3 Risks of Outsourcing Payroll for Global Employers

Outsourcing payroll offers numerous benefits, such as cost savings, payroll optimization, and scalability.

However, the risks of outsourcing payroll can impact everything from compliance and data security to employee satisfaction and your bottom line.

At Deel, we’ve worked with thousands of global teams to help them streamline payroll across 130+ countries. We’ve seen what works and what can go wrong when companies hand off critical payroll operations.

In this blog, we break down the top three risks of outsourcing payroll that global employers need to understand before choosing a global payroll provider.

1. Liability for compliance errors

Global payroll is complex by nature. Every country has its own payroll regulations, labor laws, tax requirements, social security systems, and reporting rules—and they’re always changing. Even minor errors can trigger audits and fines.

When you outsource payroll to a third party, you’re trusting that provider to stay compliant with local regulations. But if your provider makes a mistake, your company is still liable to the consequences.

For example, if your payroll provider misclassifies an employee, your business could face back taxes and penalties. Misclassifying a full-time employee as an independent contractor affects the benefits they’re entitled to, the taxes they owe, and the taxes you’re expected to withhold as an employer. When outsourcing your payroll, make sure your provider has proven expertise in all countries you operate in.

2. Vulnerabilities in data security and confidentiality

Payroll data is highly sensitive. It includes employee names, bank details, national IDs, salary amounts, and sometimes even health or immigration records. In a global setup, that data flows across countries with varying data security regulations.

When you outsource payroll, you’re adding new layers of complexity to your data security. You’re relying on an external provider to protect personally identifiable information (PII), ensure secure data transfers across multiple countries, maintain data security regulatory standards, and prevent data breaches.

As you evaluate different global payroll providers, be sure to evaluate whether they adhere to enterprise-grade security and data protection regulations, such as GDPR, SOC2, and AES-256. A reliable payroll provider not only delivers the automation and capabilities that meet your business needs, but they do so securely.

3. Process delays and service gaps

While handing off responsibilities can free up your internal team, it can also introduce process delays and service gaps. Outsourcing payroll means relying on external experts who may be hard to reach and processes that may not always match your timelines.

Some payroll providers operate on fixed schedules and batch cycles. If you need to onboard a new hire urgently, run off-cycle payroll, or make last-minute adjustments to your payroll, you might be blocked by process constraints.

When sending out global payroll RFPs and evaluating different providers, be sure to ask specific questions about customer support and how they handle urgent, adhoc requests to ensure you’ll receive the support you need.

How to mitigate the risks of outsourcing payroll

Despite the risks of outsourcing, the benefits of payroll outsourcing outweigh the risks when you find the right payroll provider.

Here are some key things to look for in a global payroll provider:

• Local compliance expertise: Choose a provider with in-house payroll, HR, and legal experts who monitor regulatory changes in every market. At Deel, we have 2,000+ experts to help you stay compliant in 130+ countries
• End-to-end security infrastructure: Look for enterprise-grade security certifications, such as SOC2, ISO 27001, GDPR compliance, and data encryption protocols. Make sure your provider can demonstrate secure data handling and access management
• Transparent operations and real-time access: Choose a comprehensive platform that gives you real-time dashboards, audit logs, and self-serve tools without having to wait on email threads or ticket queues
• Global infrastructure and customer support: Your payroll provider should operate in your key regions and offer multi-language support. Deel offers 24/7 support via email, phone, live chat, Slack, and Teams so that you can always reach someone for assistance

Reduce risks of outsourcing payroll with Deel

By partnering with a provider that offers compliance, robust security, and flexibility at scale, you can reap the benefits of payroll outsourcing while reducing risks and inefficiencies.

Deel Global Payroll combines in-house expertise, services in 130+ countries, and a unified platform to deliver 67% ROI and a 60% reduction in processing time.

We partner with you and tailor our solutions to your business so that you can focus on strategic business initiatives. Request a demo today to see how our platform can fit your needs now and in the future.