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Reasons for Hiring Third-Party Payroll Services by Companies

Third party payroll services

Table of Content

  • Introduction
  • Use Cases of Third-Party Payroll Services
  • Importance of Hiring a Third-Party Company for Payroll Services
  • Conclusion
  • FAQs


Third-party payroll management has become essential to ensure employers are making correct payments, and following the right compliance regulations, and employees are paid correctly. Unfortunately, several companies across the country struggle to maintain accurate and constant payroll processing internally and must look for affordable services elsewhere.

The key to managing this vital process once and for all is hiring payroll outsourcing companies offering payroll services. It will work out to be the economic option that also offers the ability to maintain the accuracy and security of payroll data.

What Does Third-Party Payroll Processing Services Entail?

Payroll entails managing how much money each employee is supposed to receive after the respective calculations of reimbursement, tax deductions, bonuses, and more. Payroll services offered on a contract are an option for handling all the calculations associated with payroll as well as other matters such as compliance with various rules and regulations.

Use Cases of Third-Party Payroll Services

There are other reasons why a company, small or large would want to hire out a specialized company offering these services.

  • Lack of HR staff, lack of experience
  • Insufficient resources
  • Not enough time
  • Inaccuracy
  • Cost-conscious decision making

In all of the above scenarios, hiring outsourced payroll solutions tends to be the very best path for the company to take to solidify a reliable and stable payroll system.

Importance of Hiring a Third-Party Company for Payroll Services

Contract payroll services are becoming increasingly popular among companies that are looking to reduce workload, increase accuracy, and improve cost efficiency.

1) Companies Lacking Capable HR/Accounts Department

Handling payroll is a difficult task for HR and accounting professionals working within an organization, especially if the company is large, consisting of hundreds of employees. Outsourced solutions are the best way to manage all payroll activities efficiently.

These services become the obvious decision when a company is having extreme difficulty maintaining a team of regular HR staff. Constant resignations and staff that are not experienced or trained enough will further push a company to make a decision.

The company must decide between trying to internally manage all payroll services or outsourcing their problem to a payroll solutions provider.

Outsourcing seems to be the best option because there are several affordable options. Numerous

third-party payroll outsourcing companies exist throughout India.

2) SMEs Looking to Cut Down Costs

Small-to-medium businesses are always looking for ways to cut down costs and work more efficiently and payroll processing services come into this discussion. If hiring outsourced payroll solutions from another company, the services will probably be cost-effective and these payroll outsourcing companies are highly accurate and reliable.

These companies are a cost-efficient alternative to handling payroll internally. Plus, Small-to-medium businesses may not have all the resources to carry out the process on-site, making outsourcing payroll to external companies an honest thought.

Staff who would manage payroll can put their attention to other matters, allowing the company to work more effectively and this would allow for output to increase.

3) Companies Looking for Accurate Third-Party Payroll Services

Managing a whole company staff payroll can be a bit of a stressful process and due to the stress, the chances of human error increase! This becomes even more likely when there is limited payroll staff but a large number of employees to manage payroll for.

Payroll discrepancies will further create more problems as employees will be quick to raise complaints which will only consume more time for the HR staff and lead to more errors being made. As a result, hiring one of many payroll outsourcing companies offering affordable services would resolve all problems and still save money.

These services offer accurate payroll services with accurate calculations that a company can rely on. These services are available on contract. Using software and advanced technology, payroll service providers can be just what your company needs to thrive in all the right areas.

4) Maintenance of Compliance with PF, TDS, and Other Laws

Keeping in line with statutory laws regarding PF, TDS, and other formalities is vital if the company is to not face any legal problems which is why so many companies use payroll processing services. Staying up to date with the ever-changing compliance and statutory laws can be difficult, and not being aware of the changes as they happen can lead to penalties for the company.

This means you can trust these service providers to manage all the compliance aspects while you manage other core tasks and rest easy knowing your company is abiding by all the government-enforced laws and regulations regarding payroll.

Technology-aided contract payroll services are also able to ensure that maximum accuracy is maintained.

5) Reducing the Workload of HR Staff

HR staff are tasked with managing the company workforce and everything related to them. This includes leaves, employee well-being, onboarding, exit interviews, and organizing events internally and externally. Adding payroll to this list would only increase the workload and pressure placed on the HR department.

Affordable third-party payroll services aren't that hard to find for companies that have a smaller workforce.

If an HR team is rather small, it becomes quite impossible to manage everything and still complete them, let alone to the best of their ability. Plus, payroll is a relatively time-consuming process that requires full attention and the right skill set.

Not every company and HR department is well-equipped to conduct this process. As a result, hiring payroll outsourcing companies will work to relieve internal HR teams and allow them to dedicate their time to other activities.

6) Data Documentation & Security

Payroll data will be needed at some time or another. Ensuring that the data is safely stored is ideal for any company that may require it later on.

Keeping all this data and making sure it is safe may not be possible for every company to do, and if they are it may come up to be very expensive and tiresome. Luckily, companies can choose an alternative option in the form of outsourcing payroll services to experts who can offer dedicated services for this area.

Payroll companies would be able to provide safety, security, and dedicated human resources to take care of maintaining payroll and storing it securely. With more resources available to them, affordable third-party payroll services will also be more accurate and accessible.


Accurate and effective payroll management is essential for any company, regardless of size and industry. Payroll management will have its own set of requirements for a company and not every company has them. Hiring third-party payroll services can save time, and money, and prevent human error therefore it is the better option compared to investing heavily in obtaining these requirements internally.

These payroll services obtained from payroll outsourcing companies can benefit companies that find payroll management expensive or are of small size and lack the manpower to effectively manage the entire process.


Q.) Why do companies choose contract payroll services?

Ans. Companies usually opt to hire payroll services when the cost of payroll solutions that are to be outsourced is less than undertaking it internally and is the more affordable solution. Also, it saves the time of the HR team and this time can be used elsewhere where necessary.

Q.) Is outsourcing to a payroll services provider more cost-efficient?

Ans. Given that the third-party company will already have all the software and human resources available, payroll outsourcing companies are able to satisfy the requirements needed to deliver accurate payroll data. As a result of this readiness, these companies are more cost-efficient.

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