How does outsourcing payroll work end to end?
Outsourcing payroll works when a service provider runs payroll processing under your controls while taking on execution, tax filings, and payments. You supply payroll data and approvals; the provider calculates gross-to-net, pushes salary payments and tax payments, and returns journals plus statutory payroll reporting.
In-house vs outsourcing payroll: what changes?
In-house payroll processing keeps payroll tasks, records, and responsibilities on your team. Outsourcing shifts execution to providers while you retain policies, ownership of labor law compliance, and sign-off.
| Dimension | In-House Owner | Outsourced Owner | SLA Focus | Liability | Hours/Pay Cycle |
| Data capture | HR/Payroll | Client | Cutoffs | Client | 5–10 |
| Gross-to-net | Payroll team | Provider | Accuracy | Provider | 6–12 |
| Tax filings | Finance | Provider (POA) | Timeliness | Provider | 2–4 |
| Payments | Treasury | Provider | Value date | Shared | 2–3 |
| Reporting | Finance | Provider delivers | Delivery | Provider | 1–2 |
| Controls | Internal | Co-managed | Evidence | Shared | 1–3 |
What do outsourced payroll services cover?
Outsourced payroll services cover processing payroll, direct deposit across ACH, SEPA, and Faster Payments, tax withholdings, and year-end payroll tax forms. Mature payroll providers add GL exports, analytics, and employee payroll support.
How does direct deposit work across payment rails?
Direct deposit uses local schemes to hit value dates, while providers manage reversals, off-cycle runs, and split deposits for garnishments and retirement plans.
Cost to outsource payroll
Cost to outsource payroll depends on headcount, payroll frequency, country mix, and integrations. Typical plans blend a base fee with PEPM. Final cost also depends on add-ons like benefits administration or employee benefits administration.
How much does it cost to outsource payroll?
How much it costs often lands near $4–$12 PEPM for single-country teams and $15–$30 PEPM for multi-country programs, plus a base fee. Implementation costs reflect payroll implementation effort, parallel testing, and payroll software connectivity.
Where do cost savings appear beyond the fee line?
Cost savings come from fewer payroll errors, faster close, and less prep for audits. Finance teams regularly reclaim dozens of hours each month once payroll reporting and journals standardized.
“To me, outsourcing payroll increases operational efficiency when tax compliance and filings move from spreadsheets into audited workflows.”
Vendor evaluation checklist:
- Verify SOC 2 Type II or ISO 27001. Address data security concerns and data residency.
- Confirm tax filings coverage for IRS, HMRC, and local tax regulations.
- Test gross-to-net accuracy on a sample payroll cycle with hourly and exempt profiles.
- Review integrations with your payroll system, HR services, and time tools.
- Ask for two client references that match your industry and country footprint.
- Map support processes to correct payroll errors and handle amendments.
- Model total cost and funding with a secured loan calculator from KIS Finance to price secured credit against ROI and runway.
How do providers handle data security?
Providers handle data security with SSO, MFA, least-privilege roles, and encryption for employee data at rest and in transit. Leading payroll outsourcing companies publish audit reports and log all access to fragmented payroll data.
Global payroll outsourcing
Global payroll unifies multi-country runs under one governance model while respecting local labor laws and tax rules. You can work with a global payroll provider or federate local payroll outsourcing companies under one master service.
Operating models for multi-country execution
Models include aggregator (multiple payroll providers), hybrid, or single-engine coverage where available. The right payroll service provider balances local accuracy with global payroll analytics and GL consistency.
Compliance, FX, and cross-border orchestration
Compliance and FX coordination rely on on-time tax withholdings, clean audit trails, and precise funding. A strong payroll outsourcing partner standardizes global payroll files while handling cross-border salary payments.
International payroll outsourcing vs global payroll
International payroll outsourcing solves country-specific runs. Global payroll stitches reporting and controls across all locations. That shift reduces administrative burdens and clarifies payroll operations.
What are the benefits of outsourcing payroll?
The benefits of outsourcing payroll include higher accuracy, lighter risk, and better visibility across entities. Leaders cite faster month-end, fewer payroll mistakes, and stronger audit evidence.
Why do businesses outsource payroll?
Businesses outsource payroll to focus payroll management on approvals and policies while specialists execute. Professional employer organizations and full service payroll providers also bundle benefits administration and employee management support.
FAQs
What happens when you outsource payroll?
When you outsource payroll, a provider takes over gross-to-net calculations, tax filings, and payments under agreed SLAs. Your team supplies hires, terminations, time, and approvals. The provider returns journals, reports, and year-end forms while you retain policy, sign-off, and compliance oversight.
What is the payroll outsourcing process?
The payroll outsourcing process is a structured cycle: onboarding and data mapping, parallel run, cutover, steady-state processing, and audits. Providers integrate with HRIS, time, and benefits, run gross-to-net each cycle, fund wage and tax payments, deliver GL files, and archive audit evidence.
What are the disadvantages of outsourcing payroll?
The disadvantages of outsourcing payroll are vendor lock-in, change lead times, and reduced hands-on control over edge cases. Data transfer risks and ticket queues can slow amendments during peak periods. Weak SLAs or poor local coverage increase filing risk and create reconciliation work.
Can you outsource your payroll?
You can outsource your payroll if you want scale, accuracy, and compliance coverage without growing an in-house team. Fit looks strongest for multi-entity firms, seasonal workforces, or cross-border footprints. Start with a scoped RFP and a parallel test to validate gross-to-net accuracy.
