Learn Why Payroll Outsourcing Is Crucial To Your Business
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
- Price structures for payroll outsourcing
- Tips on how to choose a payroll outsourcing service
- How an employer of record can help to outsource your payroll
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.
Price Structures For Payroll Outsourcing
So, you are wondering “How much does payroll outsourcing cost?”
In this economy everyone is trying to save money where they can, and here is one area that many businesses are looking to trim costs: payroll outsourcing.
First of all, how does payroll outsourcing work?
When you hire a payroll service company, you pay them for processing your payroll data and submitting it to your business. They then bill your business for this service, which they, in turn, take care of on your behalf.
How much will payroll outsourcing cost to your company?
There are many factors that go into calculating how much you will pay to have someone else do your payroll for you.
For example, if you have many employees, you could see a sizable increase in your monthly costs. Also, if your business doesn’t have a way to keep track of and record employee hours, you could pay out more than you need to.
But overall, the cost of outsourcing payroll is affordable, if we take into consideration also the costs associated with compliance and administration.
How is payroll pricing structured?
We have three common structures used to calculate the cost for payroll outsourcing:
1) Per frequency – This is based on how often you pay employees (weekly, bi-weekly, monthly, or semi-monthly). In this case, you are charged a base fee and a charge for each employee you pay. This approach is good for businesses with fairly predictable payrolls that don’t have a lot of changes or extra payroll runs.
2) Per employee per month – With this structure, rather than paying fees for each payroll, you can run unlimited payrolls and just pay one monthly base fee plus a fixed rate for the number of employees you pay each month. This is a good structure if you have additional payrolls like bonuses and commissions.
3) Fixed pricing – With this structure, the payroll provider will charge a fixed rate per month that covers a set number of employees. And that is the only fee paid, but companies can cap the number of employees per month, so it is not the best option for every business.
Tips On How To Choose A Payroll Outsourcing Service
This is a question that haunts the minds of many business owners. The fact that there are hundreds of payroll services available today makes it difficult for entrepreneurs to make a wise choice.
Payroll services can help a lot in running your business smoothly, but there are also unscrupulous companies who are only out there to grab your hard-earned money. Thus, it is important to take the right steps to avoid these pitfalls.
First, you need to find out the basic standards and characteristics of each service that you are going to check out. One of the most important factors to consider here is the payroll processing fee. Check the various rates charged by the payroll providers. Compare each of these to your own budget to ensure that you are not falling short of finance.
Secondly, talk to the service provider and discuss their terms and conditions. In case of any confusion, seek the help of the professionals. Get hold of the contract documents and read through them. You need to know what exactly you are getting into before signing on the dotted line.
Once you are convinced about the type of payroll outsourcing service you are getting, check the credentials of the service provider. How long has the company been in business? How much experience have they had? How many clients do they serve? These are all the questions that need to be answered honestly and without any deception from the side of the provider.
Another important factor to consider is the payroll outsourcing service’s record in the past. You should find out how well they have performed in payroll processing. Check the years that they have been in operation and the number of clients they served successfully. If the payroll-processing company has been in the industry for a few years already, then there is no reason to doubt their efficiency.
When you are done evaluating each of the companies that you have shortlisted, the next step is to ask for proposals. You should get proposals from at least three to four services. The best way to judge the pros and cons of each company offering you a payroll outsourcing service is to ask them directly how they can improve your business and provide additional services. If you get a satisfactory response, then you can go ahead and hire the payroll service of your choice.
Hiring a payroll outsourcing service can have its advantages as well as disadvantages. In order to avoid the pitfalls, be sure to check into all the factors discussed above. You should always ensure that you are hiring a company that is reliable and trustworthy. You should also ensure that the service you will receive is what you need.
How An Employer Of Record Can Help To Outsource Your Payroll
Every business with an employee base needs an Employer of Record (EOR). An Employer of Record is a company that creates and maintains a list of all employees and their contact information and can manage all the payroll-related matters for your business.
Using an EOR allows your company to handle payroll without having to hire and train new employees, which can be very time-consuming and costly. Besides this, it allows you to expand your business abroad without the need of setting up a local legal entity in the country where you expand.
How can an Employer of Record help your business to grow?
There are few reasons for that, and the most important are highlighted below:
By using an Employer of Record, you no longer have to personally oversee the management of handling your employees’ payroll. The EOR will handle all aspects of it for you, from application submission and processing to maintain your employees’ details and records. You no longer have to worry about hiring and training new personnel or dealing with the hassles of submitting your payroll taxes every year to the government.
By using an employer of record, you enjoy incredible convenience in doing everything that has to be done when it comes to payroll management. This includes managing your payroll, as well as ensuring that all the tax returns are submitted on time and submitted in full. Additionally, payroll outsourcing services can help with processing all the government benefits such as disability, health, and worker’s compensation.
When using an EOR, you are able to ensure the privacy and confidentiality of your employees. This is achieved by using a third-party company that securely guards your personal information through the secure data storage and protection features found within the EOR’s server. The security of your information is a top priority.
4) Enhanced productivity
Using a payroll outsourcing service provider, your employees are free from the hassles and time-consuming tasks of record-keeping, which is often a prerequisite for maintaining compliance with governmental regulations. You are also spared the hassle and time spent searching for qualified payroll outsourcing candidates who can fill the position.
5) Reduced employee turnover
With the assistance of an EOR, your employees’ recordkeeping is streamlined, which reduces the risk of them terminating their employment relationship with you, without just cause. An EOR ensures that your payroll records are maintained accurately and that they are updated at regular intervals. Furthermore, your business is not liable for mistakes committed by the employee. Your responsibilities simply become that of the employer.
6) No more time-consuming forms
Payroll forms are cumbersome and time-consuming. Moreover, it costs a lot of money to maintain and update these forms, making it expensive for your company. When you hire an EOR to manage your payroll records, you only pay a minimal fee and use their high-quality, comprehensive forms. The forms are easy to use and provide accurate information in record time. The result? Your company saves a lot of money on administrative costs.
7) Reduced payroll costs
Most payroll providers offer their services at a discount. In exchange, you are relieved from the task of managing payroll manually. Instead, a reputable payroll outsourcing provider handles all aspects of hiring, firing, employee benefits, and other human resource issues. You only pay a fee for the actual service you get, rather than paying for multiple payroll services.
At NNRoad, we can offer comprehensive solutions for your payroll outsourcing needs in more than 50 countries around the world.
Contacts us to get a free quote and more information about our services!