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Human Resources and Payroll in China 2016-2017 (5th Edition) -
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5. Decreased liability
Outsourcing payroll management reduces the risk that the company will make incorrect filings to
the Tax Bureau. Assuming that the correct information has been provided to the third party by the
agreed deadline, any responsibility for under-reporting of tax or penalties for late filing will be the
duty of the outsourced company.
6. Decreased cost
While the costs of outsourcing are quite obvious, they should be carefully comparedwith the costs of
running payroll internally. These can include staffing costs (HR / IT / managerial resources), software
development costs and other miscellaneous costs. Mistakes made when processing payroll can
cause discontent among a company’s staff and lead to an increase in staff turnover. This is a very
significant cost for a company to burden.
Please bear in mind that outsourcing payroll will not mean that a company can entirely disregard
its internal HR costs. Companies will still need somebody internally to supply the input information
to the provider and approve the payroll each month, as well as other HR tasks, such as organizing
the hiring of employees and ensuring observation of internal regulations.
Payroll Processing Procedure
There are several distinct steps during a payroll processing operation:
Step 1: Submission of payroll input information by company
This should include all the information regarding staff who have joined or left during the month,
details of salary increases, bonuses and other allowances. Depending on the scope of the outsourcing
work, the company may also need to provide time management sheets, mandatory benefit
contributions and details of annual leave taken for each employee.
Step 2: Initial processing of “master report”
At this stage the payroll processor checks all the information sent by the company before uploading
it into the payroll processing software. After uploading is complete, the software can generate the
“master report”. This file details all the components of salary for each individual, as well as figures
for net salaries, IIT payments, social insurance contributions (for employee and employer) and total
compensation and benefit costs for the employer. It also shows the total amount of money that
the company must prepare for payment of salary, IIT and social insurance payments. The payroll
processor will send this file back to the internal HR manager at the company for approval.
Step 3: Approval of payroll data
The internal HRmanager will check the information on themaster report, paying particular attention
to the completeness of the input information sent to the payroll processor. Once everything is in
order, the HR director will approve the payroll.