Employees may be paid on daily, weekly, bi-weekly, or monthly basis. A formal intimation to the employee of the credit in the bank account is given in a payroll stub or pay advice. This advice also contains details of all the deductions. Since the work requires considerable meticulousness, and knowledge of relevant statutory requirements, it becomes a job for professionals. In the United States, there are two levels of certifications for such professionals - the Fundamental Payroll Certification, and Certified Payroll Professional. The Fundamental Payroll Certification gives primary level guidance on payroll systems. It is designed specifically for new comers in the field, and other finance, human resources, and technology professionals. Certified Payroll Professional course is a more detailed course. The American Payroll Association offers both these courses.
A lot of time is consumed in resolving the issues emerging from payroll related activities taking the focus away form core business. Resources, such as manpower, and machines are necessary for processing payrolls. Resolving any problems entails a lot of time, which is expensive from the point of view of the business, as the time spent on this activity does not really contribute to the profits. Moreover, this is really a periodic activity. There are times when the systems are not being used, the personnel employed to look after this function may have little to do but wait for the weekend or second week to come to a close. Therefore, outsourcing this activity makes sense, as management will be able to focus on more functions in the business that would be fetching profits. By outsourcing payroll function, the management would not only save time, but on costs of personnel needed for such works, costs of installing hardware and software, costs of furniture for keeping such hardware and software, cost of space for housing the required personnel and relevant machinery, costs of paper, storage costs, utility costs, and other costs that are imposed by the law for the benefit of the employees. In addition to these, the company to which this work is outsourced by the business enterprise may be quite conversant with various aspects of it, and will be able to resolve matters related thereto much faster. Because of these factors, outsourcing payroll functions has become almost a norm.
The companies offering payroll management services may be offshore companies. They install required infrastructure, and train their staff thoroughly in payroll procedures as stipulated by laws. They can afford to further devote individual staff members for individual tasks such as verifying the payment advice, verifying the pay cheques, verifying the number of days of attendance of each employee, etc. Of course, there are software packages for payroll management that do the rest such as calculating the income tax on the income earned during the period, and deducting it directly from the amount. But data entry involved needs to be accurate. In addition to these, the employees of the company outsourcing payroll function may have their own doubts or instructions relating to their paycheck, which must also be clarified to the satisfaction of that employee. If, at any time, the employee leaves an employer, the details of his or her total deductions as of date need to be passed on to the next employer, if necessary. Payroll services providers manage the entire withholdings and are also able to generate data on total amount of tax deducted from the earnings of a single employee at any time, or the entire tax liability of the employer at any point of time. All this information can be generated in real time, as each and every employee on rolls of such payroll services provider is trained for this particular function. In addition, these employees bring to table the experience that they acquire by managing payrolls of other business enterprises as well. They also keep track of payroll cards that some employees of their contractor need to use because of their dishonored cheques. These employees of service provider know when various withholdings have to be paid to the respective state or federal government departments, or other local agencies. They remind their client of liabilities in time, and save the client from relevant penalties and legal complications. They also generate periodic reports as may be required by the management of the business. Liabilities for any errors such calculation of taxes, and payment of taxes are also taken over by the payroll services providers. Under normal circumstances, any such specialized services would cost more, but it is not so when the services are outsourced offshore. In fact, companies outsourcing their payroll function may save almost 40 percent of related costs and get more services in the bargain. There are tax incentives as well for businesses outsourcing their payroll functions. The country to which the works are outsourced gives these incentives, bringing down the overall costs still further.