What is Payroll Outsourcing?

Table of Contents
What is Payroll Outsourcing
Reading Time: 6 minutes

Payroll Outsourcing is the process of delegating the task of payroll processing to a third party to ensure accurate, on-time payroll for the employees. It ensures that regulatory compliances are maintained automatically, relieving the HR and payroll team from putting in additional efforts to ensure compliance with the statutory norms.


Activities Covered Under Payroll Services

Payroll management comprises various activities that require the payroll department to dedicate their time and effort. Some of the significant payroll administration activities covered under payroll outsourcing include:


Calculating Salary & Benefits

The most essential activity covered under payroll outsourcing is the accurate calculation of employee salary and related benefits every salary cycle. The company managing payroll should ensure the correctness of the monthly inputs, cross-verify the overtime and late-coming details, additional incentives, commissions and bonuses, and calculate the payroll accordingly.


Maintaining Payroll Records

Once the payroll is calculated, it is necessary to maintain the records since it is a financial transaction between the employee and employer. Hence, it is required by law to maintain the documents in the stipulated format. Maintaining and archiving these records can also be automated once the payroll services are outsourced.


Disbursing Payments

The process of payment disbursal should be undertaken meticulously since it deals with the transfer of funds. The payment should be deposited in the correct employee accounts at the right time to ensure employees. Failure to do so could result in disengagement, distrust and distress among the employees, which proves detrimental to the company’s progress. Timely payment of the full and final settlement also results in a better employer brand.


Providing Compliance

Maintaining payroll compliance with the laws and government regulations surrounding employee payroll management is difficult. It requires a group of finance experts to undertake the taxation of the company and associated financial transactions, which includes employee payroll management and filing taxes. Hence, payroll outsourcing also covers providing compliance services to companies.


Generating Reports

As with any significant process, generating reports is essential for the payroll process too. Statutory reports provide the company with insights into employee payroll and related budgeting. The payroll administration can make informed decisions based on these reports, enabling them to optimize their budgets accordingly. As a result, the payroll processing vendor must also undertake report generation.


Also Read: Union Budget 2023 Highlights: New Tax Slabs for Salaried Taxpayer


Reasons to Outsource Payroll Processing

There are several reasons to outsource the employee payroll system. Some of the significant ones are:


Time Savings

The time saved in repeatedly processing the employee payroll every salary cycle is one of the most significant reasons to outsource employee payroll. The time saved can be utilized in other employee management activities or strategizing engagement tactics. Additional payroll management tasks can be added to the contract to save even more time.


Accurate Calculations

Payroll service providers have long-standing expertise in employee payroll, which translates to an accurate and on-time error-free payroll process every salary cycle. Additionally, they would have in-depth knowledge of various statutory compliance requirements about the employee payroll system, ensuring 100% statutory compliance with the laws. It helps avoid hefty fines and keeps the employees satisfied with the company.


Easier Disbursals

Payroll outsourcing also results in easier disbursals since payroll solutions can automatically release the payments and share the bank advice statement with the bank to release the payments. The software would also provide multiple options to disburse the payroll, such as cash payments, cheques, or direct deposits into the employees’ bank accounts.


Report Generation

Generating in-depth reports provides HR and management with actionable insights. With a dedicated payroll processing vendor, you can quickly request any information that would help better budgeting. Generating these reports manually would take a lot of productive HR time, and outsourcing it ensures accurate reports.


Penalty Avoidance

Outsourcing payroll processing to the experts ensures the protection of statutory compliance, which helps avoid any legal penalties incurred due to not following them, resulting in cost savings. Failure to file quarterly returns, such as Form 24Q, or Form 27A, will entail huge fines, which can be avoided with the timely intervention of a third-party payroll outsourcing company.


Integrated Data

With a dedicated payroll outsourcing provider, one can be assured of having adequate data security and integrity with guaranteed backups. It helps with easy access to the data whenever required while keeping it accessible to anyone with the proper credentials. A centralized data repository also enables easy archiving and cataloguing of the information, making it easy to access whenever required.


ESS Portal

Payroll outsourcing also helps employees view and interact with their payroll and related details with the help of an intuitive employee self-service (ESS) portal. It allows the employees to undertake several tasks, such as viewing their attendance and related details, payroll taxes and benefits details, and pay slips, as well as updating any errors in the database. Using the employee self-service portal, the staff can undertake these tasks without disturbing their HR team, ensuring a better engagement rate.


Also Read: 5 Major Payroll Statutory Compliance Changes For This Year


Advantages of Payroll Outsourcing Services

There are numerous advantages of payroll outsourcing services for a company to a third-party vendor that provide payroll outsourcing services. Some of the major ones include:


Better Time Management

With the automation provided by a dedicated payroll management system, the HR and accounts team can undertake other creative pursuits which aid in employee engagement and process optimisations. Since payroll processing is a repetitive process, outsourcing positively impacts the HR department’s time utilisation since all the related responsibilities, such as answering employee queries and sharing pay slips, are undertaken by the payroll provider.


Reduced Costs

There is a significant cost reduction with payroll outsourcing as the company can avoid hefty fines due to non-compliance and have well-defined budgets. Additionally, manual payroll has several direct costs, such as printing pay stubs, maintaining financial records, manual calculations, etc. Payroll outsourcing services help avoid these costs, making it an extremely economical option for companies.


Accurate Timely Payroll

With the help of payroll services, you can disburse accurate, timely payroll to your staff. It will reinvigorate their trust in your company and enhance their loyalty toward the organization. Additionally, it will mitigate payroll mistakes since the payroll is undertaken by a dedicated provider adept at undertaking this task.


Precise Taxation

Accurate taxation is another major benefit of outsourcing payroll services to a dedicated third-party payroll company. Once the employees are paid their wages, there are other tax-related responsibilities to be undertaken by the employer. The company should be able to document the TDS, provident fund, professional tax, income tax, employee state insurance, and related details, which should be filed with the government regularly. By outsourcing payroll, HR will be relieved of these duties.


Enhanced Data Security

Payroll outsourcing to a third-party company also ensures that the documents are secured. Since the details are with another company, they take additional precautions to ensure its safekeeping. The confidential payroll information will remain secure on the vendor’s servers. They are also bound to take adequate employee data backups, which provides another safety net for the company.


Top 10 Payroll Outsourcing Companies in India

Numerous exceptional payroll outsourcing companies in India provide excellent payroll services. We have collated the best payroll outsourcing companies that provide the best services for your budget:


1. Total Sourcing Solutions

Total Sourcing Solutions provides various payroll functions and HR-related services such as payroll and compliance, leave and attendance, human resources helpdesk and consultation, policy design, HR staffing, among others. TSS enables their clients to outsource their complete HR and payroll duties, freeing the management to handle other essential responsibilities.


2. Transient HR

Transient HR provides several HR core functions and payroll-related services, such as recruitment, staffing, outsourcing, payroll, and a compliance management system. Being a nationwide company, they can provide excellent services to multiple companies in all major cities in India.


3. Quasar Consultancy

Quasar Consultancy undertakes process outsourcing, such as knowledge, financial, and business, along with HR process outsourcing. They provide several HR services, including recruitment, management, payroll processing, manpower deployment, and more.


4. HR Second Opinion

HR Second Opinion provides an online, subscription-based advisory service that provides its clientele with multiple customizable tools to save time and effort. It also enables the HR team to stay informed of the latest updates in regulatory compliance.


5. Stalagmite Consultancy

Stalagmite Consultancy Services provides its clientele with everything related to payroll, monthly compliance, labour laws compliance, and allied matters. They have multiple plans which ensure that startups and small and medium businesses can enjoy their services.


6. HigHR

HigHR provides various HR and outsourced payroll services which enable most companies to concentrate on their core business and fulfil business goals. They provide various solutions such as HR advisory, outsourced HR, and enterprise HR.


7. Minerva Technology

Minerva Technology Solutions is a well-known human resources and payroll vendor for businesses. Their ‘VistaHR’ software provides their clients instant access to their data with an intuitive interface, helping them automate several payroll-related processes.


8. Aon

Aon PLC is a payroll service provider with a long clientele list, including well-known brands and start-ups. With an international presence, they have become the go-to payroll provider for an extensive range of small to large companies.


9. ADP

ADP is an American payroll service provider that provides services in multiple countries. In India, they operate as ‘ADP India’, providing HR and payroll-related services to over 700 clientele.


10. Genesis Zeal

Genesis Zeal Multi Solutions provides recruitment, payroll, training, staffing, performance management, legal support, and more. Being an ISO 9001:2008-based company, they have an excellent track record too.



Payroll outsourcing services help you delegate your own payroll and related benefits to a dedicated services vendor and avoid human errors. It relieves the HR and management from undertaking the painstaking payroll and associated statutory duties. Hence, start-ups and small and medium businesses should outsource their payroll to save time and effort, which can be reallocated to undertaking core business activities such as research and development.

Found this article interesting? Share it on

Contact Us

Contact Us

We use cookies on our website to provide you with the best experience.
Take a look at our ‘privacy policy’