Many may argue that money doesn’t buy happiness, and while this may be true, it is still a major factor in an employment relationship. Successful employment relationships are built on trust, and if businesses do not appropriately execute a foundational requirement, such as paying people on time, it impacts employee morale and their sense of trust in the employer. Thus, it is essential to focus on how to make sure that payroll is done accurately, timeously and in a compliant manner.
Due to the business importance of getting payroll right, payroll functions are often outsourced to an external provider. This is particularly evident when a company expands their operations globally. But why is this? Why are companies so comfortable trusting a service provider with such a crucial part of their internal operations?
Read on to find out why companies choose to outsource payroll and discover the benefits that your business may be missing out on.
At its core, payroll is essentially concerned with compensating employees for work done. This involves processing payments to employees as well as contractors in a timely, consistent, and effective manner. All these procedures must be carried out in line with local regulations and labour laws, which vary – sometimes drastically – from country to country. A company expanding on the African continent needs to be wary of how they manage their payroll, as there is a lot of room for error and non-compliance due to complicated tax and labour legislation.
Simplistically, payroll can be thought of as the following equation:
Due to the difficulties associated with operating payroll for a global workforce, companies operating on a global scale often outsource their payroll to an Employer of Record company.
An Employer of Record (EOR) is a third-party organisation that acts as a registered employer and provides a legal framework to ensure compliance and thus reduce the risks associated with HR functions.
The benefits associated with outsourcing your payroll process can be broken down into immediate and long-term benefits, as seen in the visual below.
Surprisingly, administering payroll in-house is often costlier than paying a third-party service provider to manage it. This is because when expanding into different countries (particularly African countries), there is a need to train and set up a specialised team with specialist software to manage the payroll process. Further, given the complex legislation in many African countries, payroll consultants must quickly become industry experts to prevent costly mistakes or late payments.
If, for example, a company is simultaneously expanding into Madagascar, Algeria and Ghana, an in-house payroll team will need to be set up for each of these new areas. Establishing this function per country will be expensive due to associated setup, training and maintenance costs. By contracting with an Employer of Record, the company is entrusting the processing of payroll to an already established, trained and fully equipped team with the right hardware and software, and they can process your payroll needs instantly.
Further, payroll consultants at a EOR such as Africa HR Solutions are specialised experts in their countries of focus, thus ensuring that payroll is managed at the highest level of accuracy.
Processing payroll is both a time-intensive and time-sensitive matter. There are many fluctuating and dynamic factors to consider, including hours worked, leave taken, bonuses and various deductions. Accurate data entry and recording are essential to ensure fair compensation in accordance with local labour laws.
Each African country also has its own specificities that make payroll a more complicated and lengthy process. In South Africa, for example, overtime can be paid in two ways: either by financial compensation or by giving the employee paid time off proportional to the extra time worked. If for a given month, an employee wishes to be paid for 2 hours of overtime and wishes to take time off for the other 2 hours of overtime worked, this significantly adds on to the work that must be done by the payroll team.
Considering the time and effort that payroll requires from all involved, outsourcing to an Employer of Record may be the most effective solution to reduce the intense administration required from employees, who have more time to add value to their teams and ultimately the organisation.
Outsourcing payroll processes immediately benefits an organisation by reducing overall financial investment and by offering time back to its employees. Both of these benefits reduce the current employees’ workload, allowing them to focus on the profit-generation portion of their roles, rather than laborious administration. Outsourcing payroll is a smart way of ensuring that employees’ time and skills are used where they are most needed.
One crucial characteristic of a good payroll system is consultants having a thorough knowledge of local labour laws. These laws vary significantly from country to country across the African continent.
All these small details add up to create a vast amount of information that must be assimilated by a payroll team. Understandably, this may prove to be challenging for an in-house team to completely master, particularly if an organisation is simultaneously expanding in several different countries. Therefore, the services of an expert payroll service provider are often preferred, as they manage this information to run an organisation’s payroll process accurately.
Payroll is a complex process to navigate and requires not just the theoretical knowledge of local legislation, but also an intimate practical understanding of the correct steps and actions to take when setting up and executing a payroll run. This level of expertise can only be acquired through years of training and experience in the field. Partnering with an expert payroll practitioner ensures high-quality expertise in the payroll systems utilised and an efficient turnaround time throughout the process.
In the long-term, partnering with a team who understands local legislation and required governance procedures, as well as having expertise in the processing of payroll, mitigates a company’s risk of poor practice in their areas of expansion. This protects employers from costly penalties, as well as creating a positive and trusting employment relationship with the employees.
Payroll can be a lengthy and complex process to carry out in-house – one that can add on to employees’ already heavy workload as a business expands to new markets across Africa. HR and finance departments can greatly benefit from outsourcing a resource-intensive task, such as payroll, to trusted professionals at Africa HR Solutions. With over 25 years’ experience assisting businesses with their payroll needs across 40 African countries, Africa HR Solutions enjoys a solid reputation as a reliable payroll and HR partner. Africa HR Solutions manages all aspects of payroll for an organisation and prioritises relationships with their clients through a dedicated key account manager. We at Africa HR Solutions want to help your business succeed and are committed to providing consistent, high-quality service.
Kevina Takoordyal has a BA Hons Business Management from the University of Glamorgan, UK, with MBA in leadership and Innovation, MBA General, PMP Certified, and Agile Scrum Master. She currently works as the Head of Operations at Africa HR Solutions Ltd with more than 20 years of proven leadership capabilities in Operations, Business Development, People Management, Process Optimization, and Project Management in the Financial Services, BPO, Banking Industry, and Heath Care Industry. In Senior leadership roles with an international footprint across Europe working and extensive Pan- African experience from a compliance, finance, and operations angle, Kevina comes across with a panoply of cross-functional skills. Kevina also serves on a few Boards, Non-Independent Executive at MioD and for NGOs on a voluntary basis, a coach and mentor to aspiring female leaders across Africa and Mauritius.
Kevina is a firm believer in Servant Leadership with a strong focus and commitment to uplifting others, with the ability to deliver through a highly engaged – diverse team, and works towards consistently synergistic value creation. While being a focused and adaptive thinker and Kevina is actively participating in panel discussions on Innovation, CX, Digital transformation.
Kevina serves as Project Assessor for the National Youth upskilling program. She has been recognized as Global Talent in a few companies, Ceridian, and International SOS Ltd whereby she has been awarded a few scholarships and had the opportunity to be mentored by Senior Vice President in the US. Award Winner in various fields and at a national level and recognized including Super Achiever Leader Award in Africa in 2016, Awarded Africa Women Leader 2018.
A qualified lawyer who joined Africa HR Solutions in July 2020, Mark Du Preez has experience working in private practice for a reputable law firm in South Africa. He also played commercially focused roles at a leading private bank, wealth management company, and outsourcing firm in South Africa and Mauritius.
Mark has played a pivotal role in Africa HR Solution’s risk mitigation strategy, which positively impacted P&L performance over the years.
He currently leads the Partnerships function of the company including relationships and oversight with in-country partners (ICPs) across Africa.
Alex has more than 15 years of experience in the global, strategic development of both enterprise and consumer brands in categories including technology, transport, enterprise software, entertainment, and travel.
With experience in roles on both agency and corporate side, he has worked across international brands and has led the development and execution of multi-discipline campaigns across EMEA, NORAM and Asia Pacific.
His focus is on driving meaningful business impact through brand differentiation and building high-functioning, digitally oriented, and analytically driven capabilities. He is motivated by working with, and developing dynamic people, teams, and organizations.
He leads, manages, develops and mentors the Key Account Management department, including line management responsibility for the team of Key Account Managers and Key Account Administrator who represent the Company as the primary communication link between all relevant stakeholders, including clients, third party in-country partners and internal functions.
Originally from Mauritius, he holds bachelor’s degrees in International Business, Finance and Management from the University of Nevada, Reno.