Any business at scale will face payroll challenges, none more so than companies that work across borders. So, how do you make your payroll function smoother and easier to manage while remaining accurate? Outsourcing is your answer.
In this article, we will look at the top 10 payroll challenges global brands face and how outsourcing can help solve them.
The Rise of Payroll Outsourcing as a Solution to Common Payroll Challenges
Employee payroll outsourcing is on the rise because it is a more cost-effective and efficient way to handle payroll challenges, particularly as more countries welcome international business. We have seen this clearly here in the Middle East.
In fact, according to Deloitte, service outsourcing across all disciplines grew by 5.4% between 2019 and 2023. The biggest drivers were the need to address core functions, cut costs, seek expertise, handle scale, improve service quality and safeguard data through efficient compliance. Payroll is just one function that benefits in all of these areas from outsourced services.
Let's break down the specific payroll challenges companies like yours face to discuss how outsourcing helps deliver improved services and outcomes.
Top 10 Payroll Challenges Solved By Payroll Outsourcing
1. Compliance with local regulations
● Challenge: The ability to keep up with complex local labour and tax laws while understanding your full reporting requirements.
● Outsourcing solution: Outsourced payroll companies take on your pay liability. To do this successfully they specialise in staying up-to-date with local laws, ensuring your compliance, and reducing your penalty risk. There's also an added advantage where payroll providers have local hubs and teams—local connections who provide insight into compliance change.
2. Currency and exchange rate fluctuations
● Challenge: Managing payroll across multiple currencies and dealing with occasional or regional exchange rate volatility.
● Outsourcing solution: Payroll companies will often offer multi-currency payroll processing, mitigating your financial risks associated with currency fluctuations and simplifying payments—a huge help when your business deals with many countries and regions globally.
3. Data Security and Privacy Concerns
● Challenge: Ensuring the security of your payroll data and complying with global and local data protection regulations.
● Outsourcing Solution: Reputable payroll services will implement advanced security measures and comply with data protection standards to keep your employee payroll information safe. They do this across the board, which means that from day one, your payroll service is optimised for the countries you work in.
4. Integration with HR and financial systems
● Challenge: Seamlessly integrating your payroll systems with existing HR and financial software to ensure accuracy and efficiency.
● Outsourcing solution: Outsourcing partners typically offer integration capabilities with leading software brands. Here at mselect, we go further by providing extra business functions, like HR, giving you a fully integrated employee management system from day one.
5. Complexity of employee benefits and compensation
● Challenge: Managing incredibly diverse employee benefits, bonuses, and compensation packages across regions and complex staffing structures.
● Outsourcing solution: Payroll companies are experts in handling multiple compensation structures and can tailor their services to meet your specific organisational needs. A great payroll service goes above and beyond to localise its service, meaning they take the time to understand what employees need from region to region, delivering better retention and engagement as a result.
6. Accurate and timely payroll processing
● Challenge: Ensuring consistent, accurate, and timely payroll processing for your global team.
● Outsourcing solution: Outsourcing with the right partner can ensure dedicated resources and automated payroll systems that guarantee precise and punctual payments—one less thing for you to worry about, which is crucial when employees are far more likely to leave a business after mistakes in pay.
7. Managing a cross-border workforce
● Challenge: Handling payroll for expats, remote workers, contingent workers and employees on international assignments.
● Outsourcing solution: There are payroll providers that can offer solutions for managing international payroll, including tax equalisation, compliance, and localised support. We do just that for payroll clients across the Middle East, giving them peace of mind that their employees are paid on time, every time and accounting for localised requirements.
8. Scalability and flexibility
● Challenge: Adapting payroll operations to scale (up or down).
● Outsourcing solution: Payroll service providers offer scalable solutions that can easily adjust to the company's growth or contraction. Easy monthly plans can help you manage operational flexibility for whatever comes your way.
9. Cost efficiency
● Challenge: Reducing the high costs of maintaining your in-house payroll team and infrastructure.
● Outsourcing solution: Outsourcing payroll can be more cost-effective because you are less reliant on hiring specialised staff and bringing in new technology investments. You will also be less reliant on compliance support, which is often a hidden and sometimes unforeseen expense.
10. Employee self-service and satisfaction
● Challenge: Providing your employees with easy access to their payroll information.
● Outsourcing solution: Many payroll providers offer online self-service portals, which enable employees to access payslips, tax documents, and other payroll-related information. By improving transparency, you can offer a far greater employee experience.
Payroll Challenges Can be Reduced Further Through Share Services
So far, in this article, we have discussed how outsourcing solves common payroll challenges, but in the future outsourcing a single service may not be enough to remain effective or competitive. We believe you will need to consider outsourcing shared services to providers who can handle several employee management functions and deliver tech advances in each.
For example, to improve your speed to market entry for a new region, you will need a team that can deliver expert staff when and where you need them. This means finding a partner with a strong local presence and understanding who can act as your employer of record. A partner who streamlines their processes and workflows using tech integration or specifically designed tech at the highest level to engage and onboard potential candidates and get you past the red tape of government.
You may also need a partner to help you set up offices in the best locations for your product or service delivery, just as we did with Huawei and Samsung.
Long-term HR strategies, including training, will also be pivotal in retaining staff in a new region. And that training must be personalised and detailed, just as we delivered for Gazprom.
Choosing one provider to manage more than one service and tech solution, rather than paying several, will become a more practical approach to global market entry and disruption.
Contact mselect today if you are looking to expand into the Middle East.