Pros and cons of outsourcing HR and payroll services
HR and payroll management in a company is a complicated process, carried out by an independent department in the company’s structure. In many cases, however, it is more advantageous to use outsourcing, i.e. outsourcing the management of HR and payroll processes to another entity. In this article, you will learn about the advantages of HR and payroll services provided by an external company. We will also point out its disadvantages so that everyone can decide for themselves what will work best in their case
What exactly is HR and payroll service?
HR and payroll outsourcing has recently been breaking through to the mainstream and is becoming an inseparable element of many modern enterprises in Poland. Running a medium or large company with a larger number of employees involves the need to complete many formalities and manage extensive documentation. After all, every employee must have a contract on the basis of which the salary will be paid. Someone has to calculate holidays and keep records of working hours.
What is more, the HR and payroll department also deals with calculating the amount of social security contributions and income tax advances for each employee. In the case of smaller enterprises, it is not enough to hire one person for this type of duties. It is not uncommon to have to build an entire department that will manage formalities related to employees on an ongoing basis, especially when employees are offered, for example, temporary work, employment on a B2B basis or based on a managerial contract.
HR and payroll outsourcing allows companies to focus on the most important areas of their business by handing over processes to partners. In such a case, the staff service and salary calculation are handled by external specialists, and not by the internal department, which can therefore focus on other activities.
This type of solution is very popular in very large enterprises, which are characterized by complex and complicated structures that are subject to various regulations. This does not mean that smaller companies cannot use outsourcing.
Business process outsourcing – how much does it cost?
Each valuation of HR and payroll services is carried out individually. The final cost is influenced by the scope of issues, needs and expectations of the client, but also by the specifics of the company that decides on such cooperation.
When looking for a new business partner, pay attention to the range of services they offer. Cost is of course important, but even more important are the activities that are part of the entire process.
Sometimes a low price results in a narrow range of services, and additional important tasks will most likely be paid extra in such a situation. A low price can also mean low quality of service or no guarantee that the activities will be effective. In our opinion, this is not a game worth the candle, and such cooperation can be really very risky.
So how do you choose the right company? First of all, you need to estimate what costs your company currently incurs for HR and payroll services. We know that the employer does not always know exactly what the real expenses related to this are, and this applies to many departments. However, this information is essential. The costs of running a department include not only salaries for employees, but also workplace equipment, access to appropriate technologies and programs to help conduct HR and payroll activities.
What services does HR and payroll outsourcing include?
People dealing with such responsible tasks should have appropriate knowledge and education, especially in the field of accounting and labor law. After all, they are often responsible for providing information about employment conditions and answering questions from the hired people. Any mistake or oversight can have serious legal and financial consequences. To ensure that their activities do not cause problems for the company, it is extremely important that employees of this department regularly refresh their knowledge, e.g. during courses and training provided and paid for by the company.
An outsourcing company deals with the same issues, but it serves more than one company and has many HR and payroll specialists with appropriate education and regular updates of their knowledge. It is not uncommon for outsourcing companies to be additionally audited by external specialists to be able to provide the best quality services.
HR and payroll outsourcing includes all tasks resulting from HR and payroll services. Professional companies with extensive experience offer comprehensive services for tasks such as:
- HR outsourcing: keeping employee files, changing personal files, preparing employment contracts, but also civil law contracts, keeping records of working time and absences, controlling important deadlines, such as parental leave, medical check-ups and health and safety training.
- Payroll outsourcing: calculation of salaries and their timely sending, preparation of payroll, preparation and sending of settlement declarations, preparation of PIT settlement declarations, contact with the Social Insurance Institution and the Tax Office.
Often, HR and payroll outsourcing also means providing services such as ECP services, assistance in organizing health and safety training, or conducting recruitment processes for new employees from A to Z.
Advantages of outsourcing HR and payroll services
Outsourcing is a solution that has many advantages, which is why companies from almost all industries decide on it. It eliminates the need to have an HR and payroll department in the company’s structure, thanks to which the employer’s costs are reduced. There is no need to recruit HR and payroll specialists, which also naturally reduces costs. There are also no expenses related to the payment of courses or training for employees of the financial department, as well as specialized computer programs.
By entrusting the outsourcing company with the custody of documentation, the owner can also recover the time that he has so far put into controlling documentation and archiving. Responsibility for formal matters rests with the external entity. Companies of this type regularly present reports on their activities and prepare reports, thanks to which it is easier for business managers to control the financial situation.
What is more, HR and payroll outsourcing is an opportunity to use the services of the best consultants and specialists, without having to pay their time “exclusively”. In addition, your company is guaranteed “smooth operation”, because a specialized external company employs many employees, even if several of them take a vacation, it will not interfere in any way with the operation of your company in the HR and payroll area.
Reducing operating costs is not everything. HR outsourcing can result in greater processing capacity of current employees, who can focus on their normal tasks. Outsourcing companies specializing in a given field have extensive experience, which allows us to believe that they will do their job in a professional manner.
The use of external resources and the knowledge of specialists will increase the awareness of the company’s employees. An external company and its wide range of services will enable the development of standards that are normally developed over many years.
Greater efficiency is another advantage of outsourcing. We have already mentioned that outsourcing specialized tasks will allow your employees to focus on their most important tasks. The introduction of outsourcing also means optimization of the functioning of the entire company. The use of specialist knowledge will certainly contribute to the development of the entire company and its efficiency.
Other advantages of HR and payroll outsourcing:
- Comprehensive support in HR and payroll management – specialists provide full support for HR and payroll processes, ensuring their efficient functioning.
- Constant availability of experts – an external team ensures continuity of service, which eliminates the risk of interruptions in the work of the HR and payroll department.
- Lower costs – outsourcing is usually a cheaper solution than maintaining an internal HR and payroll department.
- Access to modern tools – outsourcing companies use advanced HR and payroll software, which increases efficiency.
- Sharing of risk and responsibility – the external partner takes responsibility for the proper handling of HR and payroll matters.
- Guarantee of security and confidentiality – data is protected in accordance with regulations, and the outsourcing company is financially and legally responsible for its security.
- Up-to-date regulations – specialists make sure to stay up to date with any changes in labor and tax law, which ensures compliance with regulations.
Disadvantages of outsourcing HR and payroll services
Despite numerous advantages, outsourcing is not without its drawbacks. The biggest one is that the company becomes partially dependent on an external entity. In the case of terminating cooperation, it will be more difficult to introduce people to the company’s affairs than if you had your own department. The disadvantage of outsourcing is also that with the termination of cooperation, access to specialized staff is lost. In addition, some companies dealing with HR and payroll services may also inflate rates for the services provided, which makes it more profitable to create your own department in the company.
However, all these disadvantages are related to the potential termination of cooperation or finding a dishonest company, and not to the outsourcing itself. However, when choosing a trusted partner to whom you want to entrust an important task, which is HR and payroll services, the business owner has nothing to fear.
Business process outsourcing is also a desire to reduce costs, which can be a trap for the company. The desire to cut costs to the limit can affect the quality of the services received. When choosing a partner to work with, be guided not only by the price, but also by the knowledge and experience they can offer. A wrong approach to process outsourcing can quickly overshadow the benefits of such a solution.
Keep in mind that delegating some tasks to external companies may result in less control over the processes that will take place without your participation. There is no denying that this is a kind of threat resulting from outsourcing services. Therefore, the choice of an outsourcing company must be well thought out.
You also have to take into account that the beginning of cooperation can be a bit chaotic, and the lack of knowledge in some topics on the part of external companies is nothing exceptional. Some processes in your company may be unclear, and various misunderstandings may arise in connection with them. These, however, will be clarified during the talks.
Summary
When deciding to delegate some processes, remember to do a good research on the market. Knowing the pros and cons of outsourcing, you know that there are many more benefits of such a solution. Before making a decision, analyze each pros and cons again so that the choice is fully justified.
Doświadczony analityk rynku pracy, specjalizuje się w badaniach nad trendami zatrudnienia i zmianami w strukturze zawodowej. Jego artykuły, publikowane w renomowanych czasopismach branżowych, pomagają czytelnikom zrozumieć dynamikę rynku pracy.
