Outsourcing Payroll and HR Management: Q&A with Adam Livermore

October 27, 2016 Posted by China Briefing Reading Time: 5 minutes

Payroll covers all aspects of paying a company’s employees. This includes making sure that salaries are paid in the correct amount and on time, that income tax is withheld, and that social security contributions are made. Underpaying a valued team member by accident can impact staff retention. Paying salary to an employee that has already left is equally problematic, though for different reasons. One would be surprised to learn how often these issues occur, or more shockingly, how often employees are involved in defrauding these funds.

With a country as fast-paced and dynamic as China, regulations affecting payroll change quickly. If employers do not closely follow these developments, it’s easy to miss an update and suddenly fall out of compliance. In this way, a minor oversight can have major ramifications. Depending on the jurisdiction, strict fines may be imposed for incorrect or late payments of individual income tax withholdings, or social security contributions.

At the same time, payroll is a tedious task that can distract from a company’s main purpose. Especially when a company is quickly expanding its operations in China, it may not be the best use of time to have the local manager personally handle payroll transactions.

Outsourcing payroll then offers a solution. It takes valuable time off the hands of local managers to have these processes automated. Entrusting the matter to an experienced payroll outsourcer also reduces the risk of error and non-compliance. When payroll is handled externally, reports can be sent directly to HQ, ensuring confidentiality of sensitive information.

RELATED: Payroll and Human Resource Services

Question: What information would a company have to provide to a payroll outsourcer?

Adam Livermore: This depends on what information one expects from the payroll provider. A key maxim in payroll (which is mainly IT) is ‘garbage in, garbage out’. Providing only the most basic data will only enable your payroll provider to make payroll calculations for you, such as salary, leave and bonuses. The more detailed HR information you can provide, the more sophisticated analysis your payroll provider can provide.

Q: Can a payroll provider explain how much a new hire is going to cost, or how much terminating an employee will cost? Or how to track employees’ leave?

AL: Mostly, yes. A payroll outsourcer can provide you with estimates of how much a new hire would cost in total. A payroll provider with a presence in multiple countries can for example assist you with determining where actual labor costs would be the most favorable, and provide the information necessary for decision-making. However, costs like terminating an employee, maternity leave or a work-related injury often highly depend on the situation or profile. Some of these considerations fall in the legal realm. Assessing these and negotiating with employees is a highly specialized task. Payroll outsourcers can configure platforms which allow their clients to manage the leave their employees are taking, although it is recommended this data is cross-referenced with a physical attendance management system where possible.

Q: Do companies have to manually submit staff changes to the payroll provider?

AL: For things like staff changes, the payroll outsourcer needs have some way to know you have employees joining or leaving. If you have an internal system that tracks this, it should be able to generate a ‘change information’ file to upload into the payroll system. Often, the payroll provider will also have such a system for its clients to use. The same goes for expat’s visa status. The client has to store visa renewal dates somewhere, and agree with the outsourcer on a way to track this information. One way or another someone inside your organization should be submitting these kinds of details into some platform, ideally subject to an approval process to increase the reliability of the data.

Q: Can a payroll provider assist with document retention or the handling of staff access to documents?

AL: For original documents normally the ideal method is to use a specialist storage company. However, the payroll outsourcer’s system should have the option of uploading various documents, and setting access and security controls for these. Typically, HQ will want to have as much access to information as possible, while restricting certain information to the local team.

This article is an excerpt from the April issue of China Briefing Magazine, titled “How IT is Changing Payroll Processing and HR Admin in China“. In this edition of China Briefing magazine, we examine how foreign multinationals can take better advantage of IT in the gathering, storing, and analyzing of HR information in China. We look at how IT can help foreign companies navigate China’s nuanced payroll processing regulations, explain how software platforms are becoming essential for HR, and finally answer questions on the efficacy of outsourcing payroll and HR in China.

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