The payroll staff shortage is real. And that leaves companies wondering which tasks can be outsourced, which can be left to technology, and which still require in-house oversight.
In a global context, the problem is even clearer. Managing payroll across multiple countries means juggling tax laws, compliance requirements, exchange rates, and employment regulations, all of which can be time-consuming and high-risk.
In this guide, we’ll break down what payroll outsourcing involves, its benefits and drawbacks, and — with expert advice from Michael Nierstedt, Payroll Product Director at Multiplier — how to find the best payroll outsourcing company for your business.
What is payroll outsourcing?
Payroll outsourcing means hiring third-party payroll providers to manage some or all of your company’s payroll functions. Their payroll services can include processing payroll, calculating wages, managing tax deductions and filings, and processing wage garnishments.
In the context of global payroll, outsourcing means partnering with providers who can handle payroll across multiple countries. Each will have its own tax laws, employment regulations, currencies, and compliance requirements.
Depending on the needs of your business, global payroll can be managed in different ways:
- In-house payroll software: Some companies use payroll software to manage everything internally and handle tax payments and filings themselves. This gives them full control but also requires deep expertise in multiple compliance and tax laws.
- Local payroll providers: As global teams become more common, this is where outsourcing to local payroll companies comes in. Businesses operating in multiple countries can work with individual in-country payroll providers that act as agents who manage payroll processing, tax payments, and filings for each specific region.
- All-in-one global payroll solutions: Platforms like Multiplier bring local payroll expertise from across regions and countries into a single system, streamlining payroll management for companies with international teams. By consolidating payroll into one platform, businesses can reduce complexity, improve efficiency, and ensure compliance across multiple countries.
Pros and cons of outsourced payroll services
When it comes to outsourcing payroll, the decision is rarely black and white. On one hand, it can save you time, reduce errors, and ensure compliance no matter where your business operates.
On the other hand, you might find yourself dealing with high costs and inefficiencies if you don’t dig deep enough into the provider’s offering. Let’s look at the benefits and challenges that come with outsourced payroll providers before you decide to make the leap.
Benefits of outsourcing payroll
The major benefits of outsourcing payroll? Less time, cost, and stress! Let’s take a closer look.
Global compliance
Companies with a distributed workforce are cognizant of the fact that each country has its own tax laws, reporting requirements, and employee benefits, and trying to navigate all of these regulations with just their in-house teams can prove extremely challenging. In fact, 42% of companies that outsource payroll do so to comply with the various regulatory environments they operate in.
By outsourcing payroll, you can ensure compliance with local tax laws, reporting requirements, and employee benefits without overburdening in-house teams.
Access to localized payroll expertise
Expanding into new markets means navigating unfamiliar tax laws, labor regulations, and payroll requirements. Outsourcing payroll to providers with in-depth local knowledge ensures you can meet all regulatory requirements while enjoying a smooth payroll experience.
As Nierstedt explains, “Workforces are shrinking. We need to globalize. But the problem is companies are unfamiliar with the countries they want to go into, and that’s why they need a global payroll solution.”
With a global payroll solution like Multiplier, businesses can consolidate their payroll operations under one system, ensuring consistency and efficiency across multiple countries — without the hassle of managing multiple local providers.
Time for strategic initiatives
Payroll is essential, but managing it in-house can be time-consuming and resource-intensive — especially as your global workforce grows.
Instead of spending hours processing payroll, fixing errors, or keeping up with changing regulations, outsourcing payroll gives you time to turn payroll into a strategic function that also focuses on employee engagement, talent development, and long-term business strategy.
Fewer payroll mistakes
Manually processing payroll increases the risk of mistakes, especially in global organizations dealing with multiple tax jurisdictions and compliance requirements.
A reliable payroll provider uses a combination of automation and local expertise to reduce human error, ensuring accurate calculations, timely tax filings, and correct employee payments.
Cost savings
While it may seem more cost-effective to manage payroll internally, the reality is often the opposite—especially when factoring in the cost of hiring specialized payroll talent, investing in software, and maintaining compliance across multiple jurisdictions.
As Nierstedt explains, opting for payroll software requires in-house expertise — not just in processing, but also in tax payments and filings. “This expertise is becoming exceedingly difficult to find, and it’s likely that your organization wouldn’t have or be able to bring in the talent needed to perform in-house payroll. And if you do find the right people, the cost of the talent will likely offset any potential licensing savings.”
Limitations of outsourced payroll management services
Payroll outsourcing is not a magic bullet. If you’re using several local vendors, you’ll need to be aware of these limitations.
Unexpected costs
If you don’t fully dig into all of the costs involved with payroll outsourcing, you could end up paying a lot more than you first expected. On top of payroll processing costs, some providers charge extra for services like tax filing and reporting. Some also sell non-customizable bundle packages which can inflate total costs without adding any value to your business.
More significantly, paying for different local vendors in different regions not only increases direct costs but also administrative burden. You have to pay your team to manage multiple relationships, coordinate timelines, reconcile different reporting formats, and ensure compliance.
Workflow and communication inefficiencies
When you outsource to several local vendors (rather than a global payroll platform) you end up juggling relationships with several account managers across multiple locations. As Nierstedt notes, “This leads to a lot of missed requirements and delays, which often results in inaccurate or late payments.”
The more touchpoints there are, the greater the chance for miscommunication — whether it’s missing tax filing deadlines, misapplying deductions, or failing to process payroll on time.
Distributed data across multiple systems
Outsourcing payroll to local providers often results in data being distributed across multiple systems or platforms.
Accessing this information from different systems can be time-consuming, making it difficult to get an accurate, unified view of all payroll data as and when you need it. Data security also becomes a concern if your providers store sensitive payroll information in different locations as this can increase the risk of data breaches and non-compliance.
Damage to employee experience
Fragmented payroll management can create disparities between different groups of employees. When payroll isn’t handled through a consolidated system, employees in different regions may face delays, inconsistent pay cycles, or limited access to payroll support.
As Nierstedt puts it, “Employees in other countries can end up feeling like second-class citizens when they receive a poorer payroll experience compared to those at your headquarters.”
How to find the right payroll outsourcing services
Here are some insights from Nierstedt to help you find the right payroll service for your business.
Create a list of questions to ask potential providers
Before selecting a provider, you should also reflect on how far your pool of employees stretches. Taking stock of where your employees are located, the countries you operate in, and the type of payroll challenges you face will help you choose a provider who can meet those specific needs.
Then having a list of questions to ask when outsourcing payroll helps you make sure the provider’s services align with your specific employment needs. According to Nierstedt, a key factor is whether the provider can manage all aspects of your payroll from a central hub. “I should be able to go to one place for all my global entities. Whether it’s EOR, global payroll, or a contractor, a good provider should offer a single point of contact for all your global entities,” he advises.
Look for a technology-first solution
When it comes to evaluating your list of the top payroll companies and providers, it’s essential to prioritize those who can provide clear, tangible demonstrations of their tech. As Nierdstet says, “If a service provider doesn’t show clear, accessible visuals of their product, such as screenshots or videos, they may not be a technology-first organization — and this will eliminate a surprising number of providers.”
Consider integrations
Choosing managed payroll services that integrate seamlessly with your existing systems helps create a more consistent and hassle-free experience for employees.
Payroll providers should seamlessly integrate with your existing HR systems, creating a unified and consistent experience across all regions. As Nierstedt puts it, “Your global payroll provider should be able to share information with your other HR systems and create a seamless and consistent experience no matter the country they work in.”
Evaluate pricing
Payroll is not a function where you want to cut corners, so make sure you’re looking beyond the price tag.
A provider with enticingly low prices might not offer everything you need which can result in unexpected service gaps. Consider the return on investment, ensuring the provider can truly consolidate payroll processes.
Before you make any commitments, make sure you have a detailed breakdown of pricing.
Best practices for outsourcing payroll
When businesses outsource payroll services, they can save time, reduce compliance risks, and improve efficiency — but only if done correctly. Here’s how to get the most out of your partnership.
Establish clear service-level agreements (SLAs)
Define expectations from the get-go by outlining deliverables, timelines, and responsibilities in a service-level agreement with the provider. This ensures accountability, minimizes misunderstandings, and gives you a clear framework for addressing problems if they arise.
Verify the provider’s data security protocols
Payroll data includes sensitive employee information. Confirm that your provider can maintain payroll security and is SOC 2 Type I, Type II , and SOC 3 certified, and uses token-based authentication to validate users at every step across all systems.
Communicate any changes with your employees
Keep your employees in the loop about any payroll changes — whether it’s processing timelines, deductions, or reporting updates. Transparent communication minimizes confusion, builds trust, and makes the transition to an outsourced provider seamless.
Take control of global payroll with Multiplier
If you want to simplify global payroll without sacrificing control, Multiplier has you covered. Our all-in-one platform pairs cutting-edge payroll technology with local expertise, making it easy to manage payroll across multiple countries.
Here’s what makes Multiplier the best choice for outsourcing payroll:
- Our payroll experts are based worldwide, offering local insights and multilingual support.
- You’ll save time and cut costs by consolidating vendors into one streamlined, cost-effective solution.
- Our software ensures seamless compliance, handling multi-country taxes, benefits, and compensation without a hitch and integrating with your existing solutions.
Ready to see how it works? Book a demo.
