Being a business owner isn’t an easy task as there are different kinds of administrative responsibilities that have to be looked after. Payroll is one of the trickiest jobs to handle, and it is always best to outsource payroll operations. Payroll outsourcing simply means exporting the payroll administration of the company to a specialist third-party agency.
As a business owner, it is important to understand which payroll package to choose and which one is best suited to integrate well with the existing business infrastructure. It is important to make sure of the fact that the package integrates well with the HR department as well and delivers the promised services every pay cycle.
The benefits of payroll outsourcing are plenty and help the business owner evaluate the overall growth of the company. It is of utmost importance to have a good accounting and financial system in place so that it becomes easier to focus on achieving business growth. A significant advantage of outsourcing payroll management is that it reduces business costs by offering cost-effective services.
How does payroll outsourcing work?
- Outsourcing payroll is a lot more than making sure of the fact that employees are being paid on time. Payroll as an operation is laborious and time-consuming. It requires a lot of time and attention to be done accurately every month. This can hamper the other core activities of a company and affect them adversely.
- Neglecting payroll isn’t an option because it is one of the most crucial aspects of a business. While compliance errors can lead to hefty fines being charged by the tax department, missing out on payment deadlines will lead to unhappy and dissatisfied employees. Payroll outsourcing helps in delivering more good quality work and better productivity.
- The first step when it comes to outsourcing payroll is to find a top payroll outsourcing company. Careful and minute researching before zeroing in on the providers is a must because even if the payroll is being outsourced, it is important to make sure that the system is efficient and accurate.
- Once the provider has been chosen, the next task in hand is to create a report which will include information regarding the total number of employees and the total number of hours they work. It should also have information regarding the vacation policies, sick leaves, benefit co-pays. The accuracy of the report will ensure how effectively the service providers will be able to calculate the payroll.
- Once the provider has all this information in hand, he/she will begin processing the payroll for the company. The service providers will also look after information such as compliance and payroll tax, remittance, and reporting. Depending on the company they are working with, service providers also make sure that the payroll funds are disbursed on time from the company’s account to all the employees.
Is outsourcing payroll a good idea?
A lot of valuable time has to be devoted towards processing payroll, which in other cases could have been focused on more significant business development such as serving customers or building revenue. However, if the payroll of a company is outsourced to a reputed and trustworthy provider, more time can be devoted towards other more pressing issues of the business.
If there is one function in a business that should be outsourced, then that is payroll. Payroll outsourcing is a non-core business function and business consultants have time and again emphasized the fact that noncore functions should be outsourced because they are not essentially profit-generating for the business. A few reasons will be listed down below which will help in deciding as to whether outsourcing payroll is a good idea or not:
- A very common question that most business owners ask is what can be gained by outsourcing payroll? The answer to that question is outsourcing payroll helps in freeing up time and allows the company owners to concentrate their resources on the core business.
- The majority of the companies opt for outsourcing payroll because of the cost and stress involved in hiring an accountant and retaining him/her. During every payment period, the accountant has to go through endless stages of balance sheets to make sure that there are no errors in the end result. Outsourcing payroll will help in eliminating all this hassle and tedious work.
- When we compare the time of work and costs are done by the HR of the company with that of the outsourced work, the savings is a very clear picture because activities such as calculating employee schedules, deductions, leaves, managing the timesheet, taxes, and generating payroll reports won’t be a cause of headache any longer.
- Payroll service providers usually have high-performance payroll systems that will help provide top-notch technical stability for big organizations and companies. Payroll outsourcing also helps businesses gain access to the system through the web, and there won’t be the need to install local servers.
- If the costs of setting up a separate department and allocating space and salaries of the employees and PTO and IT is considered, then the total amount will keep on adding. This is the reason why more and more company owners are shifting towards outsourcing payroll operations with each passing day.
Is it time to outsource your payroll?
- Although payroll outsourcing is being viewed as a lucrative option by the majority of the companies and industries, there are still business owners who are caught up in spending too much money and time in managing staff pay. They are also worried about data security and compliance issues. If this is the case with a business owner, then this is probably the correct time to outsource the payroll of the company.
- The challenges of managing a correct and compliant payroll that too in-house are plenty. Several factors, such as ever-changing legislation schemes and updated procedures, can make this job exhausting. Outsourcing payroll is even more required and necessary for a company where most resources and revenue are being utilized to maintain and manage payroll processing.
- Surveys and studies show that there are so many companies out there who are paying extra to their employees because of errors being committed in the employee’s time and the accurate time record. This will not only damage the functioning and revenue system of the company but also incur heavy losses instead of gaining profits. Hence as a company owner, it is time to outsource the payroll if such incidents are occurring.
- To decide whether it is time for payroll outsourcing or not, it is important to understand the major benefits associated with outsourcing. Firstly, it provides cash flow visibility which is a major advantage. Secondly, the payslips generated are electronic and no-touch, thus making the whole matter hassle-free and simple. Thirdly the safety and security are being optimized at all times. Taking into consideration these benefits, it definitely will be wise to outsource your payroll if not already done.
- Manual bookkeeping of all the important payroll slips and documents and employee records can be a very excruciating task. Organizing all of these records accurately and effectively can definitely be troublesome. Hence it is best to outsource these tasks so that the time being saved can be made to use in the betterment of other departments.
- Managing payroll operations in-house means constantly updating the software because if the software is outdated, then there will be errors in the tax and payroll information, and that will lead to severe problems for a business. Outsourcing payroll will eliminate these expenditures entirely.
- The best payroll outsourcing company will always be up to date with the tax laws and regulatory mandates on the federal, local, and state levels. If you are managing payroll in-house then there will always be added burden on the staff to maintain compliance knowledge of this level and stature. Hence this is the time to rethink your decision of continuing payroll in-house.
- If your company is being charged with fines and penalties often, then it is definitely time to rethink your decision of in-house payroll. If your payroll manager or accountant isn’t able to process payroll in compliance with all the rules and regulations laid out in the laws, then the fees charged will keep on adding up.
- If the in-house payroll department of a company has messed up with the paychecks of the employees or has failed in showing the payroll information online, then it will lead to employees being doubtful of the transparency of the company. Employees are the most valuable resource of the company, and the cost of hiring a new employee rather than retaining one can be monumental. If this is the problem with your company, then it is definitely time to rethink.
To sum it up
The biggest misconception that company owners have, whether it is a small business or a large scale one, is that managing and maintaining payroll in-house will not involve too many costs and is cheaper than outsourcing. That isn’t entirely correct because what matters most is carrying out payroll tasks accurately, and that is where the majority of companies falter and end up paying hefty amounts in the form of fines and penalties. Although initially, it may seem like paying for outsourced payroll is a lot, but the long-term benefits can’t be ignored.
The fact that the time being saved can be utilized somewhere else is too good a reason to consider outsourcing payroll, not to forget the time being saved and no hassles to endure. The greatest part about outsourcing payroll is that it will allow the business to grow and expand, and the revenues and resources can be fully utilized in doing that. Hence as a business owner, it is advisable to find a good payroll service provider and outsource the payroll functions.