By Dawn Ehrhart, Chief Operating Officer, People2.0
The world of work continues to evolve at a rapid pace. The pandemic ushered in an era of remote work, but the change didn’t stop there. Now, companies are not only employing full-time remote workers, they’ve also increased use of contingent workers across the globe and the gig economy has exploded.
A U.S. Government Accountability report states that more than 30% of companies reported using contractors in 2020. And a sampling of S&P 500 companies in 2021 found 89% mentioned using contractors.
Contingent labor is clearly where the market is trending. And, as we head into a new year with economic uncertainty, companies will continue to leverage contingent workers as a way to scale up or down quickly.
However, this varied workforce isn’t without its complexities. A recent survey conducted by the Global Payroll Management Institute and the American Payroll Association found managing the complexities of multi-jurisdictional payroll, compliance challenges, and inefficient processes are top concerns for organizations. Is your organization capable of handling these complexities? If not, it might be time to bring in an outsourced payroll partner.
Should your company outsource payroll?
Not every organization needs to outsource payroll. Companies, for example, with <50 full-time employees operating in a single U.S. state without immediate plans to expand, may not be an ideal candidate. However, companies with 100+ employees spread out across multiple states and countries should consider outsourcing. Additionally, organizations with a large contingent workforce may benefit from the expertise of an outsourced payroll partner.
Oftentimes, the complexities associated with a large and global payroll can overwhelm and stress internal teams. Details like overtime rules, paystub presentation, multi-state and multi-country taxation, and other regulatory requirements are difficult to keep track of and can challenge internal payroll teams.
By outsourcing payroll responsibilities to a trusted partner, organizations can grow faster, maintain compliance, and support a varied workforce comprising full-time, part-time, contingent, and freelance workers. Companies can rest assured they don’t have to juggle the ever-changing multi-jurisdictional tax and compliance regulations because their payroll partner has it covered.
What to look for in a payroll partner
There is so much more to payroll than time capture and distributing checks. While those two elements are at the core, a more holistic partner may also support a wide range of back-office tasks. Before you start vetting potential partnerships, consider whether you need basic payroll services or could use the expertise of a fully-integrated partner. Regardless of the breadth of services you need, there are specific elements to look for.
Advanced technology and integrations
Workers demand a seamless and intuitive payroll process. And more and more, they want that process to be accessible through mobile devices. Your outsourced payroll partner should be at the forefront of technology and mobile enablement.
They should also offer various options for time capture and payment. Some payroll partners may have their own web platform for time capture, while others can integrate with your current time management system or VMS tool. From there, it will be important to choose a partner that can facilitate all of your current payment models: check, direct deposit, pay card, or daily pay.
The more advanced, in-depth technology your partner has, the better insights they can share. A strong partner helps you understand patterns they are seeing and how that impacts your business decisions. They should act as a consultant and advisor by identifying trends and identifying practical ways to address them.
Global compliance and regulatory expertise
In-country knowledge is crucial to a successful workforce program that crosses borders. It can be difficult to monitor regulatory changes across multiple countries, but it is the responsibility of an outsourced partner to keep abreast of those changes.
Look for a partner who has actual boots on the ground in countries where you employ workers. This allows them to closely track changes and develop deep knowledge of the area. When your partner is immersed in regions where your workers live, you reap the benefits.
Exceptional client and employee experience
Both employers and employees need to be recognized and served well by an outsourced payroll provider, which is why seamless connection between the employer and payroll partner is critical.
Workers shouldn’t feel as though they’ve been deflected to a payroll vendor after being recruited. There should be an uninterrupted flow from onboarding and time capture to payment and offboarding. Your payroll partner should facilitate a collaborative environment with cross-departmental communication between legal, human resources, and IT teams.
Expanded capabilities
Hiring an experienced partner with a strong EOR/AOR network can work to your benefit. In some cases, a partner may have access to reduced worker’s compensation rates as a result of their large footprint and network of clients. They may also have connections with other helpful resources and business services.
For those looking to outsource additional back-office functions beyond payroll, consider partnering with a company that can do it all. It’s much easier and cheaper to manage varied and global work arrangements through an outsourced partner than it is to build an in-house team. This not only allows your team to focus on more revenue-generating activities, but allows you to quickly scale up or scale down as needed.
Outsourcing positions your organization for whatever comes
A growing percentage of the workforce is already contingent, and a recession in the U.S. and beyond will make contingent workers more attractive to employers that are worried about committing to full-time hires in a time of uncertainty.
The ability to flex up and down is going to be the preferred stance for companies as we head into 2023. Looking at your payroll processes and exploring outsourcing is one way to stay in control as the economy continues to change.
With over 18 years of experience in the staffing industry, Dawn has broad expertise in payroll and compliance, and has held leadership roles in tax, shared services, and operations. Dawn is a highly qualified financial specialist who holds a law degree and is a registered Certified Payroll Professional.
