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  • The benefits of outsourcing your payroll
Articles:

The benefits of outsourcing your payroll

19 October 2020

Salome Coetzee, BDO Payroll, Business Services and Advisory |

The 2020 business landscape is a vast arena of technology and services that we could not have imagined 10 years ago. Technological advancements, economic pressures and changing legislations are among a few things that force organisations to constantly evaluate the way they do business. One way companies relieve the pressure is to outsource some of their internal functions, including IT services, HR, and even payroll solutions. Payroll solutions have evolved and become more than just an HR function, the expectations are high and many organisations simply do not have the correct resources to ensure that all components are done correctly.

Products:

Outsourcing payroll functions to third parties means that you do not have to navigate the vast products on the market. This will sit with your Payroll company who will decide on what would work best for your specific needs. Think about the number of employees you have, some products offer you the option for bulk uploads, saving you a lot of time; but if you have a small group of employees, this is not a feature you would need, but perhaps a cheaper product would work best. The flexibility of a product also plays a role in how efficient your payroll system is. Certain products come with built-in functionalities such as currency conversions and can do these automatically. Your payroll solution partner would be able to decide the best products with functionalities specific to your organisation’s needs.

From a cost perspective, your payroll solutions provider will manage the costs of the chosen software. Some products offer the option to pay an annual lump-sum, while others offer a month-to-month payment plan, with the flexibility to adjust costs depending on what your needs are.

Looking at existing products, we are leaning towards flexible cloud-based products. These products charge per individual employee, while the more traditional solutions have a minimum number of employees you need to pay for in order to use their system. This means that if the product requires you to pay for a minimum of 50 employees, you have to pay for 50 employees even if you only have 10.

The other benefit of cloud-based products is that it can be managed remotely. Staff will have access to all their info whether they want old pay slips and documents such as their IRP5s, all which will be stored in the cloud; password-protected for their safety. This reduces the amount of admin that you would normally have in an HR department. It reduces paperwork and speeds up processes. It also means that management can extract reports from anywhere by just logging in onto their cloud portal.

Another advantage of using cloud-based payroll software is that most of them can integrate with a lot of existing accounting software, automating the process to ensure that what’s in the payroll is mirrored in accounting records.

At the end of the day, the costs and ease of scaling makes some products more efficient than others.

Specialised skills:

Another advantage of outsourcing is specialised skills. For example, when it comes to expats, certain third party solutions providers, such as BDO, have in-house specialists that organisations may not have internally. Those solutions providers can utilise their tax consults for the structuring of the expatriate contracts, ensuring that the software chosen aligns with current SARS regulations and comply with transfer pricing rules from different countries. This includes assisting the main team in setting up pay slips in different currencies and including line items that may be required by other countries.

One thing that keeps clients up at night is compliance. Complying with legislation and SARS, ensuring that they are applying all the latest requirements and that the process runs smoothly.

Covid-19 put a lot of pressure on companies, and many of them realised that they didn’t know how to navigate different procedures and processes such as retrenching staff, issuing of tax directives, restructuring and the reduction of salaries and bonuses. These are processes which a good pay roll solutions provider should be able to manage for you. It will definitely be beneficial to seek out solutions providers that have a wide variety of internal specialisations, including HR and legal; saving you both time and money.

Employees:

For individual employees, these solutions assist in ensuring that all tax documentation is easily accessible, but also gives them peace of mind knowing that all their information is captured accurately so that they don’t end up owing the tax man. Outsourcing also ensures confidentiality. With all the info being outsourced to a third party, there is no conflict of interest or risk of someone getting hold of some else’s pay slip. Third party solutions firms like BDO have sophisticated data security controls and companies can rest assured that their information is protected, and all data sharing protocols follow legislation.

Reporting:

Outsourcing your payroll to a third party also comes in handy when report season comes around. Whether it be management reports, BEE reports, audit reports or SARS reports, your solutions provider will be able to extract any and all information you may need to populate your reports. Employee data, such as length of service, salary components, demographics and qualifications.

At BDO, we are able to build individual client microsites or portals that will allow them to log in and extract data themselves, from anywhere in the world. The client will also be able to load or update any information on the site and a notification is sent to everyone with access to the site that updates or changes have been made, and these are uploaded directly to specific reports and payroll systems. Our IT department will create logs and all changes will be tracked and the client admin will be able to see who made changes or updates.

For those companies who don’t have the internal resources, outsourcing your payroll solution will help you manage your full accounting and payroll function - from cash flow statements to trial balances; staff pay slips to IRP5s. The best solutions are scalable to suit your organisation’s size and needs. Outsourcing these core business functions to firms like BDO means you don’t have to hire in-house staff, purchase and maintain appropriate software or worry about staying up-to-date with legislation.

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