What is Payroll? — Types, Challenges, and How to Outsource Payroll

Vedika Dureja
3 min readMay 13, 2021


What is Payroll? — Types, Challenges, and How to Outsource Payroll

Payroll is a list of workers who receive payments from an organization. It also refers to the total amount of money an employer pays to the employees or the business process that deals with employees’ wages after factoring in applicable federal or state payroll taxes.

Payroll may also refer to the organization, agency, or program that processes employee pay checks and taxes, as well as the method of measuring and distributing them.

Types of Payroll

1. In-house Payroll Services

For companies with low employee strength (<=10), using an in-house payroll service is the best option. It helps you save money, and the company’s data remains confidential.

2. Bookkeepers and CPAs (Certified Public Accountants)

For an organization to provide financial statements, tax, accounting, audit, and other economic resources, a company’s payroll services may also be outsourced to Bookkeepers and CPAs.

3. Payroll Services

Hiring a payroll processing provider for your small company is the best decision you will make because you will be dealing with a team of payroll consultants who can assist with different tax and regulatory matters as required.

Payroll Challenges

1. Local Payroll Laws

The issue with local payroll laws compliance applies to companies with a presence in more than one country. It becomes imperative to address the payroll laws of all the countries your company has a setup in. Otherwise, it might lead to compliance issues.

2. Security of Data

For your company to prosper, the data protection and privacy of your multinational staff and consumers are critical. Investing in good payroll and HR technologies for your global workforce will help you stay ahead of the competition.

3. Finding the right combination between multinational method and local versatility

Finally, businesses must balance retaining a global payroll structure and the stability provided by local laws and regulations.

Outsourcing Payroll

Payroll outsourcing is a mechanism in which a company hires an outside agency to do all payroll operations on their behalf to save time, resources, and effort. When opposed to in-house payroll administration, outsourced payroll systems have greater consistency because it is prepared, analysed, and reviewed by trained practitioners.

Giving this crucial aspect of the market to a third party will save time, resources, and regulatory problems, making it a wise business decision for international corporations of all sizes. As a result, a growing number of businesses and small business owners are outsourcing their payroll functions to specialist payroll service providers that have advanced and professionally run payroll services.

Benefits of Outsourcing Payroll

1. Saves time

Outsourcing saves resources, cuts workload, eliminates irregularities, and eliminates defects that can arise because of handling several roles.

2. Reduced costs

Most people are unaware of how much more costly manually handling payroll is in comparison to outsourcing to a payroll provider.

3. Ideal for preparing payroll taxes and filing government returns

Outsourcing payroll to a payroll service provider is essential for accurate tax filing and payment.

4. Avoidance of Civil Penalties

Since tax reporting can be a quarterly process, it’s critical to delegate payroll responsibilities to a qualified and experienced individual or organization. Fines are normally the product of civil sanctions that should have been stopped if organizations managed payroll appropriately.

Payroll management is not an easy task, especially when done manually. It is a good decision to outsource payroll due to the multiple advantages it provides. And it’s not even difficult to find payroll solutions these days. The world is operating remotely and the advances in HR Tech are helping payroll management. Global payroll platforms like Skuad, Papaya Global, and many more, are leveraging this opportunity to simplify cross-country payroll and compliances for organizations like yours.