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Advantages and disadvantages of outsourcing payroll services


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Updated on:
February 20, 2024
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Updated on :

February 20, 2024
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Advantages and disadvantages of outsourcing payroll services

Managing payroll is a relatively easy task that most small business owners elect to manage themselves.

However, as organizations grow and hire more employees, managing payroll internally becomes increasingly challenging and time-consuming. Therefore, outsourcing payroll can be a wise business decision for many businesses — especially those with employees living in multiple countries.

Continue reading to learn why some companies outsource payroll and the advantages and disadvantages of outsourcing payroll services.

Why do companies outsource payroll?

Different companies elect to outsource their payroll processes for various reasons. Although you may be unaware of the benefits of outsourcing payroll, third-party payroll providers can help improve company spending and streamline processes.  Below is a list of reasons that companies choose to outsource payroll.

Talk to our experts to learn how we can help you efficiently manage your payroll.

To save cost, money, and resources

Understanding the financial breakdown of outsourcing payroll can be challenging.

The primary reason that companies outsource payroll is that it's cost-effective. Although it may seem counterintuitive to employ a third-party company to manage something you could do internally, payroll is complicated, which means there is a significant risk of overspending and costly mistakes.

It also reduces the need for internal HR employees to focus their energy on managing payroll and learning new tax and labor laws whenever you hire foreign employees.

Improved payroll process

When you use a third-party payroll processor, you can benefit from their fine-tuned payroll processes. This ensures mistakes are caught and remedied quickly, employees receive paychecks on time, and international payroll is seamless.

You will also benefit from a heightened awareness of the risks associated with processing mistakes and payroll fraud.

Use of advanced technology

Online payroll platforms make the most of the latest technology, which means you can benefit in the following ways:

  • Payroll automation that cuts down on time
  • Seamless integration with existing HR tools
  • User-friendly tech
  • Improved processing speed

Avoid compliance risks

One of the primary advantages of outsourcing payroll services is avoiding compliance risks. Global employers face significant risks when paying international employees. If you're not careful, you could risk inadvertently breaking local tax or labor laws.

When you outsource payroll, you will have access to experts who can help you remain aware of and compliant with all the relevant regulations.

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Advantages of outsourcing payroll

There are numerous advantages of outsourcing payroll. If you're currently processing payroll in-house, contact Skuad to learn how to save on payroll expenses and make paying your global team a breeze.


One of the primary benefits of outsourcing payroll is that your internal team doesn't have to manage it. Depending on the size of your company, processing payroll can be a full-time job.

Add to this the complications that arise when you have a global workforce, and the labor costs of payroll processing can skyrocket.

Reduction of expenses

When you outsource payroll, you can automate your payroll system so that you can analyze and reduce any unnecessary expenses.

As a result, outsourcing payroll can:

  • Save you the money you would otherwise spend on hiring more HR employees
  • Reduce expensive payroll mistakes
  • Ensure that payroll is consistent, thus reducing employee turnover
  • And more

Ensure compliance

Payroll can be extremely complicated, especially for global employers. Outsourcing payroll ensures that your payroll complies with local regulations in every country where you pay employees and independent contractors.

Fast payroll processing

A global payroll platform means you don't have to manage payroll tasks internally. Instead, your payroll is automated, simplifying and expediting the process of paying international employees.

Disadvantages of outsourcing payroll

Not surprisingly, there are both advantages and disadvantages to outsourcing payroll services. Below are a few drawbacks you should consider.

Payment for unwanted services

Depending on the type of payroll platform you utilize, you could end up paying for services you don't need. If you're considering outsourcing payroll, you'll want to select a payroll service that can grow with your company and manage payroll in countries where you plan to expand your hiring base.

You also should ensure that the services you're paying for are the services you need.

Loss of control

When a member of your HR team processes payroll, you have complete control and can access any payroll information instantly. Contrary, when outsourcing payroll, you will have less control than if you manage payroll internally.

When outsourcing payroll, you need to have strong communication with the third party and abide by their company policies. Ensure you partner with a payroll service with an excellent online platform to ensure you have access to vital financial information when needed.

How Skuad can help

Skuad's unified employment and payroll platform allows employers to seamlessly manage all aspects of employment in one place. With global employment solutions in more than 160 countries, you can compliantly pay independent contractors and employees in their preferred currency without establishing a local entity or subsidiary.

In addition to processing payroll, we can help you onboard new employees, ensure country-specific tax and labor compliance, and more. Book a demo to see how Skuad can help you grow your global team today.


Is outsourcing payroll cost-effective?

Outsourcing payroll is a cost-effective option, as it cuts down on business expenses like hiring additional HR staff, unnecessary payroll mistakes, employee turnover, and more.

Do large companies outsource payroll?

Not all large companies outsource payroll, as some organizations prefer to invest in an internal HR team. However, companies that employ a large number of global employees face more significant financial risk if payroll is not processed compliantly.

Many large companies choose to outsource payroll so they can have peace of mind and internal teams can focus on other important tasks.

When should an organization outsource payroll?

An organization can outsource payroll at any time. However, it is particularly advantageous for international employers who need to be more aware of the complications that arise from remaining compliant with payroll processing in multiple countries. It's also a good choice for those who would benefit from saving time on managing currency conversion.

About the author

Nathan Williams is a Global Payroll Specialist and Finance Consultant. With a background in banking and finance, he is passionate about modern tech practices in payroll management and using global payroll platforms for global payments.

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