Advantages and disadvantages of outsourcing payroll
Outsourcing is the smartest way that businesses follow to delegate complicated and time-consuming tasks.
One such elaborate process that qualifies to get outsourced is managing payroll. Though HR professionals are competent in handling payroll and there are ingenious payroll software available to work on this, outsourcing payroll is still preferred by the majority to smartly manage their resources.
Business payroll outsourcing is when a company hands in its entire payroll process to a third-party team.
This payroll provider will get access to the in-and-out employee registry, salary, incentives, and other benefits details to estimate and send monthly earnings to all of their employees.
There are many stories around the world to prove how beneficial payroll outsourcing was to companies and specifically HR teams. The major reason is to have a small yet fully functional and highly productive team.
Companies who have migrated to payroll outsourcing solutions reportedly have seen a 40 to 50% reduction in their HR team strength.
As the time-consuming job makes its way out, your limited HR staff can effectively work on other tasks and employee engagement activities.
The next reason is improved efficiency and fewer mistakes. Payroll providers assign dedicated employees for each client to proactively handle the tasks and avoid mistakes and disarray.
On the other hand, the internal HR team has other responsibilities to focus on too. This shift from one task to another can lead to errors that can be irreversible.
Businesses also do payroll outsourcing to ensure compliance needs. To stick with the local government regulations is one of the important obligations. These regulations change frequently too. Not paying heed to them and following the old terms can lead to penal charges against employers.
In short, businesses outsource their payroll activities to get them done quicker, efficiently, and without mistakes, and additional expenses.
Before outsourcing payroll, you must know the pros and cons of this process to weigh up how it can work in favor of you. Here are some of the advantages.
Saves time by unhooking your HR team from a long-drawn-out, complex task and saves cost by letting you maintain an undersized HR team as the workload is manageable.
Ultimately, the overall employee management from hiring to dismissal falls under the shoulder of the HR team.
Including payroll management to that can only increase their working hours leading you to add more and more professionals to the team.
Errors are unavoidable while managing payroll due to the nature of its work.
Imagine having 50 to 100 employees each with different sets of wages per hour, working hours, and work benefits. The calculation can go wrong, salary can get credited to the wrong account or a different employee, and additional hours might be excluded.
Any insubstantial mistake like this can bring forth huge discrepancies and in the end, your employee will be disappointed if they don’t receive the right remuneration. These payroll errors are burdensome for everyone.
Payroll providers don’t let this happen as their sole assignment revolves around this.
The payroll task contains employee tax calculations too. Employers should report to the IRS how much salary they pay to their employees along with other inclusions.
This tax-filing should be done on time and should not contain errors. Filling the form can take hours or even days and must be done painstakingly.
The regulations can vary based on your local bodies. Upon outsourcing payroll, you wash away this responsibility and let your payroll provider file taxes on behalf of your company.
It costs you money every time you miss adherence to your local government regulations or file employee taxes incorrectly.
The penalties can be high and you need to work on them till you get it right. It’s also a matter of reputation.
Businesses often find it hard to catch up to the changes in ordinances and regulations and find it lighter when someone does it for them. That’s where business payroll outsourcing comes in to free them up.
Payroll data demands utmost security while being stored and no big corporation will take up the risk of storing this on their own company network.
Amidst data theft and other security issues, your responsibilities increase to store them safely on the cloud or use expensive payroll software.
Payroll fraud can be committed internally too where one employee can get favored and opt to receive more than what the company owes to them. You can put a full stop to this unjust favoritism by outsourcing payroll.
Some payroll providers do only tax estimation while some do the tax filing by themselves. In either case, you are doing lesser or nothing at all.
When the hard job has already been completed, you can file taxes by yourself on time and avoid fines. Outsourcing payroll lets you accurately estimate and fill in forms on time.
There are some drawbacks to outsourcing payroll too. Though negligent, this should be paid attention to as well.
Your employee payroll data can be bulk, chunky, unintelligible pieces of information that can be hard to process. But they are still your data and when you hand them to a payroll provider. You can have no or less control over this data even if it’s a responsibility off your limits.
Wanting to check or manage this payroll data will result in interference with their tasks. You can still monitor but if you need to make any changes, it should happen on your provider’s end.
Initially, it can be a cumbersome process to find a payroll provider and get your company onboarded. There can series of meetings to update and coordinate with them.
Since communication happens mostly through email, there can be delays in responses.
Some payroll providers send paychecks on a predetermined date according to their convenience and not to your preference.
While Outsourcing payroll, you can choose packages that suit your requirements. Not all packages are useful and required to carry out your basic payroll functionalities.
You might end up signing up for more services than you need.
Without checking your necessities, outsourcing payroll can cost you an arm and a leg.
Want to have the best of both worlds where you can efficiently take care of payroll data and automate paychecks?
Volopay is your genie then that can combine spend management and business payroll outsourcing for you. With Volopay, you can process both local and international transactions swiftly securely and automatically.
This cloud-based payable management solution also has other payment features like unlimited virtual cards and physical cards for employees, budgets, reimbursement platform, and smart accounting integrations with other applications.
Set up customized approval workflows, automate outgoing payments before time and never be a late payer. Short on budget but have plans to grow further? Borrow instant line of credit up to S$500k in just two steps and pay the used credits at the end of the billing period.
Employee expenses administration is another painful task for the HR team. Not anymore as Volopay has a streamlined reimbursement portal. Your employees can submit bills through the app and money is disbursed once the request is approved.
You can also have virtual credit cards for teams or employees to handle their business expenditure.
Coming back to payroll outsourcing, you can use the payroll software ‘Talenox’ that’s integrated with Volopay. So right within your payment application, your HR team can manage employee profiles, leave management, not to mention payroll. Business payroll outsourcing is not desired and so are expensive payroll software solutions.