Payroll Outsourcing Services in Chennai: A Comprehensive Guide

Introduction

In today’s globalized economy, Chennai has emerged as a critical hub for businesses seeking operational efficiency and strategic growth. As payroll management experts with years of experience in the Indian market, we've witnessed the city's thriving IT parks, manufacturing giants, and dynamic workforce demanding seamless payroll management—a challenge increasingly met through specialized payroll outsourcing services. By delegating payroll functions to external experts, companies in Chennai are unlocking cost savings, minimizing compliance risks, and redirecting valuable resources toward innovation and expansion. This shift reflects a broader trend among enterprises worldwide to streamline operations, mitigate administrative burdens, and adapt to complex regulatory landscapes, all while maintaining employee trust through accurate, timely payments.

What is Payroll Outsourcing?

Payroll outsourcing refers to the strategic delegation of payroll processes—such as wage calculations, tax withholdings, statutory filings, and direct deposits—to certified third-party providers. Having guided numerous global companies through this process, we can confidently state that these partners leverage advanced technology and deep expertise to manage intricate compliance requirements, including India's Provident Fund (PF), Employee State Insurance (ESI), and Professional Tax (PT) obligations.

By the end, you will understand how to evaluate payroll service providers, navigate compliance risks, and leverage outsourcing to enhance operational efficiency. Whether you're a startup or an established enterprise, this resource draws from our extensive experience in helping businesses hire, pay, and manage employees in India.

What services do payroll outsourcing companies offer?

Based on our extensive experience managing payroll for global businesses, we can confidently state that payroll outsourcing companies provide a wide range of services to global businesses, ensuring precise compliance with state-specific labor laws and tax mandates. Here are the key services typically offered:

Payroll Processing and Salary Management

Having guided numerous companies through the intricacies of Chennai's payroll landscape, we've observed that payroll outsourcing services manage complete salary processing, ensuring accurate wage disbursement, including allowances, bonuses, and statutory deductions They use advanced payroll software to automate workflows for different workforce categories—permanent, contractual, and gig workers—while accounting for overtime, leave encashment, and arrears. These services ensure timely salary credits through bank transfers or digital wallets, reducing administrative workload for businesses.

Tax Management and Filing

Drawing from our deep expertise in Indian tax regulations, we can attest that payroll service providers in Chennai handle complex tax obligations such as TDS (Tax Deducted at Source) calculations, Form 16/24Q generation, and timely filing of quarterly and annual tax returns. Given the frequent updates in income tax slabs, exemptions, and surcharge regulations, staying compliant with the Income Tax Act is crucial. In our experience, automating tax deductions and remittances has helped businesses avoid penalties due to incorrect or delayed filings.

Statutory Compliance

Having navigated the complex regulatory landscape for years, we understand that payroll compliance in Chennai requires businesses to adhere to both central and Tamil Nadu-specific labor laws.Payroll outsourcing companies play a crucial role in managing obligations, particularly concerning contributions to EPF and ESI, which are essential for securing employees’ financial and medical benefits. Additionally, businesses must comply with the Tamil Nadu Labor Welfare Fund (LWF), which mandates periodic contributions and filings to support employee welfare initiatives. By managing monthly and quarterly filings, generating compliance reports, and overseeing gratuity calculations, payroll services help businesses mitigate legal risks, avoid penalties, and maintain a smooth payroll operation.

Employee Benefits Administration

Payroll outsourcing companies in Chennai handle a wide range of benefits, including health insurance, Employees' Provident Fund (EPF), the National Pension Scheme (NPS), flexible benefit plans (FBPs), and travel reimbursements. These benefits require careful administration, from enrollment and deductions to claims processing and coordination with insurers. Payroll service providers also oversee leave encashment and statutory bonus calculations. By automating and streamlining benefits administration, payroll service providers reduce the HR department's workload, allowing businesses to focus on core operations while enhancing employee satisfaction and retention.

Pay slip & Report Generation

Payroll service providers generate digital pay slips with detailed breakdowns of earnings, deductions, and net pay, accessible via employee self-service portals. From our experience in paying employees across India, we've found that customized reports, including MIS summaries, tax audit trails, and labor cost analytics, are invaluable for businesses. These reports aid in budgeting, compliance audits, and strategic decision-making, while ensuring transparency for employees and stakeholders.

What is the difference between In-House Payroll Management and Payroll Outsourcing?

Drawing from our extensive experience supporting global companies with payroll operations in India, we've observed that businesses generally have two main approaches when it comes to managing payroll: handling it internally (in-house) or entrusting it to an external payroll service provider. Our years of guiding companies through this decision have shown that the choice between these options depends largely on factors like company size, budget, and specific compliance needs. Below is a thorough comparison of these two methods:

‍When should you opt for in-house payroll management?

Based on our experience working with diverse businesses, in-house payroll management is typically a good fit when:

• Your company values complete autonomy over payroll processes.
• You have an in-house team with expertise in tax laws, compliance, and regulatory requirements.
• Your budget can accommodate the costs for payroll software, staff salaries, and ongoing training.

When should you choose payroll outsourcing?

‍Through our extensive work helping global businesses make this decision, we have found that outsourcing payroll is often the more practical choice when:

• Cost efficiency and predictable pricing are a priority for your business.
• You lack the necessary expertise in compliance or need to manage payroll across multiple states.
• You anticipate rapid scaling, such as sudden hiring surges or geographic expansion.
• You want HR teams to focus on strategic business functions instead of payroll management.
• You want automated compliance updates and fewer payroll errors, reducing the administrative burden.

What are the key benefits of outsourcing payroll in Chennai?

Drawing from our extensive experience in managing payroll for diverse businesses, we can confidently state that outsourcing payroll provides numerous benefits, helping businesses ensure compliance with local laws, save costs, and streamline operations. Here are the key advantages we've observed:

Compliance with Local Laws & Tax Regulations

Having guided numerous companies through Chennai's complex regulatory landscape, we've seen firsthand how outsourcing payroll ensures that businesses stay compliant with Chennai-specific statutory requirements. This includes managing Provident Fund (PF), Employee State Insurance (ESIC), Professional Tax (PT), and Labor Welfare Fund (LWF). Our team of experts is always up-to-date with regulatory changes, managing contributions, filing returns, and helping businesses avoid penalties for non-compliance. Given the frequent amendments to labor laws in Chennai, outsourcing helps businesses navigate these changes smoothly, ensuring all filings and contributions are handled accurately and on time.

Cost Efficiency

We've observed significant cost savings through payroll outsourcing. By eliminating the need to invest in expensive payroll software, training staff, and maintaining infrastructure, companies we've worked with have reported reducing operational expenses by up to 30%. Payroll outsourcing converts fixed costs like salaries and software licenses into variable fees, making it a more cost-effective and flexible solution for businesses looking to scale.

Time Savings for Strategic Priorities

Payroll processing can take up to 5–10 hours each month, which diverts valuable HR resources away from core functions like talent management and business growth. By outsourcing payroll, global businesses free up HR teams from time-consuming tasks such as salary calculations, attendance tracking, and reimbursement processing. This enables HR to focus on strategic priorities and enhances overall productivity, which is especially important in Chennai’s fast-paced business environment.

Enhanced Accuracy & Error Reduction

Using advanced payroll software, payroll outsourcing providers in Chennai significantly reduce the risk of errors in salary calculations, tax deductions, and statutory filings. Automated systems flag discrepancies in real-time, ensuring employees are paid correctly and all compliance reports are accurate. This precision is vital for industries such as IT and finance, where payroll calculations are often complex. Outsourcing helps businesses maintain employee trust by ensuring error-free payroll processing and reducing disputes over pay.

Scalability for Business Growth

Having supported businesses through various growth stages, we can attest that payroll outsourcing offers excellent scalability, adapting easily to workforce expansions, seasonal hiring surges, or multi-location operations. Whether in sectors like e-commerce or manufacturing, we've seen how payroll outsourcing can seamlessly handle various employee types, including permanent, contractual, and gig workers. Payroll services ensure that all payroll requirements are met across multiple locations, enabling businesses to grow without worrying about the complexities of payroll management.

In conclusion, outsourcing payroll in Chennai offers businesses substantial advantages, from ensuring legal compliance and minimizing errors to reducing operational costs and freeing up HR resources for more strategic functions. By outsourcing payroll, companies can focus on growth and innovation while leaving the complexities of payroll management to the experts.

What laws govern payroll compliance in Chennai?

Drawing from our extensive experience in managing payroll for multinational corporations in Tamil Nadu, adherence to the following key legislations is critical for compliance:

Payment of Wages Act, 1936

This central law ensures timely wage payments for employees earning up to ₹24,000/month (2025 threshold) across factories, IT parks, and commercial establishments. Employers must disburse wages within 7–10 days of the wage period’s end, with deductions limited to statutory obligations (e.g., TDS, PF) or penalties for misconduct. Delays or unauthorized deductions incur fines under Section 20.

Minimum Wages Act, 1948

Tamil Nadu revises sector-specific minimum wages biennially for industries like automotive, textiles, and IT. Current daily rates (2025) range from ₹300 for unskilled roles to ₹650+ for technical positions in Special Economic Zones (SEZs). Non-compliance risks penalties and imprisonment under Section 22.

Payment of Bonus Act, 1965

Mandates annual bonuses for employees in establishments with 20+ workers. Eligibility requires 30+ days of service and a monthly wage ≤₹21,000 (basic + DA). Bonuses range from 8.33% to 20% of salaries, tied to company profits. Non-payment within 8 months attracts 9% interest on arrears.

Employees’ Provident Fund (EPF) Act, 1952

Applies to organizations with 20+ employees, requiring 12% contributions from employers and employees. Chennai’s EPFO office oversees withdrawals for retirement, medical emergencies, and home loans. Delayed deposits incur 12% annual interest and penalties under Section 14B.

Employees’ State Insurance (ESI) Act, 1948

Covers medical, maternity, and disability benefits for employees earning ≤₹21,000/month in factories/establishments with 10+ workers. Contributions are 0.75% (employee) and 3.25% (employer), with services accessible at ESI dispensaries like Chennai’s KK Nagar unit. Non-registration risks ₹10,000 fines under Section 85.

Tamil Nadu Shops and Establishments Act, 1947

Regulates working hours (≤9 hours/day), weekly holidays, and leave policies for shops/commercial establishments in Chennai. Employers with 10+ employees must register (valid for 5 years) and maintain records. These laws collectively ensure timely wages, fair compensation, social security, and workplace rights for Chennai's workforce.

These laws collectively ensure fair wages, social security, and workplace rights across Chennai’s manufacturing, IT, and retail sectors.

How does payroll outsourcing simplify tax administration?

Based on our extensive experience managing payroll for diverse businesses in Chennai, we can confidently state that payroll outsourcing significantly simplifies tax compliance by leveraging expertise in local labor laws, automating complex tax calculations, and ensuring timely submissions. Here's how it helps manage tax obligations, specifically for TDS and Professional Tax:

TDS (Tax Deducted at Source) Compliance

• Automated Calculations: Outsourcing providers efficiently calculate TDS based on employees' income slabs, exemptions, and investment declarations, ensuring full compliance with the Income Tax Act.
• Quarterly Filings: They prepare and file Form 24Q (TDS returns) and Form 16 (annual tax statements) on time, helping businesses avoid penalties for late submissions.
• Error Reduction: With the help of advanced payroll software, outsourcing services reduce errors in deductions for allowances like HRA, LTA, and perquisites, minimizing audit risks and ensuring accurate tax filings.

Professional Tax Management

• State-Specific Compliance: Professional tax is a state-imposed levy, with rates varying across territories. Outsourcing ensures the appropriate professional tax is withheld as per the applicable laws of the state where the employee is situated, particularly in areas like Chennai, where distinct professional tax regulations exist.
• Municipal Compliance: Payroll outsourcing services handle business registration with local authorities, file monthly returns, and maintain payment records to ensure compliance with municipal tax requirements, thus avoiding potential fines.
  

Integrated Statutory Compliance

• Unified Platforms: Outsourcing companies use integrated systems to align TDS, professional tax, EPF, and ESI deductions, ensuring seamless statutory compliance across all payments. This integration simplifies managing various compliance needs and reduces the risk of missing any statutory requirements.
• Real-Time Updates: Payroll providers stay informed about regulatory changes, such as tax slab revisions or filing deadlines, and proactively adjust payroll processes to ensure continuous compliance.

Audit-Ready Documentation

• Digital Record-Maintenance: Outsourced services retain encrypted records of tax challans, returns, and employee declarations for effortless retrieval during audits.
• Year-End Reporting: They assemble investment proofs, distribute Form 12BB, and counsel employees on tax-saving instruments like Section 80C.

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What employee benefits are managed through payroll outsourcing?

Based on our extensive payroll management experience across India, we’ve observed that the following key benefits are typically handled through payroll outsourcing companies in Chennai:

• Retirement Plans: Payroll service providers in Chennai handle contributions to retirement schemes like the Employees' Provident Fund (EPF) and the National Pension System (NPS). They ensure accurate deductions and employer matching, managing the annual contribution limits, tax implications, and compliance with local regulations.
• Health Insurance: Payroll services in Chennai manage health insurance premiums, including deductions for employer-sponsored plans and any voluntary add-ons. These payroll providers coordinate with insurers to update coverage during significant life events, such as marriage or childbirth, and ensure timely adjustments. They also handle Flexible Spending Accounts (FSAs) or Health Savings Accounts (HSAs), reconciling contributions with the payroll cycle for accuracy.
• Paid Time Off (PTO) and Leave Benefits: Payroll outsourcing firms track accrued leave balances, including sick leave and holidays, integrating with attendance systems to ensure accurate records. They automate the payout process for unused leave days and ensure compliance with local labor laws, such as those under the Tamil Nadu Shops and Establishments Act.
• Tax-Advantaged Benefits: Given the complexity of India’s tax structure, managing tax-advantaged benefits is crucial. Payroll outsourcing services handle deductions for tax-saving instruments under sections like 80C (e.g., ELSS, insurance premiums) while ensuring compliance with Indian tax laws. Payroll services validate proof of investments, dynamically adjust deductions, and prepare year-end reports (such as Form 12BB). They also manage benefits like meal vouchers, travel allowances, and other flexible benefit plans, ensuring that all benefits are tax-compliant.
• Additional Perks and Allowances: Payroll service also includes managing stipends for education, remote work, or transportation. Outsourcing companies efficiently automate reimbursements for expenses like fuel, mobile bills, and other employee-related claims, ensuring timely disbursements through payroll and validating claims against company policies.

Which are the top 6 payroll outsourcing companies in Chennai?

Outsourcing payroll functions has become a key strategy for businesses in Chennai, helping them boost efficiency, maintain compliance, and focus on their core activities. Based on our extensive experience managing payroll for global companies entering the Indian market, here is a curated list of some of the top payroll outsourcing companies in India:

The six top providers include:

• Wisemonk
• Paysquare
• ZingHR
• Excelity Global
• ADP
• Easy Source

Wisemonk

Wisemonk is a leading Employer of Record (EOR) and payroll specialist with deep expertise in the Indian market. Wisemonk offers comprehensive solutions tailored for businesses operating in or expanding into India, including Chennai. The services span compliance management, HR integration, payroll processing, and contractor payments, making them an ideal partner for global companies of all sizes navigating India's complex business landscape.

Key Features:

• End-to-end payroll processing with statutory compliance (PF, ESIC, PT).
• Employer of Record (EOR) services for global companies.
• Transparent pricing starting at $99/employee/month for EOR and & 39/employee/month for payroll and HR management.
• Employee self-service portal for payroll management
• Contractor payment solutions and recruitment support in India.

Paysquare

Paysquare is a leading payroll outsourcing company in India, offering comprehensive payroll management solutions. They specialize in handling the entire payroll process, from consolidating HR/Finance & employee inputs to processing payroll, providing outputs, and managing statutory filing.

Key Features:

• Customizable payroll and accounting solutions.
• AWS-powered self-service portals.
• Multi-country payroll support
• Flexible Benefit Plan (FBP) administration.

ZingHR

ZingHR is a comprehensive cloud-based human resource management software and global payroll solution. It provides a complete solution for organizational needs, including a dashboard of all employee activities.

Key Features:

• AI-driven payroll automation.
• Multi-country compliance.
• Real-time payroll dashboards.
• Gig workforce management tools.

Excelity Global

Excelity Global is one of Asia's largest payroll outsourcing companies, offering comprehensive payroll and HR solutions across the Asia-Pacific region across 17 countries.

Key Features:

• Multi-country payroll compliance.
• Proprietary ezpayroll platform.
• Benefits administration (NPS, gratuity).
• Payroll analytics and reporting.

ADP

ADP is a global leader in payroll and HR solutions, offering a wide range of services for businesses of all sizes. ADP provides comprehensive payroll outsourcing, tax processing, and HR management tools. It handles multi-country compliance and tax filings.

Key Features:

• Global payroll across 140+ countries.
• Real-time cloud-based payroll access.
• Mobile app for employers and employees.
• Enterprise-grade security.

Easy Source

Easy Source is an HR solutions company specializing in payroll and manpower outsourcing, PEO (Professional Employer Organization), and other managed services.

Key Features:

• Affordable payroll processing.
• Statutory compliance (PF, ESIC).
• AI-enabled report builder
• Manpower outsourcing services.

Overall Comparison

While global players like ADP offer extensive features and scalability, specialized providers like Wisemonk excel in local compliance and EOR services.

How to choose the right payroll outsourcing partner in Chennai?

Drawing from our extensive experience managing payroll for global businesses in Chennai, selecting the right outsourcing provider involves evaluating key factors that ensure compliance, efficiency, and scalability. Below are the four most critical considerations, refined through years of guiding companies through India’s complex payroll landscape:

• Local Compliance Expertise: Choose a provider with strong knowledge of local laws, such as EPF, ESIC, PT, and TDS. A reliable payroll partner will ensure compliance with India’s evolving regulations, reducing the risk of penalties and ensuring timely tax filings.
• Service Offerings & Scalability: From our work with startups and enterprises in Chennai, we recommend providers offering end-to-end solutions, including salary processing, tax filings, and benefits administration. Ensure they can scale with your business, managing growth, diverse pay structures, and evolving needs without disruptions.
• Cost & Pricing Transparency: Pick a provider with clear pricing, avoiding hidden fees for statutory filings or year-end processes. Transparent pricing helps with accurate budgeting and ensures no unexpected costs, like late PF payment penalties.
• Customer Support & Service Reliability: Reliable customer support is essential to address payroll discrepancies quickly and maintain smooth operations. Choose a partner that offers timely, responsive support, ensuring seamless payroll processing every cycle.

Refer to our article "Top Payroll Outsourcing and Processing Services in India ," which compares top payroll providers based on cost, and local regulatory expertise to help you make better decisions.

What challenges do global businesses face when outsourcing payroll in Chennai?

Drawing from our extensive experience managing payroll for multinational corporations in Chennai, global businesses encounter several hurdles when outsourcing payroll. Below are the key challenges, enriched with insights from our work with enterprises navigating India’s regulatory landscape:

• Lack of Local Compliance Expertise: Many global companies struggle with payroll providers who lack deep knowledge of India’s complex labor laws and tax regulations, such as EPF, ESIC, TDS, and professional tax rules. Frequent updates to these laws can lead to mismanagement of compliance filings if the provider isn’t familiar with them, resulting in penalties and operational disruptions.
• Service Reliability and Processing Errors: In Chennai's fast-paced environment, timely payroll processing is essential. Some payroll providers face delays during busy periods, like Diwali bonuses or year-end closures. Issues such as miscalculating overtime or applying the wrong wage rates can lead to employee disputes and reputational damage, especially in sectors like IT and finance where payroll is more complex.
• Hidden Costs and Lack of Transparency: While many payroll services offer standard pricing, hidden fees for services like compliance updates, tax filings, or customized reports can cause unexpected charges. Without clear contracts or transparent pricing, global businesses may face budget overruns and disputes over the scope of services provided.
• Limited Customization and Integration Issues: Global companies often need payroll systems that integrate smoothly with their existing HR and accounting systems. However, many payroll providers in Chennai offer rigid solutions that don’t cater to international pay structures, multi-currency payments, or benefits administration. Lack of flexibility and system compatibility can result in inefficiencies and manual errors.

To overcome these challenges, global businesses should carefully evaluate payroll providers in Chennai based on their local expertise, service reliability, pricing transparency, and integration capabilities. This ensures smooth payroll management, compliance, and cost-efficiency.

Wisemonk: Your Ideal Partner for Payroll Outsourcing in Chennai

‍Wisemonk stands out as a leading payroll outsourcing provider across India, offering tailored solutions for businesses in Chennai and beyond. Our comprehensive payroll services include:

• Accurate Salary Processing: Our team of seasoned payroll experts ensures precise calculation and timely disbursement of salaries, meticulously accounting for all components including basic pay, allowances, and deductions.
• Statutory Compliance Management: Our team stays updated with the latest regulations, handling PF, ESI, PT, and LWF filings specific to Tamil Nadu and Chennai.
• Tax Compliance: Our tax experts have a proven track record of managing TDS calculations, generating Form 16, and ensuring timely filing of returns for businesses of all sizes in Chennai. We've helped multinational companies seamlessly adapt to India's tax regime, saving them significant time and resources.
• Employee-Centric Tools: Based on feedback from employees, we've developed intuitive self-service portals, automated reimbursement systems, and efficient leave and attendance management tools that enhance workforce productivity and satisfaction.
• Transparent Pricing: Our commitment to transparency is reflected in our clear, no-hidden-fees pricing structure. We offer tailored plans for startups, SMEs, and enterprises, ensuring cost-effective solutions for global businesses.
• Customized Reporting: Leveraging our deep understanding of Chennai's business ecosystem, we generate comprehensive payroll reports and analytics that support informed decision-making and strategic financial planning for our clients.

With our deep understanding of local labor laws and automated systems, we eliminate risks of penalties and ensure error-free compliance across all aspects of payroll management.

Comprehensive Support for Global Businesses Entering India

Beyond payroll, Wisemonk simplifies market entry for global companies—particularly from the US—with end-to-end solutions. As an Employer of Record (EOR) in India, we enable global businesses to hire talent in Chennai and across India without establishing a local entity, handling everything from employment contracts to statutory compliance. Our talent acquisition team sources skilled professionals aligned with your industry needs, while benefits administration ensures competitive packages (health insurance, retirement plans) to attract and retain top talent. We extend support through HR consulting, office setup services, and Global Capability Center (GCC) setup in India, streamlining operations for multinational corporations. For businesses outsourcing contractor payments or managing remote teams, our secure platform ensures timely, compliant transactions.

‍Contact Wisemonk today!

FAQs

How much should payroll services cost?

Payroll service costs in India typically depends on the complexity of payroll and additional services required. Factors influencing cost include company size, payroll frequency, and specific compliance needs.

Which is the best payroll software in India?

While the best payroll software depends on specific needs. For a detailed comparison tailored to your requirements, refer to our article ''Top Payroll Software in India 2025'' which helps you evaluate providers based on accuracy, cost, and local regulatory expertise. Wisemonk offers a comprehensive payroll solution tailored for Indian businesses, integrating local compliance expertise with user-friendly interfaces.

What are the pros and cons of payroll outsourcing?

Pros include cost savings, reduced errors, compliance assurance, and freed-up internal resources. Cons may involve data security concerns, less direct control, and potential communication challenges. However, choosing a reputable provider like Wisemonk can mitigate these drawbacks.

Why should I choose Wisemonk for payroll outsourcing?

Wisemonk offers deep expertise in Indian payroll regulations, end-to-end services from EOR to compliance management, and competitive pricing. Our technology-driven approach, coupled with personalized support, ensures accurate, efficient payroll processing tailored to your business needs.

In which cities does Wisemonk offer payroll outsourcing services?

Wisemonk provides payroll outsourcing services across all major Indian cities, including Chennai, Delhi, Bangalore, Mumbai, Hyderabad and many more. Our pan-India expertise ensures compliance with local regulations in every state and union territory.

What are the key benefits of payroll outsourcing in Chennai for businesses?

Key benefits include ensuring compliance with Tamil Nadu-specific regulations (e.g., Professional Tax), access to expertise in local labor laws, cost savings on in-house payroll staff, and reduced risk of compliance-related penalties.

Can Wisemonk handle payroll for both full-time employees and contractors?

Yes, Wisemonk manages payroll for diverse workforce types, including full-time employees, part-time staff, and contractors. Our system adapts to various payment structures and compliance requirements for each category.

How does Wisemonk stay updated with changing payroll regulations?

Our dedicated compliance team monitors regulatory changes daily. We update our systems promptly to reflect new laws, ensuring our clients always remain compliant with the latest payroll and labor regulations across India.

How can employees access their payroll information through Wisemonk?

Wisemonk offers a user-friendly employee self-service portal where staff can view pay slips, access tax documents, update personal information, and submit leave requests or reimbursement claims securely and conveniently.