The benefits of outsourcing over the recent years has made it an immensely profitable and well sought out business. The beginning of payroll outsourcing in India can be traced back to the year 1997. It is said that as per a report in the Business Week, "processing your own payroll requires 54 steps and eats up between 40 to 60 hours each year, even for two-employee companies." This article evaluates the various benefits of payroll outsourcing.

Payroll outsourcing is advantageous to the companies involved and the general economy of the country. Payroll function involves various activities like payroll data processing, salary remittance, maintenance of payroll master file, tax and other statutory calculations and its compliance, dealing with payroll related queries of the employees, etc. An error in the process can make lead to the disapproval from the employees or the government. On outsourcing this function, the company can enjoy a lot of benefits. The time and resources spent on the calculation and remittance of the monetary benefits can be utilised for strategic planning which can have a huge impact on the long term policies of the company. This process is cost effective as the scarce resources of the company can be utilised for other purposes. As stated above, it was noted that payroll processing is said to utilise a minimum of 40-60 hours each year even for a small company. The company can reduce the people requirements when the payroll process is outsourced. On contracting the payroll function to another, the company can save on the amount spent on acquiring better technology and the expertise required for the same. The expertise of the outsourced company can be utilised for getting quality results.

With the payroll process involving the compliance of many statutory requirements outsourcing the process does not require the company to keep track of the changes in the legal aspects of the process. Failure to comply with the laws results in penalties and litigations against the company. On transferring the job of payroll processing to another company the company can gain on its resources – financial and goodwill.

With the company business scattered over the world, keeping track of the legal requirements is by no means an easy task. Outsourcing helps the company from being well versed in the laws of various countries. Legal remittances like tax must be done within the stipulated time. With many companies spending a significant amount on penalties for the failure to reimburse the amount on time, the outsourcing process saves the company from such losses.

The success of outsourcing the payroll function has led to the increase in the number of companies who provide the expertise. India’s mastery in the outsourcing business has induced many foreign and Indian companies to outsource their payroll function to the leaders in India. The income generated by both companies has added to the GDP of the economy of India leading to industrial development.

Thus the process of outsourcing has great importance in the current business scenario.