Payroll outsourcing is basically the option to manage employees’ salary, social benefits, taxes in a foreign or domestic location using a payroll outsourcing service.
Many companies are using payroll outsourcing as a cheaper and more convenient alternative to hiring permanent staff members, especially when they have an excess of payroll work that they cannot complete in-house.
For companies that do not provide payslips or monthly payroll results to their employees, payroll outsourcing provides an excellent solution.
To outline the key reasons and advantages to outsource your payroll to an outside payroll outsourcing company, we have gathered this quick guide below to highlight the pros and cons of payroll outsourcing.
Benefits Of Payroll Outsourcing For Small And Medium Businesses
When a company gets a large number of employees then it becomes a lot more complicated to maintain the entire accounting process. As each employee contributes his/her share, running payroll becomes a tedious job.
Besides, each employee requires his/her own training and certification. Hence, every company needs to set up a separate department for managing payrolls.
But, if payroll outsourcing service providers are engaged, then the entire burden of running payroll can be handed over to the service provider who will perform all the necessary tasks such as preparing the tax returns, preparing the tax documents, collecting the payroll data, and calculating the salary of the employees.
There are several benefits that come with payroll outsourcing:
1) Cost reduction
If the payroll is performed by a payroll provider then the company will be liable to pay for the services only. This will include payroll taxes, penalties, fines, and other administrative charges. If you have a large payroll set up that consists of multiple salaries paid to individuals, then payroll outsourcing services can save you a significant amount of money. Also, you do not have to maintain employees with payroll administration duties, as outsourcing your payroll processing costs eliminates this need.
2) Focus on the growth of your business
Outsourcing your payroll allows your company to concentrate on running your business and not on administrative tasks. You no longer need to hire a full-time payroll person who is based in your office.
3) Compliance with laws and regulations
Payroll compliance is another reason for outsourcing your payroll to an external service provider. It is essential for small businesses to be in full compliance with all the government regulations that apply to them. These laws impact everything from employee hours to the filing of tax returns. Outsourcing your payroll compliance requirements keeps your business compliant and prevents you from being fined.
4) Increase profits
In addition to saving money, payroll outsourcing can increase your profits. When you have one provider handling all your payroll, then you can concentrate on running the business. Your staff will use the time to promote more the company and closing more deals, so to increase profits in the short and long term.
5) Reduce waste
With a payroll outsourcing service, you can eliminate paper waste, which results in reduced contamination of surfaces, and reduced overall desk clutter. Most outsourcing payroll services utilize high-tech equipment to make processing quick and easy. For example, many companies use electronic check readers that allow them to print an employee’s checks quickly and automatically. In addition, outsourcing payroll also lets you save money by reducing the number of individual checks that your employees have to file.
However, there are certain cons as well:
1) The major drawback of payroll outsourcing services is that your data will be stored in an external location which may not be secure. You may not be aware of the fact that your data is being stored on an external database and this may put your important information at risk of hacking.
2) Another downside of hiring payroll outsourcing companies is that you will not be in a position to monitor the payroll data yourself. You may not know whether the calculations you make are accurate or not. If there is any mistake made, then the payroll department will have to incur further expenditure in order to correct the same. Hence, it becomes necessary for you to take these factors into account before hiring a payroll processing company.
