Step By Step To Manage Payroll Outsourcing

Step By Step To Manage Payroll Outsourcing

If you doubt whether or not to outsource your company’s payroll for fear of security risks: we will make you change your mind. Today’s technology not only helps save time and money, but also protects the confidentiality of all sensitive information contained in pay slips. 

For a long time, payroll management has been considered a strategic process for companies and managers and managers have been reluctant to outsource it.

At the end of the 1980s, however, organizations began to be aware that outsourcing payroll processing entailed a series of advantages, such as lightening the structure of companies.

Read more about:

People Analytics: How To Turn HR Into a Strategic Department In The Company?

Top 10 Skills Needed to Become a Dentist

In Which Cases Is It Advisable To Outsource Payroll Management?

Any company, regardless of its size, can find itself in a situation where it is advisable to outsource payroll. For example, the following assumptions can be made: 

  • Companies that are growing with the hiring of more people and that want to outsource all the sub-processes of payroll management. 
  • Small or recently created companies that need to focus on their business and have an effective payroll management process that complies with the law. 
  • Organizations that want to expand internationally and need local payroll management.

Companies that merge with others or that acquire others in which there is no outsourcing of payroll. 

What To Outsource Regarding Payroll Management?

The company’s payroll management process can be fully or partially outsourced, that is, the external third party that is contracted to manage the payroll can perform all or some of the sub-processes of payroll outsourcing, for example:

  • Compilation of the personal information of each employee to prepare the payroll. 
  • Calculation of all payroll concepts and preparation of it.
  • Configuration of the payroll payment method. 
  • Management of the income in the Tax Agency of the withholdings made in the payrolls. 
  • Preparation and delivery of withholding certificates at the end of the year. 

Types Of Payroll Outsourcing

Payroll outsourcing can be of various types: 

  • Total outsourcing in favor of a third party . In which a third party manages the payroll and all the processes associated with it. 
  • Hybrid model . In this case, a part of the processes related to payroll is managed by the company and another part is carried out by an external third party. 

Advantages Of Payroll Outsourcing

Payroll outsourcing saves financial and personal resources, but it also provides other advantages such as the following: 

ROI Increase

The use of Artificial Intelligence and robotic process automation (RPA) contribute to reduce errors as the costs of preparing payroll by third-party external companies are reduced, thus the return on investment of the organization that hires payroll management is increased. 

Streamlining Decision-Making Processes

According to the 2020 Global State of Enterprise Analytics report , 97% of real-time business decisions are not based on data. 

Making quick decisions based on reliable and updated data is possible with the reports that can be produced by payroll management software . Deciding on time can mean that your company is ahead of its competitors and does not make mistakes. 

Security And Confidentiality In Data Processing 

Payroll management by an outsourcing company requires the transmission and processing of confidential data. The technology used in outsourcing payroll guarantees the security and protection of information by establishing access levels by user groups or by carrying out security audits. 

Increased Productivity

In the I Addecco Outsourcing Barometer on productivity and efficiency, 3 out of 4 executives, managers and middle managers surveyed (75.15%) affirm that the quality of the processes positively affects the improvement of productivity since both aspects are closely linked .

The process of preparing and managing payroll is one of the most important in companies and its automation improves the productivity of the people who are part of the people management department and the organization’s work environment . 

How To Outsource Payroll Step By Step

If you have decided to outsource payroll management, you must follow a process that may have the following steps: 

Analyze The Situation Of The Company And The Tasks You Want To Outsource In Relation To Payroll

Before starting the process of hiring a company to manage payroll, it is necessary to analyze the situation of the organization and see what process is followed to prepare the payroll and what people and departments perform each task.

Once you have determined all the tasks that are executed in relation to payroll, you can make a list and determine which ones you want to outsource. It is advisable that you opt for repetitive tasks that require the investment of a large amount of time. 

It is also important that in this first phase you set objectives to be able to measure and know if you have achieved them. 

Choose The Right Payroll Outsourcing Provider

This is one of the most delicate steps. The elements that you can take into account when choosing a provider are the following: 

  • Constant updating to adapt to changes in tax and labor regulations. 
  • Possibility of preparing reports that facilitate the decision-making processes of the company. 
  • Centralization of the entire process and information in a single software. 
  • Possibility of creating a collaborative payroll process. 

Contract Signing 

The formalization in writing through a contract with the payroll outsourcing service provider is essential to regulate: 

  • What does the provision of services consist of and what tasks will the payroll outsourcing company perform? 
  • The duration of the provision of services, possible extensions and the power to withdraw from the contract with prior notice. 
  • The price of the services and the method of payment. 
  • What happens in case of non-compliance by the company providing the service.
  • Confidentiality regarding the information that is transmitted to the supplier and security measures that are going to be implemented.

Start Of Service Provision

In order to start providing the payroll outsourcing service, personal information about the employees, the forms of payroll payment, the terms in which the payment is made and other aspects must be transmitted. It is usual that during the first months adjustments must be made for the process to work correctly. 

Preparation Of Reports

The supplier will prepare reports on a regular basis to inform about the actions carried out and about: the expense that the company’s personnel supposes, in which complements they spend the most or how is the evolution of the payroll of the team. This will allow you to control what is spent in real time and make quick decisions. 

ROI Calculation

To find out if you are getting the benefits you expected from outsourcing payroll, you will have to compare the goals you have initially set with the results you get.

For this you will have to choose certain parameters to measure and obtain the ROI. You may have to make changes over time to adapt to the circumstances of each moment. 

Therefore, outsourcing payroll means speeding up a strategic process for any company, the possibility of making quick decisions and the happiness of the entire team. It is, without a doubt, a service that adds value to any company.


Payroll outsourcing is a great way to save time and money for businesses of all sizes. By following the steps outlined in this article, businesses can successfully manage payroll outsourcing and ensure their payroll operations are handled in an efficient and cost-effective manner. Contact us for more content like this!

Frequently Asked Questions About To Manage Payroll Outsourcing

Collect employee time and attendance data.
Calculate employee wages and taxes, generate paychecks, and record payroll transactions.

Payroll processing is a crucial procedure for paying employees at the end of a payroll period. It involves several steps to accurately calculate, track, and distribute pay while ensuring that the correct amounts for taxes, company benefits, and other deductions are withheld.

Payroll outsourcing is when a business delegates its payroll operations to a third party. Full-service providers assist with payroll processing, tax reporting, regulatory compliance, data security, and unemployment claims.

Employees can receive payment through four methods: cash, check, direct deposit, or debit card. Employers can handle the payroll process internally or outsource it to payroll-service companies or accountants.

A payroll flowchart simplifies complex payroll processes into manageable steps using visual representation. It outlines the sequence of actions for running payroll, withholding deductions, and distributing paychecks to employees.

Share post on
Chris Charles
By Chris Charles

Hey everyone, I am Chris, A versatile and knowledgeable skills writer, able to bring a fresh perspective and valuable insights to a wide range of topics, from public speaking to time management. An experienced skills writer with a talent for breaking down complex concepts into easily digestible content that helps individuals succeed.