05 Reasons NOT TO process payroll internally When doing Business in KSA
Expanding your business to Saudi Arabia? Indeed, it is a big and positive step for you! Though with big decisions come bigger risks. We are here to guide you through this risky trail, and let you in on some common mistakes made on this journey. Read through this article, and note down the reasons why you shouldn’t make the first big mistake – In-house payroll processing.
Just as every operation has its pros and cons, similarly, in-house payroll processing does have its advantages, but for a company expanding its business in a new country or market especially to the KSA, the cons outweigh the pros. Some of the reasons processing payrolls yourself might be unfavorable are listed below;
- Tax Obligations
The tax laws are horrifically difficult and need specialist attention. One of the most common reasons because of which companies opt to outsource their payroll services in Saudi Arabia are tax compliance laws.
- Complication of Payroll
Payroll itself consists of various different and difficult concepts e.g. GOSI, OT, and so on. Deduction methodology in itself is very fairly complicated
- Compliance and Legalities
Legal complications and compliances is another headache for payroll processing in KSA. Rules are strict and rationale – well sometimes employers feel that law favors employees and vice versa but these laws are fairly objective and unbiased in nature
- Saudization / Nationalization
The nationalization program forces businesses to employee locals/nationals in a mandatory ratio for various jobs – leading to organizations having a particular color code in immigration, which in turn leads into their capability of issuing further visas.
- Fines & Penalties
The laws in KSA are ruthless when it comes to fines and penalties – mistakes aren’t forgiven at ease – and this jacks up the cost of doing business in the region. Therefore, all steps need to be taken with utmost cautious and understanding of the system; a slight glitch can cost a lot more than one can imagine.
These may make one believe that doing business in KSA is one hell of a job (and actually it is); however, with the right guidance and consultancy, it is a doable task. Payroll and Employee Management is difficult – not easy by any means – therefore, outsourcing it to seasonal professionals like M&P not just takes away the burden of the aforementioned factors but also ensures compliances and coverage in case of a mishap. Multinational Corporations like M&P have aggressive and extensive support departments that support businesses over and beyond just payroll services.
For more information, you may visit our website www.mnphr.com or connect to us via one of our social media platforms.
- Tax Obligations & Complications:
Payroll In-housing is no doubt a very extensive and complicated process.. Due to these complications and much more, it is widely popular among emerging companies to pass on their payroll processes. When outsourcing, you will be doing your business a huge favor by reducing your exposure to tax fines and penalties. You will not be obliged to collect nor pay tax liabilities on your payrolls as this is the payroll-service-providers’ responsibility, meaning you are free of the nightmare!
- Time Consuming:
It can be overwhelming for companies trying to make a place in the market, to spend hours managing and accurately calculating payrolls of employees.
Payroll processing is a fairly long and time consuming process that needs to be thoroughly checked and accurately calculated. When expanding your business to Saudi Arabia, your number one priority should be focusing on your brand awareness and business operations. This is because entering a new market can be pretty risky and running multiple processes simultaneously can cause wavering focus from your main goal.
- Risk of Errors:
With increasing workload, the risks associated with that work become more probable an ultimately inevitable. Payroll processing requires high concentration and full attention as it involves dealing with hundreds of employees’ pay slips. This means that even a minute slip up can cause a lot of problems and cause you to redo the process all over again. For this reason, small and emerging companies usually prefer to outsource this task to an agency that deals with this process professionally and with full compliance.
- Not Very Cost Effective:
A very common reason companies choose to perform in-house payroll processes, is saving money. The common misconception is that you can save money if you perform your processes in-house and choose not to outsource, when that is not always true. If we calculate the overall costs of in-housing and outsourcing the payroll process, we come to the conclusion that there is not much difference, as in-house operations include costs like employee salaries, HR teams’ and bookkeepers’ hourly wages, costs on expensive software and much more.
- Risk of Delays:
For a small company expanding to Saudi Arabia, it is quite common that the number of employees is considerably less. During the initial stages, performing primary business operations is already complicated enough, processing payrolls at the same time can have a negative impact on your business operations. Your processes might face delays, due to errors which can result in unmet deadlines. The best solution to avoid these mishaps is to outsource payroll processes to focus better on the business and run it smoothly.
