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Why do more and more companies turn to payroll outsourcing?

The intense competition, unstable market conditions and unpredictable legislative measures constitute the reality that the Romanian companies are facing when dealing with daily operations. No matter the activity field, each company is forced to prevent the effects of these internal measures aimed primarily at reducing labor costs, measures which are often translated into unpopular actions: layoffs, salary reductions or reduction of benefits packages value.

The management’s availability to apply these measures is largely contrary to the absence of preliminary assessments, which indicate the cost centers potential to support business constraints such as overall performance and to increase departments concerned. The main reason for the lack of availability of internal analysis is the time required and the allocation of internal resources for evaluating the opportunity to reduce personnel administration costs. Restructuring budgets at this level should not result in a reduction in the quality of work, which happens most often when management exerts added pressure on the HR department, which in turn compromises the personnel administration processes.
According to latest studies conducted by Daedalus Consulting in collaboration with human resources departments in medium and large companies in Romania, the most acute need is felt in the payroll efforts: the Romanian legislation is far too dynamic even for the most active HR professionals; thus, the frequency and complexity of deploying monthly calculation algorithm changes prove to be major impediments.
However, there are solutions to these limitations with operational character: the latest international trends converge towards the adoption of a modular business model according to which the business segments that do not match with the company’s core competencies, are outsourced by business partners that may excel on that particular activity field.
Managers are beginning to realize that the efficiency of HR department in terms of salary calculation occurs only through internal allocation of large budgets that do not justify the overall effort. The time spent on monitoring legislative news, staff training costs and frequent updates of the internal system for an effective calculation following the new algorithm, are costs that few companies assume.
The adoption of salary outsourcing practices is not a sign of organization weakness but rather the recognition of thresholds of performance that can be achieved by adopting modern management practices, fully adapted to the turbulent business environment constraints generated by the domestic economic crisis. In addition, by relieving the salary calculation activities, companies can focus their resources on developing the strategic role of HR department that contributes to the long-term vision of the personnel management plan – aspect lacking in Romanian companies who are wasting resources in areas that are not priorities for their business.
Personnel outsourcing benefits
  • Improved operational efficiency. An automatic and standardized system for the payroll activity gives companies a cost reduction of up to 30% compared with the situation in which this process takes place internally, and with a 40% lower calculation time. The extra time and budget can be easily directed to other priority areas of the organization that can benefit significantly from additional resource allocations.
  • Access to superior expertise. Through outsourcing service providers, companies have access to calculation practices that have acquired efficiency during the administration of wages of hundreds of companies. In addition, besides the basic services, many business partners provide also HR consultancy, service aimed at the improvement of processes adapted to the specifics of each organization. 
  • Transparent costs. Companies can easily track costs associated with outsourcing because most Romanian outsourcing companies are using monitoring solutions for the time allocated to activities taking place on that account. The hours are recorded in real time while weekly reports directly overseeing the effectiveness of services can be presented to the management.
  • Daily monitoring of legislative changes and their integration in the payroll calculation. The premium outsourcing solutions available on the Romanian market ensure legislative updates to the application within 48 hours from its publication in the Official Gazette. These updates are performed by teams of consultants specialized in employment law that advise clients on the implementation of changes and prevent legislative conflicts that can cause calculation errors.
  • Fairness in filing the necessary documents for the state. Deposits are made at due time and automatically by the outsourcing company, as required by law. All risks are assumed by the contract terms that enact the relationship between partners and aims the full responsibility of the company that provides outsourcing services.
  • Reliability and continuity in service delivery. The services provided often have continuous character (99% uptime service): the payroll calculation activities are not affected by absences, holidays or technical problems of the provider. Also, the staff trainings designed to keep employees connected to the latest developments in the labor market, the acquisition and maintenance costs of hardware and software infrastructure are eliminated. If we take a look at the acquisition price of an internal payroll and personnel administration solution, we can acquire payroll outsourcing services that are equivalent for 20 years.
  • Fast go-live. If you approach TotalSoft or a TotalSoft partner for payroll outsourcing, the request can be received in 24 hours comprising the complex payroll for the entire personnel of the company.


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