Guides - Human Resources & Payroll in China 2016

- Human Resources and Payroll in China 2016-2017 (5th Edition)

3.8 Outsourcing Payroll

Payroll processing is never easy work. As a company’s payroll structure becomes more complex,

and especially when the company is expanding its operations, both the time involved and the risk

of error increase. Outsourcing payroll then offers a solution. It takes valuable time off the hands of

local managers to have these processes automated. Entrusting thematter to an experienced payroll

outsourcer also reduces the risk of error and non-compliance. Additionally, when payroll is handled

externally, reports can be sent directly to HQ, ensuring confidentiality of sensitive information.

Advantages of Outsourcing Payroll

More and more companies are turning to third parties to handle their payroll in China. Common

reasons for doing this include:

1. Increased efficiency

Providers should have their own software that can generate all the necessary reports required by

the client, the bank and the Tax Bureau. This is more efficient and reliable than generating reports

internally using relatively manual processes on software like Excel.

2. Increased accuracy

Running payroll through a manual system can often lead to mistakes. This presents a poor image

of the company to its employees. It can also cost the company money if employees have been

overpaid or are left on the payroll after they have left the company. Both of these phenomena are

remarkably common.

3. Increased transparency

It is necessary to have a clear procedure in place to ensure that the source of problems can be

located and reported to management. When companies handle payroll internally, it will often be

the case that such problems are rectified without any reporting to management. By outsourcing

the payroll process, this possibility can be eliminated.

Problems with payroll can come from one of two areas – incorrect input information or incorrect

processing. In the first instance, the problem lies within the company’s inter-departmental reporting

structures. As long as the problem is reported tomanagement, it can be investigated and dealt with.

In the second instance, the problem lies with the setup of the payroll calculation software itself. If

the company is outsourcing payroll management, the provider should take responsibility for the

error and the client should consider switching providers in the future.

4. Increased confidentiality

By outsourcing payroll, there should only be a small core of senior people in the organization who

are aware of payroll details. The finance teamwill only need to know the total amount for the payroll

every month, not the individual breakdown.