If you work globally, two options exist for centralised payroll solutions: an in-house accounting department (based in each country) or an outsourced function via a third party. But which is the right choice for your organisation?
At mselect, we believe there are steps to choosing whether outsourced or in-house payroll is right for you, and that's what we want to help you with today.
Outsourced Payroll vs. In-house Payroll: Your Steps to Making The Best Choice
We've simplified our discussion today to zoom out and look at the bigger picture with you. This will help you answer a fundamental question: "What facets of payroll matter most to your business?" Answering this will give you a head start on making a more calculated decision.
Step 1: Appreciating location and compliance
Operating and trading in another country requires a steep learning curve. You need to understand culture, economics, and legalities quickly. This takes time and investment if you want to keep control in-house, particularly when it comes to payroll. At the very least, you'll need an optimised department, qualified staff, and someone dedicated to overseeing the function set-up and performance.
Depending on your proximity to your global locations, you might have the resources to expand your in-house team as a reasonably simple move. But if you don't, outsourcing is the right path to explore. Here's an example of what we mean.
Expanding across borders was not an unreasonable task for mselect in the Middle East. We've built our business on understanding how to source great infrastructure, steer great teams, and employ great people—that's our business. That's why we offer employer of record (EOR) services, including payroll across the region. But these aren't easy tasks to source if you don't know what you need, particularly in areas of the globe with hidden complexities or industries with high compliance thresholds.
In our opinion, outsourcing payroll through your EOR is the best alternative to an in-house team.
Step 2: Availability of resources and opportunity for scale
We already mentioned investment in infrastructure and people, but there are other resources to consider when setting up in-house payroll departments across your global bases.
Firstly, there is tech, both hardware and software. Do you have compliant resources to help you quickly set up a payroll department, or do you need to invest further?
Then there are systems. Was your payroll system built to be replicated in other locations with differing compliance? Or does it need modification?
You should also ask the same of your workflows. How will your staff manage payroll compliance while adhering to your performance requirements?
Next to consider is your HR and employee support. Is it easily adaptable across borders? Wages and payroll handling is always a consideration for staff when taking a job and choosing to remain in it. How you approach international payroll when dealing with staff from different cultures and countries is critical.
Outsourcing your payroll is a great alternative to advocating and managing change in each area in-house, because your payroll partner already has everything optimised. They also make scaling much quicker and costs easier to manage by offering flexible and tailored plans to grow with you.
Step 3: Understanding control levels
The last consideration before you decide on outsourcing payroll vs. in-house payroll is how much control you are willing to give a third party. They must process and deliver payroll accurately, but if their process doesn't feel right for you, maybe an in-house team is better.
As a payroll service provider, we would say that your service level agreement (SLA) should clarify expectations, accountability, and service experience. If you have a good deal in place with a trusted partner, then there should be no concern over their process or performance.
One final piece of advice if you are leaning towards outsourced payroll
Due diligence isn't just about reviews and service offers; it's also about appreciating knowledge and expertise.
Research the provider you are looking to work with. Are they specialists in payroll processes across the country or regions you want to operate and trade in?
We have found that our clients gain trust from our knowledge of the countries we operate in and the employees of a region. We share that knowledge openly on the blog, on our socials, and throughout our digital and in-person presence.
Whoever you choose to work with should do the same.
Are you considering outsourcing your payroll for the Middle East? Contact our team to schedule a consultation today.