Why Should Companies Outsource Payroll Activities?

Nov 9 2020
Why Should Companies Outsource Payroll Activities

Running an in-house payroll can be time-consuming and daunting, especially for small to medium-sized companies or a company without Human Resource and accounting professionals. Outsourcing this function allows employers to avoid hiring additional employees, concentrate on their core business, and free up time to work on strategic tasks that could impact the bottom line.

Outsource payroll

The process of outsourcing payroll activities involves the engagement of a payroll service provider to handle a company’s payroll activities. These service providers ensure all payroll-related activities, including keeping track of statutory regulations, are well taken care of.

Most companies outsource payroll activities as it is more efficient and cost-effective than hiring a team of payroll professionals or spend on expensive payroll software to get the job done. Outsourcing payroll activities gives the management more time to focus on other core functions. It also allows the company to do away with complicated payroll activities.

Companies in Singapore have to comply with complex legislation to avoid penalties. Singapore’s Employment Act protects employees’ rights by ensuring timely payments to them, and outlines relevant duties of employers. The Act also requires retention of written records with key employment terms (“KET”s) if there is no existing formal contract that stipulates employment terms, in addition to itemized pay slips to employees, etc.

Many companies, understandably, prefer to let an experienced external party handle all relevant payroll intricacies to avoid wasting precious time and resources.

Why Should Companies Outsource Payroll Activities_Diagram

Outsourcing payroll activities, involves companies engaging a team of specialists for ready and immediate assistance. The service provider will keep track of the latest amendments or changes and have in place the necessary industry best practices, thus guaranteeing compliance with statutory regulations.

Payroll processing is a tedious job that consumes a tremendous amount of time and energy. It requires a company to keep track of every employee’s employment record, make deductions, and adhere to statutory regulations.

By outsourcing these tedious but vital payroll activities, business owners can free up time to focus on other critical functions, such as strategising and marketing their services.

Reduce costs

Outsourcing payroll activities will minimise costs incurred. The cost incurred from in-house payroll activities due to human errors is much higher than engaging an external party. Engaging an experienced payroll vendor minimises companies’ risk exposure to costly human errors and regulatory penalties. A company will be liable and penalised should there be an incorrect or a delayed statutory or tax reporting. Paying penalties is an unnecessary expense that can be mitigated or eliminated by outsourcing payroll activities.  

Leverage latest technology

Increased access to the latest technology can optimise a company’s growth. Nowadays, payroll service providers leverage cutting-edge technology, such as cloud-based systems, for better data integration and accessibility. These systems enable a wider access to payroll information for interested persons rather than submitting in-house requests.  

Some top, advanced payroll service providers also use technology that integrates human resource activities and payroll systems. Thus benefiting the company by seamlessly sharing employee data, reducing IT costs, and increasing efficiency. There are payroll service providers that also install biometric systems to keep track of employee’s attendance and timing, for increased efficiency and security.

Improve data security

When a company carries out in-house payroll activities, there is an inherent risk of possible data breach and potential misappropriation of funds, if proper payroll processes and procedures are not actively in place. The security and safety of the company’s server or network requires careful consideration.

Professional payroll service providers use cutting-edge encryption technology to ensure all employee data is safe from various cyber threats. Data is stored in highly secure cloud-based servers with corresponding encrypted electronic payment methods utilised.

Make the right choice

Today, big and small companies are increasingly outsourcing payroll activities and human resource function for work efficiency. Companies enjoy the benefits of timely payments to employees, timely tax filings, zero penalties, and guaranteed compliance to local laws. While choosing a payroll service provider, companies should choose one that best fits their business’s needs. By engaging the right payroll service provider, companies can spend more time running and growing their business effectively.

To find out more and how our PayrollServe team can assist you, please contact us.


The Stone Forest group of companies provides a comprehensive suite of business solutions to support your business growth in Singapore and globally.

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