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Payroll & Data Security

Can Companies Outsource Their Payroll Duties & Is It Safe?

By Fariz Abdullah, CEO

Outsourcing payroll tends to be a delicate matter given the details that go into the processing chambers. It includes the typical employee record, salary information and benefits that might go with it. Things are generally in good order if the information relayed is packaged securely but as soon as a leak occurs, it may trigger errors in monetary processing and also ill feelings among co-workers. Due to this, some companies would rather prioritise data privacy than just be penny wise pound foolish.

Payroll details in multinational companies (MNC) for one are treated with such confidentiality. Upholding privacy is often the main reason for outsourcing payroll to an external vendor, much different from some of the SMEs who prefer using a spreadsheet and bank transfers, keeping the HR personnel busy processing payroll on a laptop or standalone desktop. The trade off is of course, when a company delegates this repetitive yet important task to a sophisticated cloud solution complete with security layers (eg. lockdown computers, separate rooms) capable of fending off hackers and virus attacks, the in-house HR professional will then be able to assimilate a more strategic role, contributing much more to the company than just printing paychecks. But is this a matter of cost, awareness or the mindset?

From my experience in the industry up until now as a full fledged HR and Payroll Outsourcing service provider, it would not be wrong for me to say that most companies out there are unaware of payroll outsourcing. In simpler terms, the Malaysian market could still be in its infancy stage as far as outsourcing payroll is concerned and if so, this is good news for CXL and all potential clients in the market.

It’s Complicated; Really?

At CXL, we have had the privilege to work with a wide range of clientele, ranging from SMEs, GLCs to the MNCs, and while the larger corporations were already attuned with our kind of service, the rest may not. So, what could’ve convinced the latter companies to sign up with us?

Complexity of payroll and data security. Yes, the often talked about “cost” was not cited among the top reasons although it remains an obstacle for the smaller outfits. But unbeknownst to many, outsourcing payroll will in fact help companies shave off 25 to 30% in processing cost while at the same time, tap into the advantageous economy of scale and intangible benefits extended by CXL such as our industry knowledge, expert advice, cost of software licensing, hardware acquisition & maintenance and potentially new automation features.

But one might ask, how complex can payroll get since it is just calculations of basic pay, benefits minus deductions incurred during the month? Let’s take a look at our most complex experience as a payroll outsourcing vendor.

Our journey for this FMCG MNC client took a good six months from start to finish and this went from data analysis to customisation, integration and a parallel run post-implementation to ensure everything is processed without a glitch. 

The permutations in this project include more than 25 shift patterns across a multi-department environment with flexi-hour arrangement and overtime that stretches from one date to the next. There were also issues surrounding duration of virtual calls and at what point would such participation encroach into the “overtime” territory and when it wouldn’t. Not forgetting too, the benefits extended to every staff can be as individualistic as the spectrums of colours and whatever we can think of as a staff incentive (eg. club membership), this company had it. 

When a certain unionised initiative won its case for a revised overtime rate in the midst of our development, we also had to revisit all the affected formulas. Things got more interesting because the revision meant payouts must be back-dated to a mutually agreed effective date. This one instruction alone impacted more than 100 staff. One can imagine the uphill tasks we went through to infuse all the workarounds needed to get the system up to speed. But the good news is, this FMCG client had no qualms about adopting such a robust SAAS (software as a service) system because the team on the job knew the merits of an efficient system, what more when payroll complexity can be overcome with CXL’s seasoned expertise.

Payroll & Data

But that’s not all…

The six months spent on developing this project also required our developers to shape employee records into the Personnel Information Template (PIT) so that it can be channelled into the client’s enterprise system. A vital step which if done without, every update means double entry of the same data to two separate systems; totally counterintuitive from our appointment in the first place.

But after the successful integration, it facilitated a “straight through” process that synchronises information between systems with no further human intervention necessary. All we needed to do then is to generate a Payroll Variation Report on a monthly basis so the client can verify the records before the actual pay run is executed and on an annual basis, making provision for items like EA Forms and Pay History Report to facilitate taxation, and uploading E Form and CP8D Data for foreign employees.

But what about the issue of data security? This MNC client was readily able to sign on the dotted line as soon as they saw the certifications our data centre was decorated with when we made a site visit together.

We at CXL host our data and solutions at a Tier-3 bank-grade data centre, regarded as the most secured facility in the country where even banks have their systems hosted at the same place. To complement that, we also regularly conduct training to keep our staff up-to-date about the latest in the industry. This is testament to our commitment in safeguarding our clients’ data. 

But you might say that your company has very straightforward processing requirements, how fast can CXL get your payroll up to speed then? 

Formally, I’d say 30 days but we have also done it in less than that. This was when payroll records were just simple, without time attendance, overtime calculations or e-wallet payments (the latter was enforced in 2023 through a revision done to the Employment Act 1995).

About Fariz

Fariz Abdullah is the Chief Executive Officer (CEO) of CXL Group. The organisation offers HR solutions which include Contingent Workforce, Executive Search and Payroll & HR Outsourcing. Under his purview, Fariz has transformed CXL Group into an HR organisation that believes in the importance of advancing through technology but with a deep focus on the human touch in an increasingly digital era.



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