Is Payroll Outsourcing Right for You in 2025?

Navigating the complexities of payroll in 2025 is no small feat, especially as global workforces become the new norm.

Managing international compliance, tax filings, and accurate payroll data input can be a logistical nightmare—leading to costly penalties and inefficiencies if mishandled.

Deel understands these challenges deeply, having supported thousands of businesses worldwide with seamless payroll solutions tailored to their growth ambitions. In this guide, we’ll explore how outsourcing payroll can save your business time, reduce errors, and shield you from compliance risks.

By leveraging Deel’s all-in-one global payroll platform, you gain an integrated, stress-free solution to manage payroll anywhere in the world, all while streamlining operations. Imagine the confidence of knowing your team is paid accurately and compliantly every time—freeing you up to focus on scaling your business.

What is payroll outsourcing?

Payroll outsourcing is the practice of hiring an external service provider to handle the payroll functions for your company. A payroll service provider ensures that:

• All payroll funds are distributed on time and according to your employee agreements
• Payments are made accurately and compliantly with local laws
• Payroll documentation and employee information is safely and securely managed

Payroll service providers only handle making payments to your employees. Some mistakenly believe outsourcing payroll services include HR services that help you hire new people, but HR and payroll outsourcing are different. Human resources can be outsourced to a separate service, and while some companies offer both (like Deel), a payroll company only handles payroll.

How do payroll outsourcing services work?

Payroll processing by a service provider may include the following steps:

1. The setup period—providing the chosen payroll company with all the necessary information. You will need to confirm the rate and working hours for each employee
2. During the pay period, the payroll provider will need the number of hours worked for every employee so they can enter the data into their software and calculate the wages and salaries. You may need to confirm the information for them
3. When the gross pay is calculated, the payroll service will make the pre-tax and post-tax deductions, if applicable. These can include taxes, child support, workers’ compensation, and employee benefits
4. When the net pay is calculated, your payroll service provider will make deposits or deliver checks to your workers and make other necessary payments, including taxes during tax season
5. As the business owner or payroll manager, you will receive payroll reports for each pay cycle

Top 6 benefits of outsourcing payroll services

Why outsource payroll? Handing some or all of your payroll functions over to a third party can help streamline payroll processes, reduce the risk of non-compliance, and ensure correct tax payments and pay stubs. Let’s take a closer look at the advantages.

Reduced risk of non-compliance

Whether you’re running payroll domestically or internationally, you must ensure you’re operating in compliance with the employee’s payroll laws. 

Payroll laws vary by country—and sometimes by state or county. These laws dictate how employees can receive their compensation, when you have to pay them, and their payroll deductions, such as health insurance and social security.

If your payroll or HR team isn't familiar with local labor classification laws, you may be at a greater risk for misclassification. Working with a global payroll provider that has experience with international payroll laws can reduce that risk, which could otherwise lead to fines and penalties that cost hundreds of thousands of dollars.

Keeping up with compliance laws in one region requires a lot of time and expertise. If your company expands internationally, that workload grows. By outsourcing these payroll responsibilities to a service provider with localized specialists, your team will gain peace of mind and reassurance that you comply with international payroll and employment laws.

Cost savings

Typically, outsourcing payroll services costs less than creating an in-house payroll department. These cost savings are greatest for companies in high-cost-of-living regions, where recruiting, hiring, onboarding, and training an entire payroll department is a significant investment (unless they hire remote workers).

Payroll outsourcing also enables globally dispersed organizations to save money if they use one global payroll provider. Hiring and paying employees in multiple countries requires more payroll administrators and legal advisors.

Using a full-service solution that combines payroll, HR, and more in one platform—like Deel does—will provide even more valuable insights.

Better experiences for scaling teams

Processing payroll and maintaining compliance standards is difficult for overwhelmed payroll departments, especially if their organization is growing quickly. This overwhelm can often lead to payroll delays and mistakes. 

If your business is growing, you need a payroll provider that can grow with you. By outsourcing payroll tasks, you can ensure your payroll is getting the attention to detail it requires to run smoothly. Your in-house accounting team can instead focus on core tasks to support your team as you grow.

Increased data security

Outsourcing payroll can ensure maximum data security and even prevent fraud, identity theft, and other risks.

If a provider handles payroll data for employees in the European Union (EU), they have to meet General Data Protection Regulation (GDPR) standards. Your provider should also have a data processing agreement (DPA), which outlines how the parties will process and store your data in compliance with the GDPR. This includes appropriate security policies, encryption, physical data protection measures, and risk assessments.

Fewer payroll mistakes

For organizations, inaccurate data is the top barrier to effective payroll operations. A payroll provider's sole responsibility is to ensure payments are made correctly and tax laws are followed. As a result, the chances of making a mistake are lower than with an in-house accounting team.

Payroll errors can negatively impact your workers, disrupting their budgets and lives and causing unnecessary stress. Payroll mistakes and delays can also dilute their trust and positive perception of your organization and lead them to question your financial status and management capabilities.

Sometimes, the consequences of a payroll error are more severe than having an employee complain about a portion of money missing from their paycheck. Inaccurately filed federal payroll taxes may result in penalties and legal issues with local government agencies.

More efficient processes

Most payroll service providers stay up to date with the latest technology because it allows them to take their service to the next level and provide the best for their clients. This includes automation and AI capabilities, which allow payroll professionals to focus on optimizing your payroll system, ultimately making it more efficient and reducing human error.

To further increase payroll efficiency, look for a centralized payroll provider, such as Deel.

What are your payroll outsourcing options?

When selecting an outsourced payroll provider, consider your budget, expansion goals, and payroll team’s bandwidth. 

Full-service payroll company

Full-service payroll companies have broad experience with running payroll and ensuring tax compliance for businesses. If you’re hiring internationally, look for a global payroll provider like Deel that can take on the responsibility of navigating unfamiliar payroll laws and best practices for you.

Deel Global Payroll is a fully-managed payroll service that features:

• Centralized payroll process for domestic and international entities
• In-house infrastructure and owned entities, with coverage across {{GLOBAL_PAYROLL_COUNTRIES}} countries
• 350 in-house payroll managers and {{IN_HOUSE_LEGAL_SPECIALISTS}} legal experts
• Flexible payroll funding options
• 110+ integrations, API, and Payroll Connect to unify your payroll and HR data
• Global payroll reporting for holistic workforce insights
• 24/7 customer support, dedicated customer success managers, and a {{DEEL_RESPONSE_TIME}} response time

Free download: A Buyer's Guide to Global Payroll for Enterprises

Professional employer organization (PEO)

Engaging a professional employer organization (PEO) will also provide you with HR services such as benefits, compliance, and risk management in addition to handling payroll processing, deductions, and tax reporting tasks. PEOs are suitable to businesses of all sizes as they have the flexibility and expertise to handle the different legal jurisdictions and tax laws.

A PEO service may come with a higher price tag than basic payroll outsourcing options. However, this cost reflects the wide-ranging HR services it offers. While a standard payroll service just handles paychecks and taxes, a PEO also negotiates favorable rates on health benefits, handles claims processing, and manages many additional HR tasks that can consume significant time and resources.

Look for a PEO with international experience and robust integrations with your existing software. This scalability eliminates the need for additional investments in HR infrastructure, enabling your team to focus on your core business operations.

See also: Should You Use a PEO vs Payroll Provider? Benefits, Limitations, and Alternatives

Employer of record (EOR)

An employer of record is a service provider that acts as the legal employer for your employees in a specific country or region.

While your company manages the employees' day-to-day work and responsibilities, the EOR handles administrative and compliance-related tasks like payroll, taxes, benefits administration, and adhering to local labor laws. This arrangement allows businesses to hire talent globally without needing to establish a legal entity in each location.

Payroll software

Using payroll software isn’t typically considered outsourcing since it still requires work from your team. But if your team is currently using spreadsheets to manually manage payroll, investing in payroll software is a good first step to improving your processes.

Contractor accountant

Small businesses may benefit from working with a contractor as it’s less costly. If you choose this option, ensure your contract with the accountant is clear to avoid potential employee misclassification issues.

Simplify global payroll with Deel

Having an international team increases innovation, creativity, and diversity—but it also complicates payroll management. You have to navigate different currencies, exchange rates, bank laws, and compliance requirements. And as your team grows, so do your payroll needs.

With Deel Global Payroll, you can manage payroll around the world from one platform, streamline international operations, and eliminate the ongoing admin of local compliance, taxes, benefits, and more.

Deel is an all-in-one payroll and HR platform for global teams. In addition to payroll management, you can use Deel to:

• Hire, pay, and manage independent contractors
• Streamline equipment management with global IT operations
• Manage workforce development, performance, training, and more
• Simplify immigration and visa support with global mobility services
• Offer equity to workers in 110+ countries

Book a demo to see the platform in action and speak with a specialist about your outsourcing options.