Editor’s Note: Adam Livermore is an equity partner at Dezan Shira & Associates. He manages Dezan Shira & Associates’ Dalian, Qingdao, and India offices, while leading the team providing integrated payroll processing services to clients across China, Vietnam, India, Hong Kong, and Singapore. Livermore has a particular specialization in human resources in China, relating to both the legal and administration aspects, as well as possessing a comprehensive understanding of the key legal and accounting topics relating to foreign direct investment in China. Before moving to China, Adam worked for nine years in Japan acting as a translator and interpreter.
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 tax withholdings or social security contributions. 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 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 noncompliance. When payroll is handled externally, reports can be sent directly to headquarters, ensuring confidentiality of sensitive information. Let’s hear from one expert on the value of outsourcing a company’s payroll and HR management:
What information would a company have to provide to a payroll outsourcer?
This depends on what information one expects from the payroll provider. A key maxim in payroll (mainly IT) is “garbage in, garbage out.” Providing only the most basic data will enable your payroll provider to make only 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.
Can a payroll provider explain how much a new hire is going to cost, how much terminating an employee will cost, or how to track employees’ leave?
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 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. However, it is recommended this data be cross-referenced with a physical attendance management system where possible.
Do companies have to manually submit staff changes to the payroll provider?
For events like staff changes, the payroll outsourcer needs to 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 an expats’ 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.
Can a payroll provider assist with document retention or the handling of staff access to documents?
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, headquarters will want to have as much access to information as possible, while restricting certain information to the local team.