Many may question why outsourcing has become so popular all around the world and why many new companies see outsourcing as a means of saving time to focus on implementing their business strategy.
Human resources (HR) outsourcing is no different, becoming increasingly common in the world today where every organisation has to cope with a talent war and growing HR costs while still needing to maintain a good working environment for employees, be in compliance with the law and labour regulations, and bolster the business’s competitive edge.
Payroll outsourcing is a top priority for new companies in Vietnam, who pay much attention to legal compliance and the confidentiality of salary data. Payroll outsourcing is where an organisation uses external resources and professional systems to manage their payroll activities, from salary payments and insurance payments to personal income tax payments. Outsourcing payroll activities to a third party can help organisations not only utilise the vendor’s expertise to stay up-to-date with labour regulations but also sees them benefit from advanced systems that have been fully-tested and certified in terms of security and back-up plans.
Furthermore, according to research, the total cost, consisting of both the personnel and management cost, for one payroll headcount is 2.5 or 3 times their monthly salary. Therefore, the cost of outsourcing to a payroll vendor is similar to the wage of one headcount, but organisations can make huge savings on training, benefits, annual salary increments, and working space. Outsourcing payroll can also prevent new companies from other risks, like incorrect salary calculations or being unaware of legal changes, which would need to be redressed at a later date with an accompanying cost.
However, the greatest concern for most local companies when outsourcing their payroll process is the risk of confidential data being disclosed. Selection of vendor is therefore crucial. The best method is to do some research, checking with existing clients to gain an insight into the vendor. The flow of data and communications between client and vendor also needs to be taken into consideration, to foresee any potential risk of information leaks. Well-tested and certified software to ensure security is a must. It is also highly recommended that the client and vendor conduct a trial to gauge accuracy and the integration between their two systems.
Payroll outsourcing is on the minds of most newly-established companies all over the world and is particularly useful given the evolving nature of labour regulations and local practice.
(*) This column was prepared in co-operation with Talentnet Corporation. To obtain more advice on Vietnam’s labour market, email firstname.lastname@example.org.