How to Choose Between in-House Payroll and Outsourcing in UAE

Both inhouse payroll processing and payroll outsourcing in UAE enable businesses in tackling one of the most important HR functions, running company payroll. 

How can I choose the best option for running payroll?

The best option for payroll processing in UAE will depend on your business’ needs and requirements. In general, retaining an in-house payroll department is great for businesses that want to have more control with the payroll process. 

Outsourcing payroll in UAE to a reliable service provider is the better option for businesses who are worried regarding their compliance obligations and regulatory complexities that are associated in payroll processing. Outsourcing payroll to third party vendors is also great if you want to rely completely on the expertise, skills, and tools of professionals in getting payroll right. 

Another way to choose the best option for payroll processing in UAE is weighing the advantages and disadvantages of both approaches. 

What are the pros and cons for inhouse payroll processing in UAE? 

The benefits of having payroll calculations done inhouse are:

  • You are able to retain more control, as mentioned earlier, over the sensitive data of your employees, including their names and salaries
  • You won’t have to pay vendors for payroll services 
  • Payroll processing inhouse can be a lot more seamless, especially if you invest on a payroll software 


The biggest downsides to this approach include:

  • It takes a huge amount of time and effort in completing all payroll-related tasks. This detracts key employees from more important business activities. Small business owners, in particular, spend at least four hours calculating, filing, then paying employees their wages every pay period. This adds up to almost 300 hours each year! 
  • Doing payroll yourself will put your business at risk of delays in making payments to employees. There are also common errors that can’t be avoided if you do payroll inhouse and manually, which can impact employee morale and productivity in the workplace negatively. 
  • You will have to pay your employees in running payroll and provide them with employment benefits. There are also costs associated to running payroll inhouse apart from employee salaries. This includes acquisition and maintenance fees for a good payroll software. 
  • If you will hand off the task of payroll processing to a key employee within your organization and there’s no adequate controls set in place, salary data can be leaked. There’s also the risk of the employee committing fraud e.g. creating a ghost employee.


What are the pros and cons of payroll outsourcing in UAE?

As you are weighing your payroll options, consider these advantages of hiring outsourced payroll professionals in Dubai or anywhere in UAE:

  • Exposure to hefty fines and penalties for payroll errors is reduced. Payroll service providers in the country are the ones who are responsible in collecting and paying employees, as well as carrying out all payroll obligations of your business accurately and on time. 
  • Accuracy of payroll calculations and administration of benefits is guaranteed thanks to the expertise and tools of outsourced professionals. A reliable and reputable outsourced payroll service provider in Dubai, UAE helps eliminate the math errors that often happen when calculating hours and wages of employees.
  • You will be spending less time and effort on payroll. What this means if you and your company staff will have more energy in concentrating on the income-generating activities of the business.
  • You can consistently provide your employees with timely payments. This boosts employee retention and satisfaction.
  • As you provide accurate and timely pay every single pay period, you will be in full compliance with the requirements of regulators in UAE with regards to employee salaries. 
  • You can leverage a vendor’s skills and expertise in making sure every aspect of payroll processing is done right. You will also have top-notch customer service when issues arise.

There are also downsides to outsourcing company payroll in UAE. This includes:

  • There may be hidden fees, if you have not clarified what is actually included in a service. 
  • Should you hire a less reputable service provider, it is likely that the vendor has a high employee turnover. This means you will be bounced around several different representatives, negatively impacting the service level you receive. 
  • Since you are relying on outsourced professionals, there is a possibility for mistakes to be resolved a lot slower compared to having inhouse professionals.
  • You won’t have control over your data’s security, which may be unnerving for some people. It is best to have a contract with a service provider that includes non-disclosure provision for crucial company information. 
  • There is a chance for a payroll service provider to close its operations. This is why it is best to only choose a third-party service provider that’s established and reputable. 

If you want to know more about payroll processing in UAE, contact us here in Payroll Middle East today!