20.10.2022 HR and Payroll outsourcing

What is the cost of HR and payroll outsourcing?

HR and payroll outsourcing consists in entrusting a specialized external company with all or part of HR and payroll activities. Why do employers decide on such a solution and what is the cost of it?

HR and payroll in the external model

HR and payroll services create many challenges for employers. Problems with recruiting and retaining employees of HR and payroll departments, frequently changing regulations and the progressive digitization of HR requiring investment in IT infrastructure are key arguments in favor of entrusting this area to specialized external companies. The study “Why companies decide to outsource” shows that for employers who already use HR and payroll services, it is also important to have access to the supplier’s knowledge and competences, save time and transfer responsibility for the correct implementation of processes. On the other hand, fewer and fewer companies perceive outsourcing as a way to reduce costs.

HR and payroll outsourcing – the most important benefits for companies

Conducting HR and payroll by a specialized external company above all provides access to appropriate resources, knowledge and experience of the supplier. One of the key benefits is compliance, i.e. the guarantee of compliance of HR and payroll processes with the currently applicable regulations. In the case of outsourcing of personnel and payroll, it is the supplier’s responsibility to adapt IT procedures and systems to legislative changes. This is especially important in situations where there is little time to implement changes, as in the case of recent changes related to the entry into force of the Polish Order.

HR and payroll outsourcing is also a good way to optimize processes. Experienced suppliers who provide HR and payroll services for many different companies have the knowledge to streamline activities in the HR area. This is also supported by IT solutions that automate processes, improve efficiency and reduce the risk of errors.

The HR and payroll service in the external model also ensures the continuity of HR and payroll processes, which is crucial for the proper functioning of the entire organization. The current situation on the labour market causes more and more difficulties in recruiting and retaining employees, especially those with appropriate competences. By deciding to cooperate with an outsourcer, the company gains access to the supplier’s resources, then it is the supplier’s responsibility to provide an appropriate team to achieve smooth service of customer processes.

Find out more: HR and payroll outsourcing – step by step

HR and payroll outsourcing – cost for the employer

Entrusting HR and payroll services to an external supplier is nowadays less and less perceived from the angle of cost reduction. For some companies, however, it is still a very important argument in the decision-making process. However, it should be remembered that the above-mentioned non-financial benefits will also bring the company tangible savings, for example by minimizing the risk of penalties for non-compliant activities or no need to invest in IT solutions.

The HR and payroll outsourcing price list usually consists of several elements:

Implementation of the serviceOne-time cost, including system configuration and data migration
Monthly cost of HR and payroll servicesFixed monthly fee, depending on:

– scope of the service
– number of employees
– employment structure (eg is there a predominance of employment contracts or mandate contracts)
– the specificity of the industry in which the company operates and the complexity of HR and payroll processes
End of the year servicesPreparation of annual PIT and ZUS IWA declarations – the fee is charged once a year based on the number of employees
Additional servicesActivities not included in the regular monthly service, most often billed based on the number of employees, in the form of a fixed fee for a given activity or an hourly rate, e.g:

PPK service
handling employee benefits
– access to the employee portal
– ePUE administration
– consultancy in the field of labour law
– preparation of non-standard reports
HR and payroll audit  
“Why Companies Use Outsourcing”, study by Crowe, Contract Administration and TGC Corporate Lawyers, 2021

The cost of HR and payroll services is calculated individually, based on a number of criteria, especially those mentioned above, related to the monthly service. It is worth adding that the larger the scale of the project and the scope of the service, the lower the unit price for servicing per employee.

What should you consider when choosing a service provider?

When analyzing offers for HR and payroll outsourcing, it is definitely not worth taking into account only the price. First of all, you should carefully compare the activities that fall within the basic scope of the service. It may turn out that the need to regularly pay additional fees that are not included in it, will significantly increase the cost of servicing HR and payroll processes.

It is also crucial to choose a professional supplier who will ensure high quality of service and safety. During HR and payroll services, sensitive data are processed, such as personal data or information on employee salaries. Therefore, it is very important to verify the competences of the outsourcing provider also in the area of technical data protection, to be sure that the processes and data transferred to it are properly protected.

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