsourcing payroll calculation guarantees the financial responsibility of the contractor for the quality of work.
- Increases profitability of the enterprise due to the absence of fines and penalties imposed by controlling bodies.
- The confidentiality of information about the earnings of employees is ensured, while the internal leakage of information is practically impossible to prevent.
- The need for increased control over remote branches and isolated units is eliminated.
- You can always get up-to-date information about changes in legislation and consultations about personnel accounting from highly qualified specialists of our company.
What Do You Do When You Hire an Outsourcing Company?
Step One: Collecting and Transferring Raw Data
To calculate payroll, the first step is to collect raw data, which includes:
- The number of days or hours worked by each employee;
- Additional payments (bonuses, compensation, etc.);
- Withholdings (alimony, loans, etc.);
- The number of sick days;
- Number of vacation days;
- Salary changes;
- Data on new employees,
- Any other relevant information to the current month’s payroll calculation.
Fill out a worksheet for the raw data, showing the hours worked and any changes in your employees’ payroll, and email it to the outsourcing company.
Step Two: Calculation of Wages in the Current Calculation Period
Outsourcing company provides all necessary services for calculating the salaries of your company employees, including the calculation of personal income tax, insurance payments, etc.
Step Three: Preparation and Delivery of Billing Documents
After the calculations for the current period, you can get their results in virtually any format – electronically (including data encryption), in paper form (in a special package with a seal of confidentiality), or as special files.
Step Four: Payroll Reporting
Outsourcing companies don’t just calculate payroll for your company’s employees, they solve the entire range of tasks associated with this line of business. Preparing and submitting reports is an integral part of the payroll process
The final set of options is formed individually, taking into account the characteristics of each company. The list of basic operations:
- Drawing up internal organizational and administrative documentation.
- Filling out timesheets.
- We calculate wages based on timesheets twice a month (or another schedule).
- We calculate vacations, sick pay, deductions from wages, time off, and penalties.
- We prepare payrolls for the client bank.
- Preparing tax payments.
- Upload data to 1C.
What questions to ask when choosing a payroll outsourcing company:
- What is the general scheme of the payroll mechanism?
- What is the procedure for paying taxes and contributions from payroll?
- Does your organization guarantee the accuracy of calculations and compliance with the established payroll schedule?
What Is the Cost of This Service?
The exact cost per month the company determines based on:
- Audit of the current employee base;
- The number of legal entities, the presence of separate divisions;
- The number of employees per legal entity;
- The average number of employees fired per month;
- Presence of civil contracts, foreigners, disabled persons;
- Presence of Work and Service contracts;
- Charges other than salary: allowances, additional payments, bonuses;
- Type of deductions;
- Schedules of work (whether there is shift work);
- Collective agreement payments (food compensation, transportation, gifts, financial assistance).
The average number of inter-accounts per week, schedule of inter-accounts (inter-accounts – vacation payments and other accruals that do not coincide with advance payment and salary by dates)
Mobilunity-BPO Is an Excellent Choice
Mobilunity-BPO is a Ukrainian outstaffing company with 10+ years of expertise in providing dedicated teams for businesses in diverse countries. We work with different industries such as customer support, biz dev & marketing, back-office support, and data annotation. Our main goal is to help companies find the best remote assistance for their projects. Our experts know how to find the right person, whether it’s an experienced HR manager or a great team of professionals. Our clients note that Mobilunity is a company you can trust.
Entrust HR and payroll outsourcing to specialists of our company, who:
- Conduct personnel records in accordance with the norms of existing labor laws and record-keeping standards,
- Have experience in conducting personnel record-keeping of enterprises with different types of activities, forms of ownership, peculiarities of personnel policy and labor relations,
- Are always aware of the latest changes in labor laws and the design of HR documentation,
- Are responsible for the quality of the personnel records,
- Are always ready to provide consulting support on the issue of interest to you, offering a variety of options for your decision.
Moreover, you will be able to choose the service package, which will correspond to the priorities of work and the price policy of your company.
And most importantly, remember that it is much easier and cheaper to correctly maintain personnel records at the enterprise than to correct errors or even restore the documentation “from scratch”!
If you need experienced professionals to select a team for any HR tasks, payroll and HR services outsourcing, please contact Mobilunity-BPO.