Businesses in South Africa face numerous payroll related challenges, which are expected to continue through 2016. The price hikes for food and fuel, together with a threatening drought that will lead to more price hikes in future leave employees with less money in their pockets at the end of the day. This contributes to a volatile labour market and with regular changes in labour and tax regulations, managing the payroll effectively becomes a challenge.
However, one of the trends that we see emerge is that of making use of payroll outsourcing services. Johannesburg- and Pretoria-based companies have reported tremendous cost savings associated with outsourcing of their payrolls.
Various factors are contributing to the challenges of managing HR and payroll, leading to more companies approaching service providers that offer affordable payroll outsourcing services. Though companies in smaller towns far from cities such as Johannesburg and Pretoria have yet to come on board with ways to reduce their costs through payroll outsourcing, the overall trend suggests a general outsourcing culture that includes outsourcing of bookkeeping, accounting and tax processing, in addition to payroll management. Some trends that have emerged in 2014-2105 are briefly noted below.
Tax Regulations Becoming Even More Multi-Faceted
The tax compliance requirements are becoming all the more difficult to keep up with and with the complexity already experienced, businesses will in future have to deal with pension fund changes, higher PAYE taxes and stricter regulations regarding allowable benefits.
In-house Fraud Problems Associated with Payroll Tasks
More and more companies are reporting payroll fraud and this trend is expected to continue as criminals become more sophisticated in the way they operate. Forensic investigations cost companies money and payroll fraud often go unnoticed for years. Outsourcing the function may help to solve the problem, ensuring compliance with regulations and minimising the risk of internal fraud.
Taking Payroll Virtual for Improved Mobility
Many smaller businesses are taking to the virtual world for payroll management with outsourcing companies providing them with online systems where their employees can track their salary histories, payments and HR related information. With self-service options employees can update their payroll information which helps to streamline payroll management and ensure that the information is kept current. Processes such as travel claims can now be done online, enabling employees that work remote to put in claims in a timely manner to ensure on-time and accurate payment of salaries.
The virtual world is expected to become even more important in future because so many people in South Africa are already using mobile. With such even employees working far from their company head offices in for instance, Johannesburg, will be able to log in to check their salary status.
Outsourcing More Payroll Functions
Many companies have moved from straightforward payslip generation and EFTs to employee accounts by outsourced companies to full management of their payroll. With such, the companies benefit from freeing up resources and being able to focus on profit generating activities, while the firms providing payroll outsourcing services handle from leave calculations to PAYE tax calculations, UIF payments, tax returns, submissions, reports and bank reconciliations.
It seems as if the line between payroll management and tax management outsourcing is finally wiped with the outsourcing now including both functions. This ensures higher accuracy, improved compliance, reduced risks and lower costs for the client companies. Of course, it also implies lower cost regarding training of personnel, office rental space, technology upgrades, maintenance and various other hidden costs.
The benefits of outsourcing are becoming all the more apparent:
The trend of outsourcing HR, tax and payroll services to expert companies will have a positive effect on business operations as firms are able to concentrate on core activities rather than on back-office tasks.