Every company has payroll. Every payroll process involves time and attention to detail to ensure employees get paid.
Companies that value time, efficiency, and peace of mind often choose to outsource payroll. Partnering with a full-service provider can be a strategic move to enhance efficiency and drive growth.
What is payroll outsourcing?
Payroll outsourcing involves contracting an outside entity to manage your company’s payroll, including wage calculation, tax withholding, and distributing paychecks. The advantages of outsourcing payroll include saving time, reducing overhead costs, and unlocking access to finance operations professionals who can monitor tax compliance and minimize errors.
Nearshoring vs. traditional outsourcing
In this global, remote-first world, more and more companies are turning abroad for payroll outsourcing. Instead of traditional global outsourcing destinations like Asia, many US businesses are looking closer to home.
Nearshoring involves outsourcing business tasks to a nearby country, such as Canada, Mexico, or Colombia. These countries offer the convenience of similar time zones as well as a broader cultural fit
Advantages of payroll outsourcing
Payroll outsourcing offers many benefits, including:
- Saved time. Outsourcing payroll saves time that can be devoted to running your business, developing products, and closing sales. Outsourcing payroll takes care of administrative hassles, freeing you to focus on strategy.
- Reduced overhead costs. An in-house payroll department is expensive. Payroll outsourcing means you pay a predictable, scalable fee for the service. Cost savings are tripled if you outsource to a different country. Going global with your payroll needs lets you benefit from competitive exchange rates and lower labor costs in many regions.
- Minimize errors. Compliance and accuracy are critical in payroll. Even small payrolls can result in expensive consequences. Outsourcing to a dedicated payroll company gives you access to teams of experts, plus advanced software solutions and other tools to manage complex operations and minimize errors.
Features of payroll outsourcing
Payroll outsourcing partners handle some or all of the tasks associated with payroll management, including:
- Tax filing
- Tax withholding
- New hire reporting/processing of paperwork
- Custom reporting
- Year-end processing
- Payroll processing
- Setting up deposits or paychecks
- Data security & compliance
The Latin America advantage in payroll outsourcing
For US businesses, outsourcing payroll accounting to Latin America can offer all the benefits of outsourced payroll, plus access to a larger pool of competitive talent and additional cost savings.
At Howdy.com, we offer access to the top 1% of finance professionals in the region. Book a free demo and start building your bespoke remote team of LatAm payroll experts today.
Challenges of payroll outsourcing
While there are many benefits to outsourcing payroll, the process does come with risks. Challenges of payroll outsourcing include:
- Data privacy: Data privacy and compliance are critical with payroll. The process typically involves social security numbers and sensitive information. Handling sensitive employee information across different jurisdictions requires strict adherence to data protection laws.
- Legal compliance: Payroll laws vary from industry to industry. When outsourcing payroll, it's crucial to partner with providers with in-depth knowledge of local regulations to ensure compliance and avoid legal complications.
- Internal Change Management: Transitioning to an outsourced payroll system impacts internal departments. Open communication and change management strategies are essential to address concerns, maintain morale, and ensure seamless integration of new processes.
To shield your business from risks and make sure your employees are paid correctly, it's vital to choose the right provider. Selecting a reliable payroll outsourcing partner involves evaluating experience, tech, and compliance expertise.
At Howdy, we design a personalized payroll team based on your industry, needs, and preferences. Our payroll professionals are thoroughly vetted and carefully selected to meet your needs. Book a demo to start interviewing LatAm candidates for your payroll dream team as soon as tomorrow.
Global payroll pitfalls
Going global can sometimes complicate payroll outsourcing. Here are some common problems that come up when you outsource your payroll internationally:
- Communication time gaps. Working with a team based in a country several time zones away can make communication tricky.
- Language and cultural barriers. Language barriers and differences in workplace expectations can snag an otherwise smooth process.
- Hidden costs. Currency fluctuations, foreign banking fees, and unexpected service charges can result in surprise expenses.
Partnering with Howdy.com solves many of the challenges associated with international payroll outsourcing. Howdy.com payroll professionals are proficient in English and are based in countries with ample cultural alignment and time zone overlap with the US. Learn how we can help you expand your team with the top 1% of LatAm specialists in accounting, payroll, analytics, and operations.
Choosing the right payroll outsourcing provider
Thinking about outsourcing your payroll? Consider key variables:
- How much time do you spend doing payroll?
- Do you find the administration of payroll to be a burden?
- Are there frequent payroll errors?
- What’s the ROI in terms of cost per hour of keeping it in-house? What could you be doing in that time that might be more valuable?
- Are any scaling plans going to affect time spent on payroll?
If you decide payroll outsourcing is right for you, the next step is to find a provider. When researching a payroll provider for your business, start by assessing your specific needs — consider factors like employee count, pay frequency, tax complexity, and integration requirements with existing systems. Look for partners that offer user-friendly platforms, tax compliance support, and integration with your accounting and HR software. Compare pricing structures, contract terms, and fees. Pay careful attention to customer reviews, keeping an eye out for things like customer support quality, data security measures, and scalability.
How to transition to outsourced payroll
Once you've found the right provider, follow these steps to transition your business to outsourced payroll:
Step 1: Notify your team
- Inform your team about the transition plan and timeline.
- Assign a point person to manage the changeover.
Step 2: Prepare data
- Gather all payroll-related records, including employee info, pay history, and tax IDs.
- Clean and verify the data for accuracy.
Step 3: Set up with the provider
- Share your company and employee data.
- Configure payroll settings, tax info, and banking details.
Step 4: Run parallel payroll (Optional but recommended)
- For a couple of pay cycles, run payroll through both the old and new systems to catch errors.
Step 5: Go live
- Officially switch to the new provider after testing.
- Communicate the change and any updates to employees.
Step 6: Monitor and review
- Double-check the first few payroll runs for accuracy.
- Provide feedback and adjust processes as needed.
Why choose Howdy to outsource your payroll?
Howdy.com isn't your typical cookie-cutter payroll provider. We'll help you build a custom payroll department in Latin America, which will operate as an extension of your company.
Your LatAm team will be made up of English-speaking finance professionals with years of experience in their field. These payroll experts will be dedicated to your business and fully supported by Howdy.com, outfitted with physical office space, top-tier equipment, and competitive benefits.
Get started building your personalized LatAm payroll team today.
Frequently asked questions on payroll outsourcing
Is it cheaper to outsource payroll?
Typically, yes. Outsourcing payroll tends to be more cost-effective than managing it in-house, especially for startups and small businesses without dedicated HR or accounting staff.
How does payroll outsourcing work?
A payroll provider handles tasks like calculating wages, deducting taxes, filing payroll taxes, and issuing payments, using the employee and company data you provide.
Is payroll outsourcing secure?
Yes. Reputable payroll providers use strong data encryption, secure servers, and compliance protocols (like SOC 1 or ISO certifications) to keep sensitive employee data safe.
Conclusion
Managing compliance, taxes, and payroll data input can be a logistical nightmare. Payroll outsourcing can save your company time, resources, and headaches.
Howdy.com understands these challenges, having supported countless businesses with payroll solutions tailored to their needs. With our help, you can meet highly vetted candidates and manage your payroll team-building process from start to finish.
Discover Howdy.com's bespoke payroll solutions and start building your personalized LatAm payroll team today.
