Payroll is the process of paying a company’s employees. Although it is a non-core responsibility, it is one of your top expenses every month. It involves collecting data of every employee, calculating their working hours, their monthly salary, tax deductions, employee benefits and distributing pay timely, to name a few. Payroll is a complicated process, time-consuming and errors can lead to major consequences.
Many companies do not have access to the latest softwares and technologies to manage payroll. There are many legal and ethical factors involved with payroll services; hence it is important to maintain and keep payroll records spotless.
What if I told you there is a way to make payroll simple and error-free? The answer is payroll outsourcing. Payroll outsourcing services involve trusting a third-party payroll service provider that handles your payroll. Many reasons have encouraged small and large businesses to switch to payroll outsourcing solutions.
Before we talk more about payroll outsourcing services, we must understand the major challenges faced by businesses when it comes to payroll.
What are the major payroll challenges faced by businesses?
Payroll is a mundane process and needs to be carried out flawlessly. Following are the major challenges faced by businesses,
- Coordinating different teams:
Payroll managers need to coordinate with HR, accounts department, attendance management teams, and individual employees to assimilate and synthesize payroll data.
If you are a small business owner or a start-up company, it can get overwhelming to handle everything on your own.
- Staying compliant with tax laws:
Staying legally compliant is a crucial component of payroll. Even a minor miscalculation or issues with taxes can harm your company’s reputation.
Employees expect to receive their salaries timely. Even a minor delay or error in processing can bring down their morale, and you may end up losing employees.
- Outdated methods:
Traditionally, payroll was managed manually. This method is tedious and prone to errors. Additionally, if you are using an excel sheet, you need to hire professionals who are well-versed with formulas to maintain payroll records.
In-house payroll services are costly, as companies need to hire payroll experts and the latest technology to manage payroll. Moreover, payroll is time-consuming, and it shifts the attention of business owners to non-core responsibilities.
Since there are many challenges associated with payroll, payroll outsourcing services have gained popularity all over the world. By 2021, the global payroll market is estimated to reach $19.95 Mn, with a market growth at a CAGR of 4-5%
Payroll outsourcing services are driven by the increased demand to reduce payroll-related costs. Third-party payroll service providers offer the latest technology and multiple services under one roof. Vendors often aim to customize their services as per your company's requirements.
Why are payroll outsourcing solutions a better option?
- Time management
Managing payroll internally can be complex. Payroll services involve managing new hires, overtime, termination, their leaves, employee benefits, and much more. It requires a robust human resource management system to ensure smooth functioning. Payroll providers also need to stay updated with new state and federal laws about payroll.
Payroll outsourcing solutions lift the burden of the employer and hand it over to a trusted and efficient third-party service provider. They have a team of experts specialized in managing payroll and access to the latest software and technology.
Since an outsourcing firm’s core responsibility is payroll management, the entire process is done meticulously with no room for error. Payroll outsourcing services promise strategic resource management, which gives your company a competitive edge.
Payroll needs to be executed every month; hence time is an important factor. Outsourcing solutions ensure that the entire process is completed within a given period.
Outsourcing payroll helps you reduce the amount of money invested in the process. Hiring a payroll partner is more beneficial to small and medium business owners. Selecting an experienced payroll service provider can significantly reduce the cost.
Payroll staff needs to calculate every employee's payroll, stay tax compliant, distribute salary, training, termination, and leaves of the employee, etc. All these responsibilities are complex and time-consuming. Also, imagine a scenario where your in-house needs to go take sudden leaves or wishes to go on a vacation. This can lead to delays and loss of credibility.
Time is money; you should rather have your employees focusing on core responsibilities than bundled up with payroll. You will be surprised to see how much you can save from outsourcing payroll management to a payroll service provider.
- Tax compliance
Every year companies end up paying heavy Internal Revenue Service (IRS) penalties. The IRS estimates that 40% of small and large-sized companies are faced with payroll penalties. Federal and state laws keep updating, and it gets difficult for businesses to be aware of these changes. Non-compliance can lead to heavy penalties and frequent audits.
Payroll mistakes can have severe consequences. A professional payroll service provider keeps tabs on updated laws and helps you stay compliant. The experts ensure that you are not faced with penalties, and payroll calculations and filings are managed well.
- Team of experts
Most business owners and employees within the company do not have the time to research and study regulatory updates. Outsourcing firms have a team of qualified professionals specialized in helping you stay compliant. Outsourcing companies have made these services available to every business owner, which was earlier accessible only to big companies.
You can get access to the best talent pool that helps you run your company. You can get an HR manager who is an expert at managing employee issues and recommend a strong HR strategy to help your company grow.
- Advantage of the latest technology
Traditionally, manual payroll was used, especially by small companies. Manual payroll processing is prone to errors, has less data security, and is extremely time-consuming.
Payroll automation is the future of payroll. It uses computers to produce paychecks, reducing the room for errors.
The American Payroll Association suggests that automation can reduce the cost of payroll processing by 80 percent. As compared to manual processing, payroll automation reduced the time taken in processing payroll. Around 58 percent of people worldwide utilize the self-service feature to enter personal data into automated payroll engines.
Many third-party service providers sell their payroll software as a stand-alone to companies. Payroll outsourcing solutions must be explored, and you can decide whether you want to co-outsource or fully outsource your payroll needs.
- Safety and security concerns
Payroll processing involves loads of monitoring as heavy risks are involved. Payroll records give one access to the personal information of every employee. Theft of personal information can cost an arm and a leg.
Since payroll demands a high level of security and monitoring, you should consider investing in a trusted outpouring firm. Payroll service providers use the latest technology that alerts the system in case of payroll fraud. This automation reduced the need for manual intercession.
Multiple serve locations and backups of payroll records help protect data and secures your employee’s personal information. An added advantage is that you need not invest in these security measures; your third-party service provider already has them.
- Focus on your business
For companies focusing on aggressive growth strategies, payroll should not occupy their minds. You want all your employees to focus on core responsibilities that will help you generate revenue, increase sales and grow your business.
For small and large companies, payroll outsourcing has proven beneficial. Small and medium-sized organizations are more likely to adopt payroll outsourcing solutions. A survey in 2019 indicated that 15% of respondents with less than 2500 employees outsource their payroll (Statista. 2019).
The global outsourcing markets indicate a steady growth in companies adopting payroll outsourcing solutions. Companies must seek a trusted and experienced payroll partner and reduce the complexities involved with payroll.
How do payroll outsourcing services help businesses in management?
Payroll outsourcing provides ease of management and administration. Small companies, medium companies, and large multinational companies greatly benefit from payroll outsourcing solutions.
Payroll outpouring services can turn all your challenges related to payroll into opportunities. It can help your company grow tremendously and make payroll hassle-free for you. It enables you to stay compliant, manage your time, and save a significant amount of money that you need to invest in payroll management.
Outsourcing not only manages payroll but enables you to offer premium services to your customers and drive more business for companies' growth.
Paysquare is your trusted payroll partner offering consistent payroll services for nearly two decades.
It incorporates the latest technology and providers the best user experience for all your payroll needs.
Along with providing all the benefits of outsourcing payroll, it is known for its payroll engine called ‘Precision’ that offers complete automation.
It helps your company build a robust resource management system, enabling you to focus all your energies to grow and expand your business.
Book an appointment and open doors to flawless payroll services today!